Carillion a factor as European outsourcing contracts slump - report

A worker operates a crane on Carillion's Midland Metropolitan Hospital construction site in Smethwick, Britain January 29, 2018. REUTERS/Darren Staples

EDINBURGH (Reuters) - The collapse of construction firm Carillion and other problems in the British market contributed to a 20 percent drop in outsourcing contracts in Europe in the first three months of 2018, a report published on Wednesday showed.

Research firm Information Services Group (ISG), which tracks the outsourcing market, said the value of outsourcing contracts in Europe fell to 3 billion euros ($3.7 billion) in the first quarter.

Companies’ preparation for new privacy rules under the European Union General Data Protection Regulation was another factor behind the slump in contracts.

The report predicted that outsourcing would continue to have a “bumpy ride” in the months ahead.

British outsourcing giants like Capita CPI.L and Interserve IRV.L, who provide third-party services largely so that businesses can cut costs, have been beset by problems with underperforming contracts, a sprawling structure and caution in business spending while the shape of Britain's exit from the European Union is decided.

“The recent demise of Carillion and financial uncertainty of some high-profile outsourcing companies has been extensively reported, and has added a new degree of caution in the market,” said Steve Hall, partner and president of ISG EMEA.

New rules under the EU General Data Protection Regulation come into force on May 25 in the biggest overhaul of privacy rules since the birth of the internet.

They will introduce fines for companies that fail to comply and preparing for them has been prioritised by business, the report said.

($1 = 0.8073 euros)

Reporting by Elisabeth O’Leary; Editing by Susan Fenton