HR offshoring is soaring in the UK financial services sector due to the looming spectre of private equity buyouts and takeover activity.
A study by consultancy Deloitte found that companies in the sector were saving a total of £1.5bn per year by sending back-office jobs to low-cost countries such as India and China – driven by pressure to cut costs to avoid becoming a takeover target.
HR is one of the professions hit most by the trend towards offshoring. Four years ago, the majority of offshore activity was IT-related last year, four-fifths involved other business processes.
“HR offshoring has showed a significant increase in the insurance and banking sector in recent years,” Chris Gentle, associate partner at Deloitte, told Personnel Today. “Banks are under increasing pressure to reduce their cost base due to the number of investors in the marketplace and global competition.”
More than 75% of major global financial institutions now have offshore teams, compared with fewer than 10% in 2001.
However, separate research warned wage hikes and poor customer service could be damaging the appeal of offshoring in the financial services sector.
Spiralling labour costs of up to 15% annually in offshore call centre hot-spots such as India are nullifying any price advantages, according to research by Compass Management Consulting. Financial services firms are also experiencing poor customer perceptions about service and language barriers.
Simon Scarrott, head of business development and marketing at Compass, said: “In too many cases, service quality is being compromised by an offshoring decision that fails to deliver the level of savings anticipated.”