UK manufacturing firm outsourcing spend increases to £130 million

UK manufacturing firms increased their spending on outsourced IT services to £130 million during the first half of this year, according to a report.


UK manufacturing firms increased spending on outsourced IT services to £130 million during the first half of this year, research has shown.

The UK Outsourcing Index report, compiled by business process outsourcing (BPO) provider arvato and industry analyst NelsonHall, revealed that the value of deals in the first six months of 2014 increased 132 percent year on year, driven by wider growth within the sector. A recent British Chamber of Commerce survey found that 42 percent of manufacturers reported a rise in domestic sales in the second quarter - the highest since the survey began in 1989.

The outsourcing data showed that the total volume of manufacturing deals was also up by 50 percent. Meanwhile the proportion of services outsourced for the first time doubled year on year to 66 percent.

“While not seen as a traditional market for business process and IT outsourcing, manufacturers under increasing growth pressure are turning to outsourcers to help support non-core functions, allowing them to focus on their expansion strategies and product innovation,” said Debra Maxwell, managing director of arvato UK.

“The flexibility and efficiency savings outsourcing provides is the ideal tonic for their growing pains."

The overall outsourcing spend reached £734 million from 34 contracts, with the private sector accounting for the majority. Telecoms and media, financial services and energy and utilities were the most active sectors, responsible for 70 percent, or £513 million.

The research showed that the local government market had matured, with three quarters of all contracts being extensions, renewals or the replacement of incumbents, an increase from 43 percent in the first half of 2013. The average deal value in local government also grew, up by 67 percent year on year.

BPO deals were the most common, accounting for more than half, 52 percent, of all contracts.