10 December 2004
The Gershon efficiency review will contribute to growth of almost 50% in the UK public sector outsourcing market over the next three years, it was predicted this week.
According to the research company Kable, the value of the market will grow from £45bn in 2004/05 to more than £67bn by 2006/07. The annual growth rate is estimated at 22%, with significant shifts in outsourcing activity away from traditional markets such as local government towards defence and education.
The trend is a result of efficiency targets, staff reduction plans and budgetary pressures and could make some sectors that have kept services in-house more inclined to outsource.
Karen Swinden, Kable's head of forecasting, said: 'Given that the public sector has been set a target of saving £21.5bn a year by 2008, through shared services, business process reengineering and cutting 100,000 civil service jobs, outsourcing could receive a big boost.'
Kable estimates that the biggest market growth areas will be in defence, the NHS and education. It points to the potential of outsourcing the Ministry of Defence's civilian staff, who cost the department more than £3bn per year, and expects the market to increase by 300% from last year's low base of £1.1bn.
Outsourced health care, such as diagnostic treatment centres, represent the largest growth area for the NHS, which currently spends 10% of its annual budget with the private sector. Kable expects this market to grow by 164%.
In education, it points to the potential of outsourcing administrative and direct education services and predicts the market will grow by 131%.
PFdec2004
