Should Government do more for SMEs?

14 July 2011

Over two thirds (71%) of outsourcers and facilities management suppliers agree that the Government should do more to help smaller businesses win more of its work, according to a survey by Interim Partners, a provider of interim managers to the private sector.

The survey, which was conducted among Chairmen, CEOs and CFOs of some of the UK’s largest outsourcing and facilities management businesses, found strong industry agreement among 64% of respondents that the Government favours larger outsource companies when allocating contracts.

Mark Kitchen, Head of Practice for Business and Support Services at Interim Partners, commented: “Despite the Coalition Government’s attempts to improve outsourcing to SMEs, industry leaders agree that more should be done to help smaller bidders for Government work.”

“Whilst some contracts can only go to outsourcers that have reached a certain scale, there is the concern that too much of the outsourcing market will consolidate in the hands of just a few players.”

“Directors of mid-tier FM providers and outsourcers do not want to see the rapid consolidation within the sector that could happen if small providers are permanently locked out of the market for Government work. Many larger providers sub-contract some of their work to small, specialist providers so they want to see as healthy a supply chain as possible.”

Every single survey respondent agreed that FM contracts are under more margin pressure than before the credit crunch. Interim Partners believes that the poor performance of the economy and the timing of the Government’s austerity drive have put a squeeze on FM clients’ budgets.

Mark Kitchen said: “The squeeze on margins means that facilities management companies, as well as wider outsourcing providers, have to become more efficient than ever before in providing a high quality service. Interim managers have a proven record of stripping out unnecessary costs to maintain margins and service delivery quality, even when clients are asking for a cheaper service.”

Although margins are being squeezed, 79% of providers say they still are expecting more work because of the Government austerity drive. Mark Kitchen continued: “It’s increasingly accepted that outsourcers and FM providers can help the Government to deliver a lot of public services more cost effectively than the Government can itself. As further cuts are implemented support services businesses are expecting an increase in demand from central and local government.”

The survey also reveals that 64% of outsourcers and FM providers expect growth to come from adding new service lines, rather than international growth (21%) or UK growth from existing service lines (14%).

Mark Kitchen added: “Senior support services figures are saying that strong future growth is going to come from offering clients additional services, such as back office outsourcing, rather than selling to more customers in the UK or expanding overseas. It is always difficult to launch a new service to customers because of the perception of inexperience in the market place but hiring an interim manager can really help. The business can market the interim’s previous experience of delivering the service to help it win new business. When the interim spearheads delivery of the service for the client they will also train up permanent staff.”