The latest arvato Quarterly Outsourcing Index reveals that £2.21bn worth of outsourcing deals were struck between July and September of this year in the UK. The number represents an outsourcing spend that has more than trebled in the third quarter of 2015 when compared to Q2.

Contract length also increased by 38 per cent since the second quarter, with contract value increased by 69 per cent compared to the same quarter in 2014.

Post-election confidence

The report points to a sharp increase in market confidence following May’s general election, a likely cause for the steep increase in outsourcing spend. According to arvato, the 269 per cent surge in contract value, when compared to the previous quarter, could indicate the withholding on the part of both private and public sector to enter into big contracts before the election results were revealed.

In the words of Bryan Mouat, CEO of arvato Financial solutions in the UK and Ireland, “political certainty following the general election has clearly had a positive impact on the outsourcing industry. With market confidence returning, organisations across the private and public sectors are continuing to turn to outsourcing partners for the expertise and technology to help them achieve their objectives”.

Public sector outsourcing integral part of growth

The rapid growth in public sector outsourcing value has been a key part of the latest surge in the outsourcing market. Q3 2015 saw contracts worth a total of £2bn signed between the public sector and service providers, compared to £105m in the previous quarter and £275m in the third quarter of 2014.

Of the £2bn signed this quarter, £1.73bn alone was spent on seven mega contracts between the central government and service suppliers for the provision of a wide range of functions, from IT infrastructure solutions to back office services.

Local government deals have followed the general trend, largely due to severe cuts in funding and the minimum wage increase. Outsourcing in the sector has increased at an average rate of 67 per cent year-on-year, and contract value surged 200 per cent compared to the third quarter of 2014.

As Debra Maxwell, CEO of CRM and Public Sector at arvato UK and Ireland, commented: “with even greater cuts to funding expected in this month’s Spending Review, the growth seen across local government will only continue. Councils are increasingly looking to change how they operate and deliver services to leverage significant savings.”

HR remains popular, while telecoms and retail increase outsourcing

According to the survey, the value of HR outsourcing contracts increased by 193 per cent year-on-year, making it the most outsourced BPO service line this quarter. HR’s quarterly success is in great part due to the public sector, which makes up 60 per cent of the sector’s outsourcing value.

Apart from the public sector, the telecom industry has been the biggest outsourcer this quarter. Its outsourcing amounted to £133m for Q3, with a year-on-year growth of 244 per cent.

Finally, the report also revealed a remarkable surge in retail sector outsourcing. The sector increased from outsourcing services worth £5m in Q3 2014 to an impressive £42m this last quarter.

Read the full report.

For weekly news updates, subscribe to our email newsletter.

Related: “Local Government Continues to be the Vanguard of UK Outsourcing” says arvato