MINISTERS need to encourage schools and councils to take more risks if they want the market for private-sector education services to grow, a government-commissioned report says.

Policy-makers have been disappointed by the “patchy” development of the market in supplying services to education authorities and schools, according to the study by Bannock Consulting and Indepen Business Consultants.

The report, which examines new ways of working in LEAs, says growth of privatised services has been held back by inertia and reluctance by schools and LEAs to enter the unfamiliar commercial world.

“For people unused to commercial negotiation, dealing with private providers can introduce risks and, in some cases, lead to an unwillingness to participate,” it said.

The consultants found legitimate fears among LEAs and schools that there was not enough competition in the schools’ services market. The small number of firms competing for business might mean one-sided contracts as well as high prices and delivery problems.

Moves to encourage partnerships within the public sector may deter LEAs from working with the private sector in future - and firms may be less willing to invest.

“If it remains government policy to stimulate private provision, procurers will need more encouragement to take the necessary risks and support in how to do this effectively,” the study says.

It comes as the Government’s education privatisation programme continues to falter. Already this year Atkins Education has announced its intention to pull out of running Southwark LEA while Serco, the company doing a similar job in Bradford, has had it targets lowered after hitting only five out of 52 in its first year.

Graham Lane, Local Government Association education chair, said firms were running LEAs with “no accountability to anybody” and had “a record of failure”.

John Bangs, head of education at the National Union of Teachers, said LEAs did not need companies’ help: “We don’t need to stimulate a market that apparently, in terms of outsourcing, just isn’t there. Leave it alone and let authorities themselves develop from inside the enormous and fantastic experience (they have).”

Iestyn Williams, Serco Learning managing director, said he believed partnerships between schools and firms would be increasingly popular as schools continued to form clusters to buy services.

As The TES revealed last week, Serco is in negotiations with a group of headteachers in Essex to provide advice services.

A Department for Education and Skills spokeswoman said there was evidence that the education services market was still developing. East Sussex and Lincolnshire had given contracts to CfBT for school improvement and Surrey was finalising a strategic partnership with Vosper Thorneycroft Education.

But ministers would be looking to see whether any further action was appropriate to encourage contracting out.