UK vs the developing world

With offshoring to developing Asian nations becoming more and more prevalent, many believe the UK is set for fall. But the NOA's Mark Kobayashi-Hillary argues the outcome of global business is not nearly so clear-cut.

As China and India boom, will the UK bust?

Well, it will if the picture of doom and gloom that the UK populace is envisaging comes to fruition, a perception outlined in research from Deloitte and YouGov, which was released at the CBI conference this week.

The public, with job losses in manufacturing and heavy industry as a result of offshoring to China and the Far East still fresh in its collective mind, believes offshoring is an increasing problem and that firms should not move more jobs abroad, according to the research. Fuelled by media hyperbole and union uproar, a third of respondents even believed the UK is haemorrhaging jobs to such an extent that companies should be forced to bring jobs back onshore.

So is it likely this will happen? The answer is a resounding 'no' - for a number of reasons. For a start, the UK is beginning to show the strain of an ageing working population - as the baby boomers reach retirement age, the pressure on the dwindling working population will increase. There is an emerging skills gap in the UK economy - a gap which can be plugged to an extent by strategic sourcing of services.

Another reason is that the world of work is globalising, whether we like it or not. Practices such as global outsourcing - IT and business process delivery from global locations - have ensured that globalisation is burgeoning. The cost efficiencies that this practice affords in the western world mean companies are highly unlikely to bring those services back to more expensive onshore locations.

The Deloitte and YouGov research also revealed that 50 per cent of Brits believe the UK is a waning global power. Is this true? This is anyone's guess.

During the CBI conference, Chancellor Gordon Brown was very positive on this front and extolled the virtues of offshoring and forging good relations with India, China and other emergent economies. Brown presented the possibility of the UK taking a leading role in the global outsourcing market, to become the hub of the industry.

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This means that the UK would become the innovator, the force that would drive the global demand, whereas countries like India and China would become the engine rooms. A delegation led by DTI Minister Alistair Darling is scheduled to travel to India in January to promote this idea and cement the UK's position of prominence in the global workplace.

Whether this vision is realised remains to be seen - although with China and India primed to be the next generation of economic superpowers in the next decade or so, these developing countries could well be driving demand and becoming the knowledge bases themselves.

However, there is little doubt that trade between the UK and India, China and other developing countries is set to soar. And the outsourcing of IT services and business processes will be a fundamental part of that growth.

So on the whole, how does the UK's business community feel about doing business with and investing in these countries? According to polls conducted during the CBI conference, it is clear that UK industry still feels more at ease, from a cultural and political perspective, in dealing with India as a business partner than other countries. CBI delegates believed it would remain this way for possibly the next 20 years or so.

China is seen as a trickier proposition at the moment, with businesspeople concerned about the country's record on data security, IP protection and copyright - no big surprise given its track record in these areas. Concerns also abound about the political situation in China and the country's human rights record has raised doubts from an ethical point of view.

Still, the business community does feel this situation is set to change in the medium to long term, with CBI delegates recognising the power that China will wield, bearing in mind its vast population, skilled workforce and infallible infrastructure. And who knows - it could be that the economic possibilities that globalisation and outsourcing are opening up to China could start to impact its politics.

Thomas Friedman outlined in his 'Golden Arches Theory of Conflict Prevention' that globalisation was a powerful influencer on the democratic peace process - where trade could actually play a part in forming economic policy and therefore have an impact on politics.

This was evident when India hastened peace negotiations with Pakistan in a bid to appease the concerns of Western businesses who were worried about outsourcing there, believing that conflict could impact the security of their operations. It is altogether possible in the future that young graduates in China will increasingly see the influences of the global knowledge economy and demand to be part of it, rejecting the China of the past and smoothing the path to democracy.

Only time will tell how this global landscape will develop over the next 20 years or so. Technological developments and migration patterns will serve to shape that landscape still further but it will be interesting to see how it all pans out.

Mark Kobayashi-Hillary is offshoring director of the NOA (National Outsourcing Association).