Outsourcing big business for the UK

The UK public sector is now spending at least £6.7bn on IT and data related work per year, compared to £35bn in the private. But, suggests a new report, both the size of that outlay and the ratio between public and private is only likely to change as the sector becomes more open to the approach.

Over half (51.5%) of all UK public sector goods and services procurement (£82 billion) may thus now be coming outsourced sources, according to new research into the market encompassing detailed looks at how IT, catering, facilities management, employment services, office support, technical consultancy and public services are being supplied.

Outsourcing also now accounts for 8% of all the economic activity of the UK or some £207 billion per year across all the markets, making it only marginally smaller as a contributor to GDP than the City and financial services (8.1%).

The analysis comes from a group called the BSA (Business Services Association), a group that styles itself as representing companies providing business and outsourced services in the private and public sectors, though it was actually carried out by a body called Oxford Economics, which specialises in quantitative, macro-economic forecasting. The BSA says that in the UK alone the combined turnover of its membership is around £30 billion and employing around half a million people.

Its study claims that around 3.1 million jobs, equivalent to 10% of the total UK workforce, now works in some kind of outsourced capacity and pays the equivalent, at £35 billion, of 12% of all tax the UK Exchequer gets on an annual basis. (It is important to note that all these figures are from 2009 and are an amalgam of public/official data and other sources.)

The authors are careful to put boundaries on what exactly they mean by outsourcing, possibly to head off any skepticism about these claims. The report defines outsourcing as meaning "The supply of services governed by an ongoing or time-specific agreement involving a degree of delegation of management responsibility, where that service would more typically be provided, or would in the past (UK 1950s-2000s) have been more typically provided, by an in-house team of the customer themselves."

This definition is probably not that problematic in the commercial world. But how is this manifesting itself in the public sector? According to the study, as we've already seen, technology is not that high up the totem pole yet. Residential care, property services, health-related work are all ahead of ICT in terms of outsourcing, accounting for 17.3, 15.4 and 11.9% respectively (in turnover terms as opposed to 'value added').

But across all the sectors currently seeing outsourced activities - from property to catering via waste management and so on - the authors claim public sector clients are wanting more; thus turnover across the "outsourced property services" sector as a whole will be in the region of £39.0 billion, some £17.3 billion relating to work for the private sector and £21.7 billion to that for the public sector for property services and in portfolio and real estate management the size of the outsourced segment of this market to be £2.2 billion, of which £2.1 billion is in the private sector and a 'mere' £0.1 billion in the public sector, and so on.

Not all data is so easily split into the public-private split, however; as the report notes, government stats split intermediate demand into industrial categories, but not strictly into public and private sectors, so there's been some guesstimates in at least some of these projections.

But all in all, this study will make interesting reading in a couple of years time to see to what extent the public sector will or will not up its already substantial commitment to this way of sourcing.