The fear of large numbers of good quality British jobs being outsourced to rapidly developing countries such as India may be overstated, says a new report published by The Work Foundation.
Despite the rhetoric of an abundance of Indian knowledge workers hungry for British jobs, there is little direct evidence so far of significant job migration, the report finds, setting at rest fears that India is taking away a large number of British jobs.
The report also says that British trade in information and communications services with developed countries such as Germany dwarfs that with India. The Work Foundation is an independent research organisation and consultancy.
The report finds that according to independent analysis just 5.5 percent of all jobs lost across Europe were due to offshoring activities in the first quarter of 2007. In 2005 the figure was 3.4 percent. Meanwhile jobs in sectors theoretically vulnerable to outsourcing such as call centres have gone up rather than down in Britain.
The report says travel (£626 million) and transportation (£289 million) are the largest services imported from India while computer and information services (£122 million) are only the third largest import.
Britain imports almost four times more computer and information services and over 16 times more business services from Germany than from India, according to the report. India ranks 15th in the list of countries from which Britain imports services.
The report says that labour costs are only one factor in decisions regarding business location. Cultural contexts, in particular the advantage for producers in being located near to key target markets, remains critically important for successful organisations.
Katerina Rüdiger, author of the paper - "Globalisation, a threat for the UK's knowledge jobs" - said: "If you go to an Indian business district you could be forgiven for thinking the whole world is chucking work and jobs at India because of its magical high-skill, low-wage mix. India's high tech sector is indeed booming, but is not 'coming for our lunch' as some of the more apocalyptic commentators have suggested.
"The evidence suggests that while trade in services between Britain and India is certainly rising, it is not happening nearly as fast as is sometimes imagined. An increase from 0.4 per cent to 1.2 per cent between 1995 and 2004 is less of an explosion and more of a slow evolution.
"Technology has always led to people being displaced from some lines of work into others, but what is not happening is a straightforward job migration from North to South, West to East."Over recent years, the debate about offshore outsourcing has taken on an alarmist tone amid anxiety that lawyers, medical professionals, software designers, actuaries and chartered surveyors were all potential victims of outsourcing.
The report argues that self-serving claims from consultancies and aggressive public relations work by outsourcing companies themselves have tended to drown out the careful analysis of data regarding offshoring.
Rather than a clearly defined trend of western multinationals offshoring to save money on labour costs, the report argues that increasingly companies are mixing business models, combining near-shoring, offshoring and retaining operations close to home. Cultural difference remains a critical component of business models.
Meanwhile, successful Indian companies are setting up and creating jobs in developed western countries and targeting affluent western consumers. Countries that outsource most also tend to be the recipients of most outsourcing.
The top recipients of outsourcing are rich, industrialised countries rather than poor, developing ones, the report says.