Moving offshore

The CBI warned today that companies are under growing pressure to relocate parts of their business overseas.

The CBI warned today that companies are under growing pressure to relocate parts of their business overseas, arguing that the benefits outweigh the drawbacks, and claiming that the process will increase productivity, profitability and economic growth.

The employers’ organisation and Alba – the electronic goods and power tool specialist – published a MORI survey on the topic as business leaders gathered in Birmingham for the CBI annual conference.

The survey covered 150 CBI member companies employing three-quarters of a million people in the UK and 2.2 million globally.

51% of respondents to the survey said pressure to ‘off-shore’ has increased over the past two years, with 21% describing these pressures as ‘very great’. 30% said they have already taken some activities overseas and almost one in four are considering doing so in future.

The survey shows the trend increasingly extending beyond manufacturing to areas like information technology, financial services, design, research and development.

Unsurprisingly, it shows the main reason to off-shore is to cut costs, followed by improving the speed and quality of services. But restrictive regulation is having a growing impact – 26% of respondents currently considering a move said legislation was a reason.

The survey confirms that China and India remain the most popular off-shore locations, each cited by around half of respondents. But firms see Eastern Europe as an increasingly attractive alternative, with Poland and the Czech Republic the leading options.

The CBI says the most important reasons for choosing a country were low employment costs and the availability of a skilled workforce. It says low-skilled, low cost labour was once the main strength of the emerging economies, but this is changing as they produce more English-speaking, highly trained, graduates.

Surveyed firms said the number of jobs lost to the UK was on average equal to about 4% of their UK workforce.

The West Midlands has been the most affected region, while the Southeast and Northwest have also been hit. But the CBI pointed out that just over half of respondents have continued creating jobs in the UK since they began off-shoring.

The quality of jobs in the UK is rising with firms saying they are creating mostly skilled and graduate jobs in the UK, while semi-skilled and unskilled job creation is now moving off-shore.

The survey shows there are drawbacks to off-shoring, notably difficulties exercising managerial control and the risk of supply disruption. Smaller companies were less likely to off-shore than larger companies.

But there is no sign of the trend reversing, with 87% of respondents expressing satisfaction with the off-shoring experience.

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