Headlines: April 20th, 2005

Public sector organisations are set to spend a further 20 billion pounds on outsourcing services. The figure, set out in new research by Kable, represents a growth of 50 per cent between the financial year just ended and 2006-7. “The UK public sector outsourcing: the big picture to 2006/07” is the first published assessment of total public sector outsourcing values and trends.Kable’s report forecasts that the outsourcing market will grow from just under 45 billion pounds to more than 67 billion in the period under review.

It says one of the key factors driving the predicted boom is the Government’s efficiency agenda. This sets out to achieve more than 21 billion pounds of savings by 2008 with more than 80,000 Civil Service jobs being cut. The report estimates that Whitehall outsourcing alone could reach 7 billion pounds a year as a direct result of the Gershon Efficiency Review.

The growth is expected to be fastest in the Ministry of Defence. Starting from a relatively low base, the value of outsourcing will rise from 1.1 billion pounds this year to 4.2 billion in 2006-07. In the National Health Service the market is predicted to grow by more than 150 per cent in the period from 2003-04 to 2006-07, and will have reached more than 16 billion pounds in three years’ time. Kable says outsourced NHS IT projects are worth a total of a little under 7 billion pounds with an annual expenditure of 725 million.

The study finds that central government currently outsources 4.6 billion pounds worth of its work overall. In IT Whitehall outsourcing is set to increase to 1.2 billion pounds in this financial year and is then expected to grow by six per cent.

Growth of the outsourcing market in local government, currently between six and seven billion pounds a year, is likely to be at the relatively lower rate of 16 per cent.

Mark Hudson, Kable’s managing director, said: “The government has been using private companies to deliver public services for over 20 years, so this should not come as a big surprise. However, the breadth of the growth is quite impressive, and shows there will be considerable opportunities over the next three years.”