Outsourcing Giants Made £6bn in Profit From UK’s Public Services Last Year

Outsourcing companies made an estimated £6bn in profit from public services last year, with close to 11% of all public expenditure going to these private firms.

A new report by the think tank Common Wealth found that the public sector spent £129bn on services provided by outsourcing firms, despite the Labour government pledging to bring more public services in-house.

Since the 1980s, private companies have increasingly been brought in to run services once offered by the state. It was hoped that these supposedly efficient firms could break up cumbersome state-owned monopolies. 

But the influx of private companies has just created new monopolies. Serco – which has a £2bn contract with the Royal Navy and also manages public bicycle hire schemes – gets 90% of its global revenue from public sector contracts, according to Common Wealth’s research. 

Meanwhile, outsourcing giants have faced numerous scandals over the years. Back in 2020 G4S was fined £44m by the Serious Fraud Office after overcharging the Ministry of Justice for tagging offenders, some of whom had died. 

Common Wealth found that around 1.3 million people are employed by these firms in the UK, which is over seven times the number of police officers in the country. Many of these workers are in low-paid jobs, as the pressure to win public contracts forces wages down, even as their bosses get huge salaries. Former Serco CEO Mark Irwin, for example, reportedly earned £845,000 a year. 

Report author Sophie Flinders said: “For too long the government has allowed outsourcing giants Mitie, Serco and Sodexo to grow rich from worsening living standards. Public sector-wide insourcing would restore decent work for over a million people across the country. The government should work with the unions to make insourcing a reality.”