|What is the Government doing about the loss of Call Centres to India?
6 Jan 2004
This is the text of a letter Sir George recently received from the the DTI:
Department of Trade and Industry
1 Victoria Street
London SW1H 0ET
The Rt Hon Patricia Hewitt MP
Secretary of State for Trade and Industry
22 December 2003
Thank you for your letter of 19 November 2003, enclosing an email from your constituent, XXX of XXX about the issue of offshoring, that is outsourcing abroad, service sector jobs. .
This Government is sympathetic to the concerns of those immediately affected by plans to offshore services work. We know these announcements are painful, as they affect many of the same communities left devastated by the loss of manufacturing industry twenty years ago. And we take the local employment effects very seriously -especially given our record of job creation of over 1.7 million jobs since 1997.
However, we do need to put this into perspective. This is not a zero sum game. Headlines do not tell the whole story. They miss the thousands of jobs created or safeguarded by companies choosing to locate in the UK. Or the many companies that look at offshoring and choose to stay.
The UK service sector heavily contributes to our economic success. It accounts for almost 21 million jobs and 70% of our economy. We are world leaders in financial services, accountancy, consulting and business services. The UK is the second largest global recipient of Foreign Direct Investment behind the US. In the year 2002 to 2003 alone, inward investment created over 34,000 new jobs in the UK. Just recently, a CHI report showed confidence up in the service sector. It is against this background that the recent decisions of a number of firms to offshore their back office operations has to be set in context.
Offshoring is not a new issue. In the UK companies are operating in an increasingly competitive, global business environment, where they need the freedom to choose where to locate to maximise their competitive advantage, minimise costs and reduce prices to consumers. The decision where to locate operations is a commercial matter for companies to take. Such decisions are complex. Labour cost factors are one consideration but not the only one. Falling communication costs, coupled with the spread of technology, has made it easier for some services to be provided across long distances and international borders, including in developing countries.
But many services, for example haircuts or dentistry, cannot be undertaken abroad because they are produced and consumed locally, face to face. Even where services could be undertaken abroad, companies may also factor into their considerations the need or desire to locate close to their customers -and many do choose not to offshore for this reason.
We can not ignore those companies who have decided to offshore and now wish they hadn't. Their reasons are that they failed to see the difficulty of managing staff; the difficulty of maintaining standards when staff are thousands of miles away; and the difficulty of offering proper customer service from staff who, however good their education, have never been to the UK.
Data on offshoring are piecemeal. What we see are examples of activity. What we need is to open up the debate on offshoring, to understand better what is happening, and what is motivating companies -both those that offshore and those that don't. But we also need to address some fundamental misunderstandings.
Take the case of call centres. The first misunderstanding is that we do not want these jobs in this country and that the UK call centre sector is in terminal decline. The reality is that we have more call centres than any other European country and that new ones are being opened all the time. Estimates vary, but industry experts suggest there are around 5,500 UK call centres employing almost 400,000 workers. The skills and vital local knowledge of our workforce, the stable economic background created by this Government and the UK's strong IT and telecoms infrastructure mean we remain well placed to attract call centre jobs in a very competitive market.
Call centres are also vital to the success of many different sectors -from banking and insurance to manufacturing and telecoms -providing a vital link with customers, raising focus, informing strategy, adding value.
Britain remains in a strong position to attract certain types of high added-value call centre work -with our language, location, infrastructure and customer service skills.
A second misunderstanding is that protectionism of any kind offers any sort of solution. Protectionism is clearly not the right response. UK exports are worth £270 billion a year -including £86 billion of service exports -and many jobs depend upon open markets abroad. Given our leading position as a global exporter of services, we need to keep pressing for further opening up of markets for our exports. We are doing this within Europe through the proposed new Services Directive, and in the wider world through the Doha round of the World Trade Organisation. We cannot therefore at the same time adopt a protectionist response to off shoring at home. Nor should we. As we saw when the EU grew to include poorer countries such as Ireland, Spain, Greece and Portugal, as they have grown, so have we. And so have our exports to them, generating jobs and profits here. And so have their investment back into the UK. So instead of protectionism, we need to enable and encourage firms in the UK to invest in new technology, workforce skills and to move into advanced, high value activities. We need to continue to make the UK an attractive place to invest and do business.
And third, we are powerless in the face of this global restructuring. This is not true, although globalisation of course offers many challenges. But being a major global player, the UK must be ready to meet these challenges as well as new opportunities. Where companies are undecided, we can help them weigh up the costs. If companies do decide to restructure, inside or outside the UK, the Government, through UK Trade and Investment, can provide advice to companies to do this successfully, while minimising risks and maximising benefits to the UK economy.
Our response is three-fold.
First, we have to keep raising our game, ensuring that companies and their staff continually upgrade their skills and technologies.
Second, where jobs are lost, we must do everything we can to help people find new jobs and, if necessary, new skills as quickly as possible, calling on the services of Job Centre Plus of which the Rapid Response Service is part.
Third, we have to do even more to build strong, sustainable economies in all the regions of the UK. To raise the business birth-rate, forge strong partnerships between regional universities and business, develop the skills that the regional economy needs, and attract more inward investors and improve the local infrastructure- in other words, to create a virtuous circle of better skills, better jobs and better, more profitable businesses.
This Government takes the issues surrounding off shoring seriously. We know it is not going to be easy as there is much more we need to know and do. That is why I announced to the CBI Welsh Conference on 5 December the publication of a DTI consultation paper "The Impact of Increasing International Competition in Services". Copies have been placed in the library of the House. This paper outlines the main issues and highlights areas for further research. It is intended to lead an informed debate giving all stakeholders an opportunity to contribute. I hope that all interested parties will comment and submit their views using the following address firstname.lastname@example.org. I also commissioned a new Call Centres Competitiveness study to make sure we maximise our advantage as we compete worldwide for more high skill, high value, high wage call centre jobs.
This Government will continue to focus all its efforts on keeping the UK economy strong and stable, generating more and better jobs by raising skill levels, supporting enterprise and raising innovation and productivity in business. We will also be vigilant to the impact that globalisation can have on regional and local economies and ensure that the UK economy is best equipped to respond to these challenges.