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Year of two halves for UK outsourcing in 2015 PDF Print E-mail
Thursday, 11 February 2016

UK outsourcing experienced a year of two halves in 2015, with the public sector dominating the market in the third and fourth quarters as spending rose sharply, according to the arvato UK Outsourcing Index. 

Following a relatively quiet first half of the year, government spend increased by 55 per cent in July to December with public sector organisations agreeing deals worth £2.31 billion. In comparison, private sector spending lost momentum in the final two quarters, falling 42 per cent to £688 million.

Central government played a pivotal role in the public sector rise, with deal value more than trebling to £1.77 billion in the second half of the year compared with the period January to June. According to the new data, procurement focused on a mixture of HR, document management and multi-scope IT infrastructure agreements.

Debra Maxwell, CEO, CRM & Public Sector, arvato UK & Ireland, commented: “The surge in activity across the public sector comes as no surprise as the market rallied following the general election. In addition, last year’s Autumn Statement has presented new challenges to government organisations with many under increasing pressure to find greater efficiency savings.

“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 research, compiled by business process outsourcing (BPO) provider arvato, in partnership with industry analyst NelsonHall, identified a total of £5.67 billion worth of deals across the UK public and private sector outsourcing markets in 2015.

According to the findings, the proportion of outsourced work delivered from the UK is increasing, with only 6 per cent of deals signed last year being delivered entirely offshore, down from 9 per cent in 2014. UK outsourcing is also benefitting from a healthy flow of new work into the sector, with first-time agreements accounting for 61 per cent of all contracts signed last year.

Buoyant government outsourcing market thrives in 2015
The value of outsourcing contracts across the public sector saw a 26 per cent year-on-year rise in 2015, with deals signed last year worth a total of £3.8 billion, according to the findings. Growth was also seen in average contract value, which increased by 12 per cent to £69 million over the same period.

Local government outsourcing thrived in 2015, with the total value of contracts agreed reaching £756 million, representing a year-on-year rise of 23 per cent. The research found that average deal value (up 30 per cent) and contract lengths (up 29 per cent) also increased over the same period, indicating that outsourcing remains a key strategy in councils’ plans to meet new efficiency challenges.

The Index, which tracks the volume and nature of UK outsourcing agreements, shows that local authority spending concentrated on securing deals across the back office, with contracts focusing on revenues and benefits, HR and multi-process customer management services.

Other headlines from the 2015 full-year Index include:
· Overall 67 per cent of spend came from the public sector and 33 per cent from businesses
· Business Process Outsourcing (BPO) represented 57 per cent of deals and £2.5bn spend
· Agreements for ITO accounted for 42 per cent of contracts signed at a value of £3.1bn
· Combined BPO& ITO deals represented £54m spend 

The arvato UK Outsourcing Index is compiled by leading BPO and IT outsourcing research and analysis firm Nelson Hall, in partnership with arvato UK. The research is based on an analysis of all outsourcing contracts secured in the UK market during 2015.

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