Opportunities for the UK economy
145. There is no doubt that countries such as India
have an advantage over the UK in that they have an abundance of
workers willing to take lower wages. However, the UK service sector
and the CCC industry in particular has many other competitive
advantages over low-cost economies. To retain this advantage,
the UK service sector, and in particular CCCs, needs to exploit
the things which it does best. This includes exploiting the experience
and skills which they have built up over the last few decades.
146. Most of our witnesses agreed that customer service
is one of the areas in which the UK has a competitive advantage
over other countries. The CCA told us that UK economy had: "a
lot of experience in setting up and managing customer service
departments and contact centres here in the UK, which they [businesses
which offshored] will not get in emerging markets".[284]
The quality and experience of UK CCCs' operations has meant that
the UK has been successful in attracting inward investment in
the past, especially from the US.[285]
UNIFI told us that the original reasons for such businesses to
site their CCCs in the UK still held true, that is, the quality
they provided with high skills and training. This, they suggested,
had been proved by the number of US businesses which had remained
in the UK despite the low-cost opportunities available to them.[286]
147. The CWU told us that there still was a high
margin for improvement in productivity and entrepreneurial response
in UK CCC businesses. They argued that if UK businesses could
capture this it might outweigh the increased margins from cost
reductions businesses gained simply by going to low-cost economies.[287]
The NOA suggested that only a fraction of the potential value
of outsourcing had been extracted by UK business. Increased productivity,
profitability, global competitiveness and enhanced economic growth
could all be achieved through re-evaluation by business of their
approach to outsourcing. They believed that if these benefits
were realised in the UK, businesses would not need to offshore
their CCCs. The NAO also argued that the UK was ideally placed
in Europe to capitalise on the trend towards greater outsourcing
by businesses in other countries by improving the quality of its
services, an advantage which other Community members would find
hard to match. [288]
148. As low-cost economies develop, new opportunities
will arise for UK businesses to trade their products and services
within these new markets. In the long-term, low-cost economies
will 'migrate' further up the value chain, promoting development
in these countries and ultimately increasing the global markets
for UK products and services.[289]
The geographic nature of offshoring also brings its own advantages.
UK businesses which offshore will be able to take advantage of
their presence in these countries to provide similar products
and services to indigenous businesses and consumers. Developers
and support personnel in the relevant regions will have a better
understanding of customers' needs, regulatory compliances and
regional preferences in these economies, and will be better placed
to successfully launch new products or services which are being
provided.
149. Outsourcing
and, in particular, offshoring, provides UK businesses with the
solution to specific needs, for example lower costs and the ability
to expand operations quickly. However, businesses need to be sure
that these benefits are weighed against the costs they could incur
from poorer infrastructure and lower consumer confidence.
150. We are aware
that the Government is currently in the process of compiling a
more detailed response to the issue of offshoring and we look
forward to its results. We recommend that the Government keep
this situation under review. If it becomes clear that job losses
in the service sector are becoming a serious problem, we have
no doubts that this will be one area our successor Committee will
want to pursue in the future.
222 Q 246 Back
223
Q 203 Back
224
National Statistics (series EWSP, ABML) Back
225
National Statistics (series QTPZ, ABML) Back
226
National Statistics (series YEJA ,YEJC ) Back
227
Appendix 17 Back
228
Q 268 Back
229
Q 271 Back
230
For example see Q 154 (UNIFI) and Q 221(Amicus) Back
231
Q 339 Back
232
Q 264 Back
233
ONS website (23 February 2005): www.statistics.gov.uk/pdfdir/lmsuk0204.pdf Back
234
OEF, Economic Outlook, April 2004 Back
235
DTI, The UK Contact Centre Industry,: A Study, May 2004,
pp3-10 Back
236
Who's Offshoring website (23 February 2005): www.whosoffshoring.co.uk/html/index.html? Back
237
Q 201 (Amicus) and Q 207(CWU) Back
238
Q 334 Back
239
ONS website (23 February 2005): www.statistics.gov.uk/pdfdir/lmsuk0204.pdf Back
240
NASSCOM - Evalueserve, Impact of Global Sourcing on the UK
Economy 2003-2010, 2003 Back
241
For example see Q 154 (UNIFI) and Q 221 (Amicus) Back
242
Q 333 (NASSCOM), Q 153 (UNIFI) and Q 207 (Amicus) Back
243
Q 239 Back
244
Q 192 (UNIFI) and Q 204 (Amicus) Back
245
McKinsey Global Institute, Offshoring: Is it a Win-Win Game?,
August 2003 Back
246
For example see Q 153 (UNIFI) and Q 207 (CWU) Back
247
Q 322 Back
248
Q 181 Back
249
Q 287 Back
250
Q 241 Back
251
In 2002, over 90 percent of the increase in the UK's IT offshoring
went to India. Source: Appendix 16 para 3.4 Back
252
Appendix 1, para 3 Back
253
Q 369 Back
254
Q 247 Back
255
DTI, The UK Contact Centre Industry,: A Study, May 2004,
pp177-178 Back
256
Q 247 Back
257
Q 354 Back
258
Q 328 Back
259
Ibid Back
260
DTI, The UK Contact Centre Industry,: A Study, May 2004,
p187 Back
261
Appendix 16, para 5.3.4-5.4.7 Back
262
Q 283 Back
263
Call centre operator opts for Scotland over India, Daily Telegraph,
17 January 2004 Back
264
RHL website (23 February 2005): www.response-handling.com/press_releases/26.htm Back
265
Who's Offshoring website (23 February 2005): www.whosoffshoring.co.uk/html/index.html? Back
266
Q 325 Back
267
For example see: Nationwide Building Society, Nationwide says
no to sending call centres abroad, 12 January 2004 Back
268
Q 292 Back
269
DTI, The UK Contact Centre Industry,: A Study, May 2004,
p182 Back
270
Q 198 Back
271
Q 148 Back
272
Q 271 Back
273
Q 174 Back
274
Alliance & Leicester Press Notice, Keep Financial Call
Centres in Britain, 054/04/GB, 3 May 2004 Back
275
Q 192 Back
276
DTI, The UK Contact Centre Industry,: A Study, May 2004,
p108 Back
277
Q 205 Back
278
Q 174 Back
279
Q 158 Back
280
Q 205 Back
281
Q 169 Back
282
Q 154 Back
283
Appendix 2 Back
284
Q 281 Back
285
Q 268 Back
286
Q 156 Back
287
Q 229 Back
288
Appendix 17, section 3-4 Back
289
Appendix 19, para 1.6 Back