Outsourcers: the good, the bad and the ugly

Outsourcers: the good, the bad and the ugly

Even before the collapse of Carillion, many investors were bearish on the outlook for outsourcing companies. A common refrain is that competition over non-specialised public sector works leads to suppliers competing on margin and – all too often – committing themselves to contracts they are later unable to fulfil profitably. When budgets overrun or the cost of labour increases, the situation worsens. It is a familiar pattern in the industry, leading many companies to include provisions in their accounts for onerous contracts they are obliged to complete, even at a loss.

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