British outsourcing market shrank by more than a quarter in 2018 -ISG

Carillion

18/01/2019 12:57

EDINBURGH, Jan 18 (Reuters) - The British outsourcing market
shrank 27 percent to 2.5 billion euros ($2.85 billion) in 2018,
weighed down by uncertainty around the nation's decision to
leave the European Union, research firm Information Services
Group (ISG) said on Friday.
    In Europe, the Middle East and Africa (EMEA) traditional
business services contracted out to the sector, providing work
for companies such as Capita  CPI.L , Serco  SRP.L  and Mitie
 MTO.L , rose 9 percent year-on-year however to 12.9 billion
euros in 2018. 
    Within that, traditional services which do not require cloud
computing shrank 6 percent but other services which do expanded
by almost half to 4.9 billion euros, the research found. 
    The collapse of British contractor Carillion a year ago was
a high-water mark for the sector, forcing the government to step
in to guarantee services ranging from road-building to school
meals. It sparked public debate about the extent to which
private firms should run essential public work, and exacerbated
poor investor sentiment around the sector.
    A trend towards a more fragmented market was also confirmed,
with a 5 percent increase in the number of individual contracts
in the UK.
    "Even though the macro environment is more volatile now than
a year ago, demand for sourcing remains strong," said Steve
Hall, head of ISG. "We believe the industry will see an
accelerating growth trend in 2019, driven by a growing appetite
for digital transformation, even in the face of unforeseen
macro-economic challenges."
    Since the June 2016 Brexit vote, Britain's traditional
outsourcing market has slumped, ISG data showed.
    Prior to the vote, the UK averaged three 800-million-euro
quarters for traditional sourcing per year. Since then only one
quarter – the first quarter of 2017, which included the signing
of exceptionally large deals – reached that mark.
    The EMEA ISG Index, which measures commercial outsourcing
contracts with annual contract value of 4 million euros and
above, showed that in the fourth quarter alone the overall EMEA
outsourcing market grew 5 percent to a value of 3.0 billion
euros year-on-year. 
 

 (Reporting by Elisabeth O'Leary; editing by Stephen Addison)
 ((elizabeth.oleary@tr.com; +44 131 248 9208; Reuters Messaging:
elizabeth.oleary.thomsonreuters.com@reuters.net))