Demand for IT services has helped outsourcing become one of the highest grossing industries in the UK, research has shown.

IT and data services provided by British-based businesses generate revenues of about Ј41.7bn per year, more than any other outsourcing sector in the UK, according to the report The size of the UK outsourcing market – across the private and public sectors.

Overall, outsourcing generates about Ј207bn each year, roughly eight per cent of the annual output of the UK economy, making the industry almost as big as the financial services sector, researchers from Oxford Economics found.

The share of the output of the UK economy enjoyed by outsourced services in 2009
Photo: Oxford Economics/Business Services Association

Mark Fox, CEO of the Business Services Association – which commissioned the research – said: “IT is an important part of an industry, which itself is a significant part of the UK economy.”

Richard Holway, chairman of analyst house TechMarketView, welcomed the research findings, adding that the practice of IT and IT-related business process outsourcing “is far more advanced here than in any other European country”.

The IT outsourcing industry employs some 340,000 people in the UK, more than 10 per cent of the some 3.1 million people employed by the outsourcing industry as a whole.

The bulk of outsourcing is carried out by the private sector, with a 60-40 split in terms of spend.

In recent years, a number of large outsourcing deals have been signed, including airport operator BAA striking a Ј100m deal with a consortium led by Capgemini and EDF Energy signing an IT support deal with Capgemini worth up to Ј100m.

According to the report, outsourcing contributes a further Ј115bn to the UK economy each year, through supplies, goods and services that are procured by outsourcing firms.

The report, largely based on turnover figures from 2009, defines an outsourced service as one that involves “a degree of delegation of management responsibility” and that is “more typically provided by an inhouse team of the customer themselves”.

The research is better news for the IT outsourcing industry, following recent figures that suggest organisations pared back their IT outsourcing spend in 2010.