Private sector's £46 billion hit from spending review

15 October 2010
15 October 2010 | Angeline Albert

Public sector spending cuts will hit private sector suppliers hard according to a report by PricewaterhouseCoopersPwC.

PwC research predicts private sector gross output related to government spending will fall £46 billion a year by 2014/15. Next week the Comprehensive Spending Review is likely to announce cuts of between 25 and 40 per cent in departments outside health and international aid.

PWC also predicts supplier expansion in outsourcing, including labour sourcing.

“A sector likely to see growth opportunities from spending cuts is outsourcing, and not only in back office services,” said Jon Sibson, PwC partner and head of public sector.

“Government and public sector organisations will look to reduce their non-core and fixed cost operations by increasing the use of private and voluntary sector organisations for the delivery of front-line services,” he said.

PwC have forecast that government buyers would be more discerning than over the past decade. It said only suppliers that offer real value for money and bring the investment capacity that the public sector lacks, would prosper.

PwC’s report said that, in particular, organisations with “flexible supplies of labour”, such as manpower service providers, will get new opportunities in future.

“Partnerships between government and private sector manpower providers could be put in place to performance manage and retrain staff, find new employment for them where possible, and to manage redundancies when necessary,” the report said.

The private sector will support the “public sector’s transformation over the next 4-5 years” in back office rationalisation and outsourcing, the report added.

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