In 2007/08, the UK government spent £79bn on the procurement of services from private and independent suppliers. Measured in terms of value-added, the industry is significantly larger than the ‘feed, beverages and tobacco’, ‘communication’, and ‘electricity, gas and water supply’ sectors. It is larger than aerospace, automotive and pharmaceuticals sectors combined.
Over the last 12 years, this sector has grown at an average annual rate of 5.4%, although the rate of growth slowed somewhat in the last four. As a share of GDP, the public service industry in the UK is slightly larger than that of the US, and almost double that of France and Spain. Australia and Sweden are slightly larger at 6%.
As a result of the Julius Review, we now have a clear picture of the size of the public service economy, or at least that part represented by private and independent sector providers. We know much less about the structure of this market – the variety of market models that have been used, the scale of these sub-markets, the range of services provided, the market share accounted for by private and voluntary providers, and by large, medium and small-scale providers.
There is virtually nothing available of the supply side of the market, in part because of the diverse range of market models and the different ways in which providers have structured themselves to meet demand.
With that in mind, this paper attempts to describe the structure of the public service economy in the UK. It is incomplete, in large part because of the paucity of information, but also because of the constraints of time and space. Another way of analysing the supply side might have involved an analysis of a variety of different suppliers, exploring the diversity of business models; again, that was not feasible given the resource constraints, and must await a future study.
We conclude with a brief analysis of some of the issues confronting the market over the immediate future.