KN74164

KEY NOTE Market Review Contracted-Out Services : August 2004

CLICK TO BUY

This report covers:canteens & catering, canteens, catering, computer and related activities, asylum and immigration legislation, hardware consultancy, Aviation Security, software consultancy and supply, data processing, database activities, research and development, consulting engineering, basic research, applied research, experimental development, legal, accounting and market research servies, legal activities, accounting, book-keeping and auditing activities, and tax consultancy, advertising, market research and public opinion polling, business management consultancy activities, mangaement activities of holding companies, architectural and engineering services, Architectural and Engineering Activities, and Related Technical Consultancy, technical testing and analysis, advertising, labour recruitment and personnel servies, investigation and security services,industrial cleaning,washing and dry cleaning, miscellaneous business activities,

Companies covered include: Compass Group, PricewaterhouseCoopers, Computacenter, KPMG, AMEC, WS Atkins, Fujitsu Services, GlaxoSmithKline Research & Development, Qinetig, Aegis, WPP, Hays Personnel Services, Manpower, Securicor, Reliance Security Services,OCS Group, The Davis Service Group, Rentolil Initial Servies,

EXECUTIVE SUMMARY

In 2003, the UK market for contracted-out services was worth an estimated £232.63bn at current prices, based on the turnover of firms operating in this sector. The market's value grew by 6.4% in 2003, producing a real growth rate of 3.6% after taking into account price inflation.

This Review covers the activities of ten separate and distinct sectors: canteens and catering; computer and related activities; research and development; legal, accounting and market research services; architectural and engineering services; advertising; labour recruitment and personnel services; investigation and security services; industrial cleaning; and washing and dry cleaning. For the sake of completeness, the Review also includes a `miscellaneous business activities' sector. Of these sectors, investigation and security services recorded the highest growth rate in 2003, at 13.6%. Real growth in this sector was just 8.1%, as a result of sector inflation of around 5%.

All sectors owe their existence to the fact that companies contract out operations that might otherwise be carried out by employees of the firm. Some small firms simply do not have the ability to conduct certain tasks, because their existing staff do not possess the necessary skills and it would not be economical to take on full-time, or even part-time, staff to carry them out. This is particularly true of professional tasks such as book-keeping, the provision of legal advice and the undertaking of market research. Reasons why larger companies might decide to contract out certain activities include cost savings, the increased quality of service resulting from the use of specialist skills, and the increasing need for managers to concentrate on a company's core activity.

Between 1999 and 2003, the climate for the contracted-out services industry was generally favourable, with steady economic growth, low inflation and a relative immunity to the fluctuations in currency exchange rates that have affected other sectors of the UK economy, such as manufacturing. The sector has also benefited from favourable industrial relations and from the increasing competitive pressures felt by companies as a result of regulatory change, which have led them to turn to outsourcing as a means of enabling managers to concentrate on their core business.

A less benign influence has been exerted by legislation at regional, national and European levels. This legislation is mainly concerned with hours of work and other conditions of employment. It has affected most suppliers of contracted-out services, but it has had the greatest impact on smaller organisations, which are well represented in this industry.

Some providers of business services offer a restricted range of services within a narrowly defined industrial sector, but others set out to provide a complete range of services, focused on the needs of clients and offering a 'one-stop shop' for a particular market. This latter approach is typified by the concept of 'total facilities management'. Although it is not well defined in government statistics, this sector has been growing strongly over the past few years, as evidenced by the growth in trade organisations and other bodies addressing its needs.

The various sectors of the contracted-out services industry have some common characteristics, but they are different in many other respects, since they are at different stages of market development and are affected differently by external events. For example, sectors such as canteens and catering, industrial cleaning, and washing and dry cleaning are relatively mature. For firms operating in these markets, opportunities for growth are most likely to be available from diversification or expansion into related sectors, rather than from expansion of the original core business. Security concerns are a negative influence for most companies, but they represent an opportunity for firms in the security sector, as illustrated by the high rate of growth in this sector in 2003.

Independent forecasts for the UK economy suggest a relatively favourable business climate over the period to 2008, and Key Note anticipates that the market as a whole will grow at much the same rate as it did over the 4 years from 1999 to 2003. Although demographic trends are generally not as significant for business-to-business markets as they are for consumer markets, the ageing of the UK population may affect some of the sectors covered by this Review. For instance, as the population of working age declines, there is likely to be a switch in the balance of cleaning and catering contracts from works premises to hospitals and care homes.

Pressure from the EU and other legislatures seems set to result in further legislation for the industry. However, there seems no reason why the UK Government should not be able to deliver on its promise to restrict the tendency to 'gold plate' EU legislation by adding unnecessary complication when translating EU directives into UK law. Also, on a positive note, enhanced awareness of the environment by both the public sector and the private sector will present opportunities for the development of existing services and the creation of new ones.

TABLE OF CONTENTS

Text © 2004 Key Note

Can't find what you need? Try our "Research on Request" market report service and define your own report research! Fixed prices - £150, £450 and £1,250 - and fixed delivery of 4, 5 and 14 days

Click here for full details

---

Ariadne - working together with our customers to enhance productivity and increase knowledge
© 2004 www.the-list.co.uk Ariadne
Last updated by Amanda Porteous September 2004