Global Economics

Are British Offshoring Fears Overblown?


The nonprofit Work Foundation says public perception of an "explosion" of outsourcing from Britain to India is exaggerated

Fears that scores of highly skilled jobs are vanishing overseas to India are overblown -- and offshoring is instead helping the creation of more interesting jobs in Europe.

That's according to a report by not-for-profit research organisation The Work Foundation, which has found the perception that high numbers of quality jobs are being lost through offshoring is not grounded in reality.

The report (Offshoring, a threat for the UK's knowledge jobs?) found little direct evidence of significant job migration -- just 5.5 per cent of all jobs lost in Europe were due to offshoring in the first quarter of this year -- despite a public view that runs counter to that.

According to The Work Foundation report, trade with developed countries far outweighs work going to India. For instance, the UK imports nearly four times more IT services and more than 16 times more business services from Germany than it does from India, it found. India ranks 15th on the list of countries the UK imports services from, the report said.

And although there has been an increase in the import of services from India over time, it said this is on a much smaller scale than the popular myth of "an explosion of offshore outsourcing activities".

The report said: "High-value knowledge-intensive services are still principally located in developed countries. Despite the media frenzy, India's growth in services has, in large measure been driven by an expansion of more routine support services. Progress towards higher-end knowledge intensive services has, so far, been rather slow."

It added: "Indian business insiders see future offshore outsourcing as an advantage for Europe enabling it to focus on the 'thinking part of the job', providing opportunities for 'better jobs' and 'knowledge work' in Europe."

The Work Foundation report also points to the emergence of a new outsourcing model in India - as Indian companies diversify their operations, even acquiring footholds in the developed regions they are gaining business from. "An Indian IT company may well have a base in that country but may also operate a number of satellite operations overseas and invest directly in operations in the European or US market," the report said.

The future for offshoring, it predicts, is likely to be "more complex", with companies offering a combination of near-shore and offshore activities and making use of different locations to optimise their business models.

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