On the Attractiveness of the UK for Outsourcing Services

Abstract

Outsourcing has entered what the industry is positioning as a new era of value-added services, innovation and transformation. This means that a shift of emphasis is underway towards skills, sector expertise and business transformation and away from mere technical solutions. Competition between the countries that supply outsourcing services is intensifying as the market moves away from its historic focus on slashing costs and towards providing superior technical and managerial skills, strategic guidance, and operational excellence. So where does the UK stand in all of this? The UK has long been a lucrative outsourcing market in that it is both the world’s second largest consumer of outsourcing services and a major hub for global ITO and BPO vendors that want to sell services into Europe, including into the UK itself. However, the global shift away from low-cost solutions and towards higher value professional services is also enabling the UK to position itself as a global provider of outsourcing services and not just as a customer for them. In this new environment, and despite its high cost base, the UK may be well positioned to capitalise on this shift in focus, given the high level of business and managerial skills that it offers and also given its proximity, in many senses, to the massive US market. In this article, we explore the attractiveness of the UK, as an example of a Western economy, for outsourcing services.

Appendix A – Comparative Analysis of Attractive European Destinations

		UK	France	Germany	Netherlands	Czech	Ireland	Spain	Poland
Costs	Average wage per skilled employee and managers ($) (2011)a	33,513	27,452	24,174	29,269	15,115	41,170	26,856	14,390
	Average rental office space per square metre (€/sq.m/yr)b (2013)	717 (London) 234 (Outside London)	915	533	500	339	437	439	415
	Cost of telecom, internet access (US$ per month)c (2012)	27.25	12.43	27.4	12.37	18.76	31.06	31.72	11.27
	Cost of power (Kw/H) (2011)d	0.158	0.142	0.253	0.298	0.147	0.209	0.209	0.135
	Corporate taxese, f (2011)	20–24 %	33.33 %	29.8 %	25 %g	19 %	12.5 %	25–30 %	19 %
Availability of skills	Size of the labour market (2011)a	31.72 million	27.99 million	43.51 million	8.33 million	5.4 million	2.3 million	22.97 million	5.58 million
	Size of the local vendor market indicator (0.1–1.0)	0.92	0.41	0.53	0.73	0.34	0.83	0.62	0.28
	Quality of delivery skills indicator (0.1–1.0)	0.9	0.65	0.65	0.66	0.71	0.9	0.68	0.74
	Quality of sourcing management skills indicator (0.1–1.0)	0.93	0.65	0.74	0.91	0.55	0.83	0.87	0.5
Environment	Level of corruption (2013)h	74	71	79	84	49	69	65	58
	Quality of life (index) (2013)i	148.12	151.36	204.84	160.54	122.18	149.64	141.05	90.47
	Serious crime per capita (per 1 million people) (2006)j	<0.7	8.0	2.5	8.7	<0.8	5.5	0.8	9.8
	Accessibility to the country indicator (1–100)	90	85	80	70	60	65	75	55
Quality of infrastructure	Average downtime per year Recovery time per year (2011)k	25 h 13 h	24 h 16 h	14 h 9 h	12 h 13 h	16 h 15 h	19 h 21 h	11 h 8 h	31 h 20 h
	Availability & quality of real estatel (2012)	93.7	89.0	84.7	86.4	54	65.9	79.9	65.9
	Quality of overall infrastructure (2012)m	5.6	6.4	6.2	6.2	5.5	5.2	5.8	4.0
	Quality of electrical supply (2012)m	6.7	6.7	6.7	6.7	6.4	6.4	6.0	5.3
	Scale and quality of roadsm Rail (2012)	5.5 4.9	6.6 6.4	6.2 5.7	5.6 5.7	3.6 4.5	4.8 4.0	5.9 5.6	2.3 2.5
Risk Profile	Risk to personal security (fraud, crime and terrorism)	80.222	80.9	84.98	86.67	74.77	62.33	66.71	70.99
	Risk of labour strikes indicator (0.1–1.0)	Moderate-low	High	Moderate-high	High	Moderate-low	Moderate-low	High	Moderate-low
	Political unrest (Political Instability Index)n (2010)	4.6	5.3	3.8	4.0	3.7	4.6	5.5	4.5
	Natural disasterso (Economic Damage per year US$ X 1,000): (2009)o Disaster reported (2009)o	960,215 Flood, Storm	1,256,829 Storm	1,171,036 Flood	145,829 Flood	161,470 Flood	11,389 Flood, Epidemic	846,784 Drought, Flood, Wildfire	266,650 Flood
	Cost inflation (2012)c	2.8	2.3	2.2	2.4	3.3	1.3	2.5	3.6
	Intellectual property risks (2013)p	Not listed	Not listed	Not listed	Not listed	Not listed	Not listed	On a watch list	Not listed
Market potential	Attractiveness of local market (GDP growth rate & GDP$) (2012)a	0.2 35,657	0.1 35,246	0.9 39,491	−0.5 42,772	−1.0 26,208	0.7 41,682	−1.5 32,045	2.4 21,261
	Access to nearby markets Indicator (0.1–1.0)	0.95	0.74	0.72	0.84	0.52	0.86	0.68	0.45

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