UK public sector outsourcing hits new high of £50b, now worth almost double the commercial sector

G-Cloud spending has pushed UK public sector outsourcing to a level twice that of the commercial sector and worth over £50 billion with a large dose of thanks due for the G-Cloud scheme.

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Data recorded by Information Services Group [ISG] over the two years spanning 2012-2013 showed the total contract value of public sector outsourcing hit £51 billion whereas commercial sector outsourcing could only reach £30 billion.

This is despite the fact that more commercial sector outsourcing contracts were awarded over the same period in the form of 726 contracts compared to just 585 public sector agreements.

Public sector contracts are being driven by “mid-market” agreements valued between £15 million and £30 million with 22 per cent of outsourcing awards falling into this category compared with 18 per cent in the prior two years. Smaller contracts have dropped from being worth 46 per cent of the market in 2010-2011 to 40 per cent in 2012-2013.

“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 utilize cheaper, offshore resources. It will be interesting to see, over the next two years, whether the drive to procure services from small to medium enterprises via the G-Cloud will cause a shift to smaller contracts,” stated Luke Mansell, partner at ISG.

The departments spending the money in the public sector has also shifted with central government accounting for 42 per cent, local government 30 per cent and healthcare 13 per cent. In the period prior to the recession running from 2007 to 2008, the three segments each made up around 28 per cent of the total market.

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“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, while the Government’s G-Cloud initiative opens the market to a greater number of specialist service providers,” Mansell added.