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business environment

Public–private partnerships

Pros and cons

Nigel Watson examines the advantages and disadvantages of private-company involvement in the public sector

BT was privatised in 1984. Public–private partnerships allow private companies to have involvement in the public sector without requiring that state assets be sold off
David Adamson/Alamy

The UK is an example of a mixed economy. Mixed economies are composed of a privately owned private sector, and a state-owned public sector. Examples of private sector organisations include British Airways and Virgin Atlantic. Private companies have a variety of objectives, including survival, growth and innovation. Most private sector organisations are not charities, therefore profit is an important goal. If a private company supplies an over-priced or poorquality product, consumers can cut off its revenue stream by refusing to purchase the product again. This is dependent on companies operating in a competitive market, where consumers have a choice.

The public sector is owned and controlled by the government. A good example of a public sector organisation is the police. The goal of the public sector is not to make profit, instead the objective is to use taxpayers’ money wisely in order to provide highquality public services. In many cases public services have no revenue because the service is supplied free of charge. For example, NHS hospitals incur costs but fail to generate any revenue from the people who consume the services they supply.

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