Government spending cuts set to benefit outsourcing firms

The incoming coalition government’s pledge to cut £6bn worth of spending this financial year will ultimately benefit outsourcing companies as Whitehall looks to shed staffing costs.

With the Conservatives and Liberal Democrats vowing to significantly accelerate the deficit reduction plan, analysts said businesses such as Serco and Capita would be asked to help make efficiencies.

Henry Carver, an analyst at KBC Peel Hunt, told the Telegraph the deficit reduction plan was “very good news” for Capita, the back-office specialist.

“We know they have long been in discussions with senior Tory MPs about how they can start to deliver efficiencies in central government immediately after the election if they needed to,” he added.

Prior to the election the Tories told Personnel Today government HR and back-office functions could be outsourced within two years if they came to power.

Industry experts have forecast that both internal shared services and outsourcing would achieve up to 30% efficiencies in headcount reduction, putting about 6,000 HR jobs at risk.

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