Sharp rise in public sector outsourcing over the past six months - study

Latest Outsourcing Index by firm arvato finds 26% year-on-year rise in government spending on outsourcing

By Civil Service World

11 Feb 2016

The value of outsourcing deals signed by central government trebled to £1.77bn in the second half of 2015, according to new research.

The latest Outsourcing Index compiled by business processes firm arvato and analysts at Nelson Hall found a 26% year-on-year rise in government spending on outsourcing, with the wider public sector signing some £3.8 billion-worth of deals in the last year.

Outsourcing saw a “relatively quiet” first half of the year in the run-up to the general election, the research says, but government spending on outsourcing then increased by 55% in July to December when compared to the January to June period.

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According to the research, central government procurement over the year focused mainly on HR services, document management and IT infrastructure.  

The study also found that the public sector was responsible for the lion’s share of outsourcing spending in 2015, with 67% of spend coming from the public sector and 33% from businesses. Private firms meanwhile pared back their own reliance on outside help in the second half of the year, with contract value tumbling by 42% over the period.

Arvato’s chief executive Debra Maxwell said government departments were now “under increasing pressure to find greater efficiency savings”.

She added: “It’s clear from the research findings that an increasing number of departments and authorities are turning to the private sector to help them with the service transformation needed to address the new targets introduced in November’s Spending Review.” 

The overall uptick in outsourcing comes at a time when some government departments, including HM Revenue & Customs and the DVLA, are making efforts to bring their IT services back in-house after decades of reliance on the private sector.

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