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What the UK election results mean for the outsourcing sector

  • A Conservative government will likely increase the role of outsourcing in the public sector, presenting an opportunity for outsourcers to renew their reputations.
  • Those companies that emphasise accountability and transparency will be best positioned to defy the industry’s reputation.

A Conservative majority has been voted in, and the outsourcing sector is set for business prosperity. While an apparent win for outsourcers’ balance sheets, this also poses substantial reputational risks for the industry. alva will be tracking the reputational shifts closely to see if the increased scrutiny and subsequent reputational issues outweighs the extra income for the leading outsourcers.

Greater business opportunities for outsourcers

On face value, it would seem a Conservative government will be good for business in the outsourcing sector, and thus reputations. Simply, Conservatives favour smaller government and more privatisation, which will present greater opportunities for outsourcers to win government contracts ranging anywhere from prisons to asylum detention to NHS transportation services. Under the coalition, public spending on outsourcing is said to have nearly doubled, and is expected to grow under the Conservatives. In their manifesto, the Conservatives pledged to allocate a third of central government procurement to small and medium enterprises, up from 25% under the coalition.

Outsourcers who win government contracts will be more vulnerable to public scrutiny

However, as the new government outsources more services under the new government, outsourcing providers are likely to come under the microscope. While G4S and Serco have the most government contracts, they consistently sit at the bottom of their comparator set, as calculated by alva’s scoring methodology. Criticism of profit margins is more amplified when profits are coming from taxpayer money. A4e’s reputation was so tarnished after defrauding the taxpayer an alleged £300,000 that the company is now all but extinct.

The issues of transparency and accountability in outsourcing have been hammered home by the industry’s perennial antagonist, Margaret Hodge, and her criticism is unlikely to go away as she kept her seat in the election. The Cabinet Office, likewise, is reported to be asking contractors to report revenue and profit margins, and subjecting government contracts to annual audits. If the Conservatives stick to their pledge and increase outsourcing and SME procurement, smaller outsourcers will also be subject to audits.

Reputational winners and losers in outsourcing

At this time of apparent opportunism in the outsourcing sector, outsourcers need to be more careful than ever in monitoring their reputations. Emphasising to the government and the public that they are open and willing to be held to account can help outsourcers avoid reputational damage from the likes of Margaret Hodge and privatisation opponents.

So, which outsources will win, and which will lose? The well-known players may get a second chance at demonstrating accountability and transparency, or could continue to be haunted by past damages. As smaller providers enter the spotlight, they risk being defined by the poor reputation that precedes them. But they also have the opportunity to set themselves apart. Companies that manage to defy the reputation that defines a sector and demonstrate accountability and transparency will be the ultimate winners.

alva’s reputation suite can help outsourcers stay on top of developments in their industry, ensuring they are well positioned against their competitors. Contact our team of specialists to find out more and set up a free demo.

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