Outsourcing could boost UK economy by £16bn

Increased IT outsourcing during the next five years could boost the British economy, increasing GDP by £16bn and narrowing the 'productivity gap', according to new research.

The study, The Potential Economic Impact of Increased Outsourcing, was conducted by the Centre for Economic and Business Research (CEBR) for LogicaCMG.

It claims that UK companies have the potential to increase outsourcing by almost 50 per cent by 2008. This would cut the country's 28 per cent productivity gap - which measures output per worker - by 10 per cent, because of increased investment in fixed capital and a decrease in skills shortages.

The benefits would also have a positive impact on UK businesses, boosting consumer spending by £177 per household per year, which would lead to additional profits for UK plc of £1.7bn.

Douglas McWilliams, CEO of the CEBR, said in the report: "Overall, the benefits of outsourcing for individual companies and their shareholders have been well documented, but I think a lot of people will be surprised to see how the benefits could extend across, and strengthen, the entire economy over the longer term."

The study also says that where these IT services are delivered from will increasingly cease to be an issue.

Kirk Smith, an outsourcing strategist at LogicaCMG, said in a statement: "In five years, we could see the terms 'business process outsourcing' and 'offshore' becoming standard business practice and we will no longer have to label them. The increased use of outsourcing will lead to the development of global service networks."