In this report, contracted-out services are defined as business-to-business services that could in principle be supplied in-house by an enterprise, but that instead are bought in from specialist providers. The following sectors are analysed in detail:

• contract catering
• computer services
• accounting, market research and legal services
• architectural and engineering services
• advertising
• labour recruitment and personnel services
• investigation and security services
• contract cleaning
• laundry and dry-cleaning services.

Also included in the figures for the total market, but not covered separately within the report, are:

• research and development
• miscellaneous business activities not elsewhere classified.

MARKET SIZE

In 2001, Key Note estimates the value of the market for contracted-out services at £213.7bn — 49.5 percent higher, at current prices, than it was in 1997. The causes of this growth vary between sectors, but certain factors have encouraged the development of outsourcing across almost all sectors. Among these influences are the acceptance of outsourcing as a way to allow management effort to be focused on the running of the core business, and the favourable climate for industrial relations.

INDUSTRY STRUCTURE

The industry that provides contracted-out services to much of the rest of UK industry is, in general, highly fragmented, although significant differences exist between individual sectors. Overall, in 2001, 60 percent of firms in the sector had an annual turnover of less than £100,000. The sector provides over 3.4 million jobs, 29.3 percent of which are part time, with 71.5 percent of these part-time jobs being filled by women.

Many providers of contracted-out services started out in business as providers of one of the core activities considered in this report, such as cleaning, catering or security services. However, in many cases, these companies have expanded their range of activities into other sectors of the market. Indeed, most of the larger companies in the cleaning sector also offer services such as security, catering and washroom services as part of a 'one-stop shop' for clients. Rentokil Initial PLC, for instance, is engaged in the provision of facilities management, hygiene, security, pest control and the supply of tropical plants, as well as parcels delivery and conferencing services.