UK outsourcing market hits rut

Total deal value plunges by 30 per cent in Q1 but market expected to bounce back

A sharp fall in outsourcing deals in the UK and Europe is being viewed as a temporary blip by the research firm that compiled the figures.

The Information Service Group's (ISG) Outsourcing Index – formerly the TPI Index – tracks IT and business process outsourcing deals across EMEA with a value of €4m (£3.4m) or more.

Its figures suggest the market slowed in Q1, with the total of EMEA deals falling 20 per cent year on year and 30 per cent sequentially to €1.5bn. IT outsourcing made up €1.1bn of the total.

The UK - historically Europe's biggest outsourcing market by far – saw its deal total plunge by 30 per cent to €500m compared with Q1 2012.

ISG blamed this on a sharp drop in "new scope" rather than restructured deals, although ISG north Europe president John Keppel predicted that the market would bounce quickly.

"Following a solid 2012 performance, the European outsourcing market is still in a state of flux," he said.

"While on the surface these figures might seem worrying, our pipeline analysis indicates a more bullish performance in the second half of the year."

Despite the steep drop, the UK was only slightly below the average for first quarters over the past five years, ISG said, meaning that activity here "remains robust".

Across EMEA, the market awarded 105 contracts in EMEA in Q1, down 15 per cent year on year, ISG said.