Insider Media Limited

More than half of public sector organisations will seek to save costs through restructuring, mergers and consolidation over the next year. That’s according to a survey from finance and business adviser, Grant Thornton.

Fifty- eight per cent of respondents said mergers, restructuring and acquiring other businesses were the most effective ways to keep costs down.

Directors from the public sector see mergers and consolidations as an important approach to implementing spending reductions, as indicated by the 74 per cent who identify this as an opportunity to reduce costs. Forty-nine per cent see this as a chance to develop more strategic and smarter systems and 47 per cent as an opportunity to innovate.

According to the survey, the biggest challenge in undertaking a merger is cultural differences between organisations, as perceived by 61 per cent of respondents. This was followed by a lack of incentives by the senior management staff of the merging organisations (38 per cent) and the benefits of the merger not being validated (33 per cent).

Partner Jon Roberts, who is also head of Grant Thornton’s public sector team in the Midlands, said: "The coalition government has made deficit reduction its number one priority and with politicians setting expectations of achieving ‘more for less’, the period ahead is inevitably going to be tough and turbulent.

"Public sector staff will be constrained by having little practical guidance available on successful implementation of merger activity in the sector. Despite 30 per cent of respondents in the survey saying that in the past, mergers and consolidations have improved efficiencies, there is extensive evidence to suggest that reorganisation and restructuring in the sector often result in failure.

“The public sector therefore needs to have both the capacity and capability to respond. The inherent risks of reform on this unprecedented scale must be grasped firmly to ensure that the huge potential benefits are fully realised."