Recent figures have shown that UK manufacturing firms are spending more on outsourcing services as leaders look to take better control of daily operations and increase profitability.
According to the latest UK Outsourcing Index, spending in the first six months of the year increased by 132% from the same period last year. This is in line with an increase in growth rate for the UK manufacturing sector, which saw a Q2 domestic sales rise of 42%.
Meanwhile, the index report showed that outsourcing of new areas, those being outsourced by firms for the first time, doubled over the year to 66%. The first time such a trend has occurred.
The managing director of arvato, the firm behind the report, said that outsourcing is a sensible choice for smaller firms and startups. Whether it’s to support core functions or take charge of non-core activities, outsourcing helps give focus.
Going on to say it empowers innovation and better strategic decision-making, Debra Maxwell said in a press release:
“The flexibility and efficiency savings outsourcing provides is the ideal tonic for their growing pains.”
Private sector spending contributed most to the total outsourcing spend of £734m, with IT and financial services like outsourced accountancy being particularly active markets. Along with media, energy and utility spend, these areas contributed 70%, or £513m, to the total pot.
The growth of outsourcing accounting services is partly in response to increasing layers of legislation and compliance that the government is bringing in. Greater efforts to control corporate tax by HM Revenue & Customs (HMRC) is also likely to be a driver.
However, it is not simply staying compliant with HMRC that sees small firms engaging with accounting providers. Business leaders recognise that such fundamental but time-consuming tasks takes up a lot of their valuable time, when they should be building the business, securing new contracts and looking for market opportunities.
Getting bogged down on tax affairs and the books can also impact on the decision-making process, causing wrong or less effective decisions to be made.
By removing the work of the accountant, these areas of running a business are improved. It essentially gives that control back to running the firm as it was imagined at startup stage. It is also like adding an accounts department similar in size and expertise to big hitters of the world, to a small company.
It seems that thinking big is often the best way to go, no matter how small your business.