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UK public sector spend of £51 billion almost double that of commercial sector

The UK public sector is spending almost twice as much on outsourcing as the commercial sector, a result of governmental services striving to cut costs.

Money_dollars_coins_istock_FMJ_jan12New research by Information Services Group (ISG) reveals that the total contract value (TCV) of public sector outsourcing agreements reached £51 billion in the latest two-year period, compared with £30 billion for the commercial sector.

While the commercial sector has seen a shift toward smaller contracts over the past two years, the UK public sector has seen a contraction in the number of smaller contracts, from 46 per cent of the market in 2010-2011, to 40 per cent in the period since 2012.

Large contracts on the other hand remain steady. Growth in the sector is largely in “mid-market” contracts, those valued at between £15 million and £30 million. Indeed, 22 per cent of public sector outsourcing awards now fall in this category, compared to 18 percent in the prior two-year period.

Luke Mansell, partner, ISG, said:

“The recession and the subsequent focus by the public sector on cost reduction and value for money has driven a renewed interest in outsourcing and its role in helping deliver efficient, cost effective services.  While the commercial sector has moved to smaller contracts over the past two years, the public sector has seen a rise in mid-market contracts, mainly as a result of the complexity of the services required and the lack of appetite to utilise cheaper, offshore resources.”

The ISG data also show a shift in the pattern of contract awards within the public sector; central government now accounts for 42 percent of public sector TCV, followed by local government (30 percent) and healthcare (13 percent). In the period prior to the recession (2007 to 2008), these three segments each made up around 28 percent of the total market.  Although healthcare has seen its market share fall as the size of the public sector market has increased, the amount of actual spend in that segment has increased.

The largest public sector contracts awarded since 2012 are:

Client

Service Provider

Total Contract Value (£)

Scope

Staffordshire County Council

Capita

600M+

Industry-specific BPO

Birmingham City Council

Carillion

600M+

Industry-specific BPO

Department of Energy and Climate Change

Telefonica

600M+

Infrastructure

Ministry of Defence

CSC

600M+

ADM and HR

Oxfordshire County Council

Carillion

600M+

Facilities Management

Lancashire County Council

BT

600M+

Infrastructure

Leicestershire NHS Trusts

Interserve

600M+

Facilities Management

Ministry of Justice

Capita

300M-599M

Industry-specific BPO

Criminal Records Bureau

TCS

300M-599M

Industry-specific BPO

Foreign and Commonwealth Office

Computacenter

300M-599M

Infrastructure

Mansell concluded:

“The UK public sector is a significant market in its own right and is the largest public sector market outside of the United States.  Looking ahead, we expect to see continuing growth in public sector outsourcing activity as initiatives like Value for Money make outsourcing a more attractive proposition.”

 

About Sarah OBeirne

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