CBI says benefits of off-shoring outweigh drawbacks

November 8 2004 - A survey released at today's CBI Annual Conference shows that 51% of responding companies say that the pressure to off-shore has increased over the past two years. 21% described these pressures as "very great" and 30% said they had already taken some activities abroad with almost one in four considering doing so in future.

The CBI argues that the benefits of off-shoring outweigh the drawbacks, saying the process will increase productivity, profitability and economic growth. The main drawbacks to off-shoring are the difficulties of exercising managerial control and the risk of supply disruption. Smaller companies are less likely to off-shore than larger businesses but there is no sign of a reversal in the trend as 87% of respondents are satisfied with the off-shoring experience.

The MORI survey on the topic was sponsored by the CBI (the employers' organisation) and Alba - the electronic goods and power tool specialist - The survey was based on responses from 150 CBI member companies employing three-quarters of a million people in the UK and 2.2 million globally. The survey shows the trend increasingly extending beyond manufacturing to areas like information technology, financial services, design, research and development.

Digby Jones, CBI Director-General, said: "Off-shoring is now part-and-parcel of doing business in the global economy.

"Make no mistake, this is a survival issue. Anyone who believes that firms have a great deal of choice are naive. Companies know if they don't do it, somebody else will. If competitors act and they don't respond, they may put their business at risk.

"It is short-sighted simply to see all this as a bad thing. Globalisation was made for Britain. Off-shoring means greater productivity and more efficient goods and services. It also means UK jobs will be of higher quality, more skilled and in many cases more secure.

"Globalisation means that jobs will come, jobs will go and nothing remains the same forever. The challenge is to create more jobs than we lose - which we are doing - and to ensure people have the skills to take advantage of them, which remains a problem.

"But the government must avoid forcing firms to off-shore through an increase in policies unfriendly to business. The rising cost of compliance with regulation is now starting to drive firms abroad."

The main reason to go off-shore is to cut costs but improving the speed and quality of services are also important justifications. 26% of respondents said they were currently considering a move because of restrictive regulations. legislation was a reason.

The choice of country is governed by low employment costs and the availability of a skilled workforce, according to the survey. China and India are the most popular off-shore locations, each cited by around half of the respondents. However, Eastern Europe is viewewd as an increasingly attractive alternative, particularly Poland and the Czech Republic.

The survey found that, on average, off-shoring firms send the equivalent of about 4% of their UK jobs overseas. The West Midlands has been most affected, while South-East and North-West England have also been hit. However, the CBI points out that just over half of responding firms have continued creating jobs in the UK since they began off-shoring.

Meanwhile, UK jobs have risen in quality with firms saying they are creating mostly skilled and graduate jobs in the UK, with semi-skilled and unskilled jobs moving off-shore.

• More Strategy Articles