Rampant offshoring could threaten a third of UK jobs

IT and customer service are the two most likely areas to be offshored

As many as a third of UK jobs at multinationals are at risk as businesses prepare to migrate major functions overseas, with IT firmly in the crosshairs, according to research.

The study by strategy consultancy Roland Berger Strategy Consultants polled senior executives at 200 UK-based multinationals and suggests that around 29 per cent of the current workforce within those businesses could be replaced in favour of lower-cost labour by 2015.

More than half of those polled have already started the process or are considering doing so. IT has been earmarked as the most suitable function to offshore, with 68 per cent of the respondents confirming that they are thinking about such a move. IT was followed by customer service (64 per cent), research and development (61 per cent) and sales management (59 per cent).

Some 81 per cent of the respondents intend to offshore key business areas within the next six years. According to Roland Berger, the results highlight a willingness to ship abroad functions previously considered as core to the business.

“This trend towards offshoring is markedly different from the international outsourcing we have seen to date, with both knowledge economy jobs and core business functions now being exported to economies that are more competitive in the global environment,” said UK managing partner at Roland Berger, David Stern.

“These are unlikely to return once the economy picks up, a trend that threatens a permanent rise in UK unemployment, leading to falling revenues and ultimately a decline in GDP,” said Stern.

Cost management is one of the key drivers for the offshoring acceleration and is considered a “fundamental driving force” for such decisions by 78 per cent of respondents.

The need to improve operational efficiency and thus remain competitive was also mentioned by 49 per cent of managers as a reason to offshore, while 76 per cent of those surveyed said such moves would better position their firms to take advantage of globalisation.

According to the study, macroeconomic factors contributing to erode UK competitiveness include high operating costs – wages, tax, regulatory spending – and a lack of skills cited by 58 per cent of the firms polled.

“The government must help UK companies and employees become more competitive in the global market place, otherwise the trickle of jobs moving offshore will become a torrent,” said Stern.

“This will require reducing bureaucracy, enhancing the skills of the labour pool and alleviating the cost burden on business, but this will present a huge challenge in the current economic climate.”