UK outsourcing market 'lags behind rest of Europe' - analyst

Overall EMEA market reports record Q1 but Brexit drags down UK

The EMEA outsourcing market saw a record Q1 this year despite widespread Brexit uncertainty, according to market watcher ISG, but the UK has slipped behind other regions.

In the first three months of the year the value of outsourcing grew 23 per cent year on year to €3.9bn (£3.4bn).

Traditional outsourcing, which has often faltered in recent quarters, saw growth of 24 per cent to €2.6bn. As-a-service outsourcing, meanwhile, rose 21 per cent to €1.4bn.

Steve Hall, partner and president of ISG, said: "The drive for digital transformation shows no signs of slowing.

"European businesses are investing in their future, despite the continuing political and economic uncertainty in Europe and the six-month extension to the Brexit deadline.

"Much of EMEA's regional growth is being fuelled by a robust IaaS market, with hybrid and multi-cloud emerging as the architecture of choice."

In the UK, traditional outsourcing grew a "modest" seven per cent, ISG said, with the number of new deals flat.

"With an extended timeline and no clear conclusion in sight for the Brexit negotiations, UK companies are continuing to exercise caution in their traditional sourcing investments and are focusing their spending on new technologies that will increase their agility and efficiency," the analyst explained.

The DACH market saw traditional outsourcing grow 63 per cent year on year to just over €3bn, after "several quarters of lacklustre contracting".

ISG said the German market was helped by the start of a number of contracts that had previously been delayed as a result of Brexit uncertainty.

Globally, the market watcher said that regions globally are preparing for economic struggles.

"Growth has slowed in Europe and China, large enterprises appear to be preparing for a downturn in the US during the second half of the year and concerns of a broader, global slowdown remain," Hall added.

"While the dark clouds of a looming economic downturn are on the horizon, the long-term forecast for sourcing remains sunny."