The total cost of asylum accommodation in the UK is now expected to reach £15.3 billion, more than triple the original estimate made by the Home Office in 2019, according to a new report by the National Audit Office (NAO). The sharp rise is largely attributed to the increasing use of hotels to house a growing number of asylum seekers, as the system faces mounting pressure from record arrivals.
The Conservative government initially signed contracts worth £4.5bn over ten years with three private companies—Serco, Mears, and Clearsprings—to provide housing for asylum seekers. However, the NAO’s analysis now puts the projected cost at £15.3bn. Clearsprings alone is expected to receive £7bn for its contract in the south of England—up from an original estimate of just £0.7bn.
Between 2019 and 2024, the three companies made a combined profit of £383 million from their contracts. Clearsprings’ director, Graham King, has previously donated to the Conservative Party through other companies.
Hotel Accommodation Drives Soaring Costs
The report highlights that although only a third of asylum seekers are housed in hotels, three-quarters of all accommodation spending goes toward hotel use. The number of asylum seekers placed in hotels increased from 47,000 in 2019 to 110,000 by the end of 2024. The NAO warns that the Home Office has “few levers” to control the rising costs under the contracts currently in place.
The average annual cost of asylum housing is now projected to exceed the government’s intended savings from cuts to the winter fuel payment, raising further concerns about fiscal management.
Home Office Blames “Broken” System and Small Boat Crossings
A Home Office spokesperson said the Labour government had inherited a “chaotic” asylum system and blamed the Conservative Party for signing “disastrous contracts.” They added that hotel numbers have now fallen and that ongoing reforms are forecast to save £4bn by the end of 2026.
However, a senior Home Office source pointed to the surge in small boat crossings and the collapse of timely asylum processing under previous governments as key drivers of the crisis. The source admitted that contracts had been signed “in a state not fit” to manage the escalating situation.
Backlog, Hotel Use and Future Contracts Under Scrutiny
Despite Rishi Sunak’s government claiming to have cleared the asylum backlog, the UK statistics watchdog rebuked the statement, and Home Office data released in February showed that asylum claims are at their highest level since records began in 1979.
The Labour government has pledged to end hotel use for asylum seekers, following a similar Conservative promise made in October 2023. Although the number of hotels in use had begun to fall, a Home Office minister admitted in November that usage was rising again.
The Home Office holds the option to terminate its contracts with the three providers next year, but no decision has been made. Officials say the companies are under ongoing scrutiny, with no guarantees of future involvement beyond 2029.
