London, United Kingdom (AFP)—The UK government on Tuesday said it was ending a “disastrous” £2 billion ($2.58 billion) a year contract with a hotel group providing accommodation to asylum seekers because of performance “concerns”.

The Home Office revoked its contract with Stay Belvedere Hotels (SBHL), one of the largest providers of hotels for asylum seekers with 51 hotels across England and Wales.

The Home Office, which is trying to slash an asylum seeker backlog and reduce the use of costly hotels, cited “concerns about its performance and behaviour as a government supplier”.

SBHL was awarded the contract in 2019 by the previous Conservative government, and the earliest the government can exit without paying break-up costs is September 2026.

It also runs the Napier Barracks as accommodation in Kent, southeast England, which is set to close in September after facing multiple allegations of poor conditions.

“We did need to review these disastrous contracts on asylum accommodation we inherited,” housing minister Matthew Pennycook told Times Radio

“We’re doing so to improve management and guarantee value for money for the taxpayer,” Pennycook said, adding that he would not go into the “specifics” of why the contract was cancelled.

According to The Times newspaper, some contracts will instead be handed to the firm which ran the controversial Bibby Stockholm barge.

Prime Minister Keir Starmer’s government ended the use of Bibby Stockholm to house asylum seekers last year.

The Tories championed the vessel as a cost-cutting alternative to hotels, but it came under fierce criticism over reports of poor conditions on board, fears of Legionella bacteria and one man dying in a suspected suicide.

The SBHL decision comes as the Treasury indicated that hotels would continue to be used for years to come and directed the Home Office to find cheaper providers, according to The Times.

During the general election last year, Starmer vowed to speed up the processing of a hefty asylum claim backlog and end the use of hotels.

However as of January 2025, there was a net increase of six hotels being used, with over 200 in total.

Pennycook said he would not provide a “timeline” for the phasing out of hotels for asylum seekers, which the government says it is still determined to end.

“Since July, we have improved contract management and added more oversight of our suppliers of asylum accommodation,” said border security and asylum minister Angela Eagle.

Eagle had previously said that nine hotels were due to close by the end of March.

As of September 2024, there were over 35,000 asylum seekers awaiting decisions in hotel accommodation, down from 56,000 the year before, according to Home Office figures.

In 2023-2024, the government expected to spend over £3 billion on hotels for asylum seekers, according to a National Audit Office report.