Outsourcing giant Capita has announced plans to reinvest cash generated from recent cost-saving measures into artificial intelligence (AI) technologies as part of a broader strategy to improve operational efficiency and margins. The company, which administers the BBC licence fee among other public service functions, has maintained its forecast of "broadly flat" sales for the year but aims to deliver stronger margins through disciplined cost reductions.

Capita recently expanded its cost-cutting target to £250 million from an earlier £160 million goal, reflecting its increased confidence in efficiency gains primarily driven by AI adoption and voluntary staff departures. The company has so far achieved £185 million in annualised savings and is channeling much of this into AI initiatives. One notable project is the Capita AI Catalyst Lab, which has already identified over 200 potential AI use cases across the business, ranging from contact centres to local government services.

AI integration has reportedly brought tangible benefits, such as a 20% reduction in average handling times in contact centres, mirroring Capita's intention to streamline both customer service and administrative tasks. Voluntary staff attrition, which stands at around 21% annually, especially in high-turnover roles like call centres, is expected to complement AI-driven efficiencies by reducing reliance on redundancies and facilitating workforce renewal.

Capita has also embraced Salesforce's Agentforce AI platform, becoming the first UK business-to-business company to deploy this AI-powered recruitment system. This technology, set to launch within the summer, promises to cut recruitment time dramatically from weeks to hours by automating over 200 tasks in the hiring process. CEO Adolfo Hernandez highlighted the importance of this tool for their large-scale annual recruitment of approximately 10,000 staff, enabling recruiters to focus on final interviews and onboarding rather than early-stage screening.

Salesforce has rapidly expanded the adoption of Agentforce, securing over 1,000 paid deals worldwide and enhancing the platform with a new version, Agentforce 2dx. This upgrade brings capabilities such as embedding proactive agentic AI into workflows, multimodal experiences, and improved digital labour integration, which have already led to 40% faster case resolution and 25% higher lead conversion rates for clients. Industry analysts view these advancements as transformative, positioning AI to fundamentally reshape operational processes and customer engagement.

Despite a 4.5% decline in adjusted turnover for the five months ending in May—driven by a 21.1% drop in the contact centre segment due to weaker telecommunications volumes—Capita's public service and regulated services divisions showed growth. The group secured £969 million in new contracts in that period, a notable 24% increase year-on-year. These contracts include significant deals like a £97 million training services contract for the Royal Navy, a £92.4 million extension with Southern Water, and a £107 million IT services agreement for Northern Irish schools.

Market sentiment remains cautious due to the competitive pressures in public sector outsourcing, but Capita's renewed focus on operational discipline and technology investment could make it an appealing prospect. Market analyst Mark Crouch of eToro observed that while growth remains elusive, early signs of technological adoption bearing fruit might rekindle investor interest in the company.

Capita's shares have responded positively, rising over 4% following the announcement and gaining around 25% over the past year, reflecting optimism that its AI-driven transformation strategy may deliver tangible results.

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Source: Noah Wire Services