Offshoring 'will cost UK £5.7bn and 250,000 jobs by 2010'

Over a quarter of a million UK workers will have their jobs moved to countries such as India over the next six years at a cost of £5.7bn to the UK economy in unemployment benefits and retraining costs.

But the cost to the UK by not offshoring would be much higher - £34bn - due to a drop in output and a subsequent slowing of GDP growth, according to The Impact of Global Sourcing on the UK Economy 2003-2010, a study sponsored by Indian IT trade body National Association of Software and Service Companies (Nasscom).

The study, based on a variety of government economic and job statistics and carried out by research company Evalueserve, predicts that 272,000 jobs will be moved offshore by 2010, although around 19,000 consulting, legal and management jobs will be created as a result - leaving a net loss of approximately 253,000 jobs.

Based on current UK unemployment trends, 102,000 of those are likely to be out of work for more than six months and will require "substantial financial help, retraining and reallocation".

"The total additional economic burden on the UK economy because of this unemployment and retraining cost will be £5.7bn," said the report.

IT, software development and call centre jobs will be hit hardest, accounting for 213,000 of the jobs lost.

But the report warns that the consequences of not following a "global sourcing" policy will be much worse.

It predicts that slow population growth and an ageing population will lead to a shortfall in the supply of domestic labour in the UK, with a demand-supply gap in the UK of 714,000 jobs by 2010 - and IT will be one of the main sectors impacted. Immigration will fill around 372,000 of those positions but that still leaves a shortfall of 342,000, according to Evalueserve.

"Without offshoring and temporary workers, the UK economy will face a cumulative loss in potential output of £34bn," said the report.

Other benefits cited include increased competitiveness in the global economy of UK companies and an expansion of global markets for goods and services from the UK.

Marc Vollenweider, CEO of Evalueserve, told silicon.com that offshoring will bring benefits to the UK economy through more profits for UK firms, and also to wider society in general.

"It translates directly into more jobs for people and the long-term sustainability and competitiveness of the UK economy," he said.