(see also http://www.investorschronicle.co.uk/MarketsAndSectors/Sectors/article/20090811/9a417d2c-8673-11de-80de-0015171400aa/Get-on-the-government-gravy-train.jsp)
http://www.guardian.co.uk/business/2009/sep/16/public-spending-winners
Serco and Capita expect to profit from government woes
Contraction of the public sector could present opportunities for firms that have benefited from the Thatcher revolution
Richard Wachman
guardian.co.uk, Wednesday 16 September 2009 19.43 BST
Contraction of the public sector could pave the way for private companies to play a bigger role in the economy, either via public private partnerships or as a result of more outsourcing to private firms. Groups such as Serco and Capita made huge profits from the privatisation of public services, initiated by the Thatcher government of the 1980s.
Local authorities account for a fifth of Capita's business. Starved of central government funding, local government is viewed as a fruitful source of income as councils seek to slash their finance and IT departments. Support services firm Serco, which runs prisons, railways, school inspections and London's congestion charge (pictured), said this summer that it expected to win new contracts.
The company recorded a 33% increase in pre-tax profit in the first half of the year to £83.4m, and looks likely to continue to benefit from the government's increasing need to outsource work that has been the domain of public sector employees. It has won more than £500m of work this year, including a £140m contract to provide and maintain a fleet of 6,000 bicycles for hire in central London.
Another company that has done well is contract caterer and school dinners firm Compass, headed by Richard Cousins. He said that the need to cut public-sector spending worldwide would provide good opportunities for growth. Cousins said only 20% to 25% of the healthcare and education markets were outsourced. The company saw profits rise from £281m to £387m for the first half to March 2009.
