The commercial outsourcing market in Europe, the Middle East and Africa (EMEA) has yet to exhibit signs of recovery following the sharp downturn in demand in mid-2008, according to the latest figures published by data and advisory firm TPI in their Q2 2010 Index.

Reduced outsourcing activity in the UK and Germany in the first half of 2010 has caused an overall decline from the same period last year.

In the first half of 2010, the Nordics accounted for almost 17% of global total contract value (TCV), making it the second-largest outsourcing market in the world behind the US. The impact of the decline in these traditionally strong markets was offset somewhat by a number of large contract signings in the Nordic region and France.

“So far this year the Nordics ranked as the second largest outsourcing market in the world – mostly owed to a few significant restructuring deals," noted Duncan Aitchison, partner and president of TPI, EMEA. "Germany dipped a little this year but is still reasonably strong and has the greatest potential for sustained growth. In comparison, growth in the Nordic region is likely to be less consistent.”

He added, “The UK is without a doubt the market that has suffered the most, certainly in Europe but the case could be made globally. For a long time the two big markets were the US and the UK, with the UK knocking a 20%+ of the global market –reaching close to 30% in 2008. We have witness it step down, halving from 2008-2009 and again from 2009 to the first half of 2010.”

One of the latest additions to the EMEA TPI Index is the reporting on public sector outsourcing trends in the region , which has shown that public sector contracts awarded in EMEA in the first half of 2010 stood at over €9bn, with the UK Public Sector accounting for 86% of EMEA public sector expenditure.

Between 2005 and 2009, the UK public sector accounted for 57% of all outsourcing, compared to the commercial sector’s 43% share. In the first half of 2010, there was a notable shift as the commercial sector share fell to just 25% of the UK market. With a 75% share of UK outsourcing spending and an increased appetite to explore outsourcing options, the public sector has become an increasingly important target for service providers to help balance the reduced opportunities in the commercial sector.

Nevertheless, Aitchinson admits that activity is not likely to increase significantly, as few contracts have been launched. “So far this year there has been little to no news of contracts in the works. The first six months were dominated by talk about the election, and now the coalition government is setting up the agenda.”

The overall picture for the remainder of 2010 is not a rosy one, given the number of uncertainties that prevail at the macroeconomic context.