Thursday, 10 September 2009

UK Outsourcing

(By Richard Holway 7.00am Thursday 10th Sept 09) Interesting article in Lex in the FT yesterday - UK Outsourcing.

"For anyone concerned about British government spending – be that on prisons, defence or even London’s new bike hire scheme – the solution is simple. Invest in outsourcing service firms such as Serco, Capita, G4S or VT Group, and join in the profits. All four companies have substantially outperformed the FTSE All-Share Index over the past two years. With significant income derived from stable public sector contracts, their outlook continues to brighten."

But "the recession is reshaping the industry. Customers may be increasing their use of outsourcing but they are also reducing the number of providers they use, preferring companies that can offer full services. While this benefits large providers, smaller firms without a definable niche are being absorbed into a consolidating industry. Capita made no less than 12 acquisitions of small competitors during 2008".

Today, George Osbourne, the Tory Shadow Chancellor will point to increased use of outsourcing as the way in which an incoming Conservative Government would provide 'More for Less' throughout the Public Sector. This chimes exactly with our report earlier this year - the Effect of a Conservative Government on UK SITS. Available ONLY to our subscribers.

I reproduce a chart from that report showing how a Conservative Government could affect our UK outsourcing forecasts from 2011 and beyond. No wonder the outlook for the firms involved are considered to be rosy.

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