Understanding the Public Services Industy

Public Services Industry Review
Section 2: How big is the PSI in the UK and how is
this changing?
2.1 The PSI in the UK covers a huge range of services, provided at both the central and
local government levels, by a wide variety of private and third sector organisations,
ranging from multinational companies to small local suppliers. In terms of its diversity
of providers and the range of service offerings, the PSI in the UK is the most developed
in the world.
2.2 This section of the Review draws on work commissioned from Oxford Economics 8 to
quantify the size and growth of the PSI in the UK.
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In 2007/8 the turnover of the UK PSI was £79bn. It generated £45bn in value
added and employed over 1.2 million people. If indirect and induced impacts are
included, its value-added rises to £88bn and jobs supported reaches 2.3 million.
Over the 12 year period for which comparable data are available the PSI has
grown at an average annual rate of over 8 per cent in nominal terms or 5.4 per
cent in real (inflation adjusted) terms. However, in recent years its rate of growth
has slowed.
UK’s PSI leads the world
2.3 Given the range of areas where there is private and third sector involvement
in the delivery of public services in the UK and the variety and development of
commissioning methods used, the UK PSI market is generally considered to be the
most developed, as well as one of the largest, in the world.
2.4 This is confirmed by an analysis of the size of the PSI for a sample of OECD countries.
When expressed as percentage of GDP, this ranges from just over 6 per cent in Sweden
and Australia to less than 3 per cent in Spain (Figure 2.1). In the UK the PSI accounts
for 5.7 per cent of GDP, up from 4.2 per cent in 1995/96. This is slightly higher than its
share in the US and nearly double that of France and Spain.
8 See The public services industry in the UK and The Market for Public Services – International Comparisons Oxford
Economics, published alongside the Review.
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