Understanding the Public Services Industy

Public Services Industry Review
What does the PSI contribute in terms of value added and employment?
2.15 From an economy-wide perspective, the £79.4bn of purchases by the public sector
on services from the private and third sectors in 2007/08 generated a value added
contribution to GDP of £44.8bn. This has risen substantially from just £24bn in 1995/96
(in real terms) as the PSI share in GDP has grown from 4.2 per cent to 5.7 per cent.
2.16 The number of jobs supported by the PSI has grown by nearly half a million since
1995/96 to 1.24 million in 2007/08. By 2010/11, under the central projection, the PSI is
expected to support about 4 per cent more jobs than it does today (bringing the total to
1.29 million) 12 .
2.17 For cross-industry comparisons it is sometimes relevant to include the second-round,
or indirect and induced impacts 13 on GDP and employment. In this case the PSI
contributions almost double – and the PSI accounts for £88bn of value added and
2.3 million jobs.
How does the PSI compare in size to other sectors?
2.18 To put the size of the PSI into context it is helpful to consider how it compares to other
industries (this is shown in Figure 2.8). In terms of GVA, the PSI output of £45bn in
2007/08 was slightly less than ‘Transport and Storage’ (£55bn in 2006) but significantly
larger than ‘Food, beverages and tobacco’ (£23bn), ‘Communication’ (£28bn),
‘Electricity, gas and water supply’ (£32bn) and ‘Hotels and restaurants’ (£36bn).
In terms of employment the PSI generated slightly more jobs than ‘Transport and
storage’ (1.1 million in 2007) but less than ‘Hotels and Restaurants’ (1.9 million).
12 Much of this new activity in the private and third sectors will represent a simple shift from the public sector, while some
activity will reflect growing demand.
13 Indirect impacts are caused by employment and activity supported down the supply chain to the public services
industry, as a result of the public service industry purchasing goods and services from UK suppliers. Induced impacts
are caused by those directly or indirectly employed in the public services industry spending their incomes on goods
and services in the wider UK economy.
18