Outsourcing of services is a vital part of the UK economy

08 June 2011

New data shows that our outsourcing industry is one which makes a real and positive contribution to the wider economy, creating wealth and jobs as well as helping the Government do more for less, as Mark Fox explains

The outsourcing industry in the UK has grown over the last 20 years, but has never been properly analysed, so we asked Oxford Economics to conduct research into the size of the market and the economic impact on the UK economy.
The report revealed some very interesting facts and demonstrates the huge contribution made by the industry to the UK economy on a range of fronts.
Often the debate around our industry is influenced by the lack of good data and a clear definition. It is too often seen as well through the prism of public sector outsourcing. This is an industry that is shown in this report not to be dependent on the public sector. It is a world leader in innovation, training and skills development, as well as a significant driver of efficiency and growth.
The research reveals:
● 60 percent of outsourcing in the UK is in the private sector, business-to-business.
● 40 percent is public to private.
● The industry accounts for 8 percent of the UK economy’s output or £207bn – this is roughly the same size as financial services.
● The industry supports 3.1 million jobs, equivalent to 10 percent of all UK workforce.
● Combined business and employee contribution to the Exchequer is 12 percent of the total – some £35bn.
In addition, separate inhouse research we have conducted across the BSA membership indicates that our members are in partnership with about 250,000 small and medium sized businesses across the UK. This would suggest the industry is very much part of the economic and business fabric of the UK economy.
The option to outsource is part of the toolkit that private and public sector managers should arm themselves with to ensure the most efficient delivery of a service or facility.It will not always be the case that outsourcing is the best answer – and even when it is it might well be that a range of models from which the manager can choose is desirable.
Outsourcing is not privatisation. It suits the critics of the industry to pin that label on what we do, but it is misleading. Privatisation is when a service or an asset is sold off and ownership of it is transferred from one place to another. Outsourcing is something that is quite different. Outsourcing is when the delivery of a service or facility is done by an outside operator. The responsibility to manage that operator and the opportunity to take some back under direct control remains.
Outsourced services can include back office functions, customer contact centres, catering, cleaning, security and pest control. The industry also provides public sector-specific services like social housing maintenance and management, offender management, building and maintaining schools, and managing defence estates.
Services which were once considered absolutely core to an organisation’s success are now successfully outsourced. In today’s business environment, it takes more than just meeting the terms of a contract to become successful.
Businesses have to demonstrate how they are responsible corporate citizens. What these new figures show is that our industry is one which makes a real and positive contribution to the wider economy, creating wealth and jobs as well as helping government do more for less.
Linked to this is our view that opening up the public sector to greater competition should not begin and end with the private sector. We are moving into a new era where public services can be provided by a mix of government, employee-led and private organisations working together to improve services for everyone. The government wants to see more charities,
employee-led mutuals and joint ventures delivering public services, and our industry stands ready to help realise this goal.
Clarity
By working together, the private and voluntary sectors can blend the former’s access to capital with the latter’s expertise and local and sectoral knowledge. However, we need to see greater clarity on how the Government expects new models of public service delivery to function if we are to reap the full rewards of diversifying service providers. We continue to await the publication of the coalition’s public services white paper.
At a critical time for both the economy in general, and outsourcing and business services companies specifically, we hope the report, sitting alongside as it does other BSA research and publications, will help increase a greater understanding of the industry’s role in the UK economy.
● Mark Fox is chief executive of the BSA. www.bsa-org.uk