One of the defining political images of the Thatcher and Major governments was Michael Heseltine opening the Liverpool Garden Festival on a site that once teemed with traditional smokestack industry.
There are fears now that his contemporary, the new Conservative leader, Michael Howard, could find himself in the same situation some fifteen years later. This time, it won’t be soot blackened heartlands of the industrial revolution being made over; it will be the fleshy heart of middle England.
Twelve thousand skilled white-collar jobs in financial services, life insurance, banking, IT, legal support and even City analysis have been exported overseas – mainly to India since October, 2000 alone since the end of the Christmas holidays.
Amicus has calculated that that total will rise to 200,000 by 2008 which, according to Deloitte Research, is part of an exodus of two million jobs from Western economies to India.
After the collapse of manufacturing in the 80s and 90s huge swathes of the country were left devastated, only to be promised a brighter and cleaner future thanks to service sector jobs, primarily call centres.
This time it’s different. While the same communities hurt in the 80s are being hurt again, middle class jobs in places like the Prudential in Reading and Norwich Union in Norwich and Perth are bearing the brunt of the offshoring phenomenon. This time the jobs are skilled business processing and management roles as well as call centres.
Unions naturally don’t take kindly to tens of thousands of jobs being lost overnight and resort – as they must – to vigorous campaigns to secure the best possible deal for their members when redundancy is the only option.
However, Amicus is also leading a campaign that deals with the reality of technological change. Rather than asking for the impossible, Amicus wants to be involved in open debate and negotiation to establish how and why business decisions on offshoring are made and analyse why companies like the Royal Bank of Scotland and Nationwide are taking commercial decisions to stay in the UK.
Amicus perceives a key role for government in this process, However, their initial reaction was that they cannot and will not intervene in how a company chooses to make a profit. They also claim that offshoring cheap labour intensive work allows for investment in the skills that will make Britain leaner and more competitive and also that global companies have a welcome role in assisting the economies in the developing world.
The Prime Minister, the Secretary of State for Trade and Industry and the Leader of the House all went on the record saying offshoring was inevitable but that there would be benefits. No one really believed the headlines until the first wave of job cuts came in the autumn. Ten thousand job losses went at Norwich Union, Abbey, Axa, HSBC, Lloyds TSB, Prudential and Barclays. Even the National Rail Enquiries Network absurdly announced it was offshoring 1,700 jobs in order to ‘improve services’. With insurers creating a maelstrom of bad publicity the DTI has reconsidered, ordered a ‘study’ into the call centre industry and a round table seminar with company heads and civil servants.
Unions meet with government for the first time next month. Amicus will use the opportunity to argue that the business case has not been made and point to a range of evidence which companies must take into account when deciding whether or not to offshore.
A recent CBI survey shows that 43 percent of businesses feel obliged to offshore regardless of whether it is the right business decision. Consultants and offshore providers are putting enormous pressure on IT and financial service companies by threatening them with the loss of competitive advantage and share price tail spin unless they take part in what Chris Gentles, Head of Deloitte Research, calls the ‘offshoring bonanza’.
Companies are being promised up to 40 percent cost savings in India as a direct result of low labour costs. The facts are that the process hides a myriad of hidden costs including rising wage bills, constant training because of high turnover, recruitment and relocation. There are also costs involved in upgrading maintenance of energy and IT structures compounded against geopolitical issues and cultural differences.
Services in India also deteriorate for a number of different reasons. A recent report by industry analysts, Contactbabel, has indicated that UK call centres are 27 percent more productive and that queries are answered and completed more quickly in Britain.
As importantly Amicus research into consumer attitudes to offshoring has also found that the overwhelming number of policyholders believe that services are worse in India whether they are or not. This is starting to have an impact on brand perception and over 60 percent of the Amicus study found that people are taking offshoring into account when choosing insurance policies.
We are facing the biggest industrial crises since the service sector solved the last one. What Amicus is asking is: what comes next?