Mark Whitehead 17 October 2018

Capita recovering but other outsourcers still at risk, experts warn

Capita recovering but other outsourcers still at risk, experts warn image

Outsourcing giant Capita is 'on the road to recovery' according to a report by market experts.

City-based data specialists Tussell say the decline of more than 80% in the company's share price over the last three years 'masks the green shoots of recovery'.

In April the company announced a major reorganisation after reporting £500m losses and £1.7bn debts.

It followed the collapse of construction outsourcer Carillion with £7bn of liabilities, which left many local authorities forced to find alternative contractors.

Tussell says Capita is now in a strong market position with lower risk, more predictability and better management, and is currently winning around 16 contracts a month.

But it warns there is still the risk of another major outsourcer going bust.

Figures supplied to LocalGov by Tussell show a huge drop in the amount of business being done by councils with Capita.

The value of its local authority contracts fell to £32.2m in the first six months of this year compared with £161m in the same period in 2016.

For the company this was partly offset by increases in business with central Government and other public sector bodies.

Tussell's data shows that while the number of new public sector contracts won by Capita has declined year-on-year, their value has doubled on average.

In a report for Government departments the analysts say too many outsourcing contracts have been agreed where the risks were not fully understood and the resulting financial stress is 'continuing to threaten several large outsourcers'.

Tussell's founder Gus Tugendhat told LocalGov: 'In the first six months of 2018, Capita has seen a fall in contract value from local government but overall its public sector footprint has grown.

'The company’s biggest advantage is a strong market position: with a contract win on average every two days, it is more embedded than any other supplier to the government.

'Some outsourcers remain financially stressed and there is still risk of another Carillion. But in our opinion the threat doesn’t come from Capita.'

A spokesperson for Capita told LocalGov: 'Government services remain a strategic area of focus for the company as we continue to deliver our multi-year transformation.

'In recent weeks, we have secured new or renewed contracts with Gas Safe Register, the Standards and Testing Agency, and Ealing Council.  

'Our strategy is to focus upon and leverage areas where Capita has core expertise, invest in our transformation, technology and operational capabilities, and productise more of our services.'

For more on outsourcing read our feature, 'Has outsourcing had its day?'

SIGN UP
For your free daily news bulletin
Highways jobs

Head of Looked After Children and Vulnerable Young People

Enfield London Borough Council
Up to £89,319
 This is an exciting opportunity to lead all the services that support Enfield’s children in care and care leavers. Enfield (City/Town), London (Greater)
Recuriter: Enfield London Borough Council

Head of Communities

Kirklees Metropolitan Council
to £61,751 (pay award pending)
We are looking for an innovative and knowledgeable senior professional to join our leadership team with strong experience of working in communities... Kirklees, West Yorkshire
Recuriter: Kirklees Metropolitan Council

Economic Development Officer (Town Centres)

North West Leicestershire District Council
Band F, £29,636 - £32,878 per annum
The Economic Development Officer (Town Centres) post forms part of the Council’s Business Focus team who provide help directly to businesses. Coalville, Leicestershire
Recuriter: North West Leicestershire District Council

Educational Psychologist

Camden London Borough Council
£44,131 - £53,34
The ideal candidates will have an excellent understanding of psychological frameworks and their application in... Camden, London (Greater)
Recuriter: Camden London Borough Council

Economic Development Officer

North West Leicestershire District Council
Band F, £29,636 - £32,878
Are you interested in a challenge and want to help shape the future of North West Leicestershire? Coalville, Leicestershire
Recuriter: North West Leicestershire District Council

Public Property

Latest issue - Public Property News

This issue of Public Property examines how how flexible workspaces can lead the way in regeneration for local authorities, Why local authority intervention is key to successful urban regeneration schemes and if the Government’s challenge of embracing beauty is an opportunity for communities.

The March issue also takes a closer look at Blackburn with Darwen Council's first digital health hub to help people gain control over health and care services.

Register for your free digital issue