After offshoring, comes ‘reshoring’

As consumers it didn’t take us long to become familiar with the idea of talking to someone on the other side of the world in a different time zone whenever we had a problem with our phone bill, however much we may have moaned about it.

The reduced costs offered by outsourcing services to lower cost emerging economies were so appealing to businesses that many of them rushed to outsource over the last two decades.

The effect of this on working practices and communities in different countries – not to mention the growth of vendors – has been enormous.

Graduates around the world have sought to get a job working for a provider servicing a contract with BT, for example. UK-based managers – particularly in the HR profession – have seen their workforces rendered unrecognisable as many daily tasks have been removed to another location.

However some companies, particularly in the financial services sector, have recently brought many of their functions back in-house, sometimes to provide a unique selling point to consumers fed up of talking to someone on the other side of the world.

There may be signs that the tide is beginning to turn more generally.

Analysis by PwC suggests that ‘reshoring’ has the potential to create between around 100,000 and 200,000 extra UK jobs over the next decade in sectors including textiles, advanced manufacturing, business support services and research and development.

This scale of reshoring could boost the level of UK GDP by around 0.4-0.8% by the mid-2020s, which equates to around £6-12 billion at today’s values, PwC says.

The consultancy suggests that companies want to locate closer to consumers with fast-shifting preferences, and are seeing less of a wage gap with emerging economies. Global transport costs are volatile and UK managers want to better control quality, inventory levels and supply chain risks.

The impact of this prediction is likely to be a massive increase in UK-based job creation, with obvious positive effects on the recruitment sector.

Equally, that companies may choose to bring many offshore jobs back to the UK will obviously have a big impact on recruiters that have expanded abroad to serve emerging markets that have been bolstered by UK offshoring.

PwC suggests that some jobs will still be offshored over the coming 10 years, but the situation will be much more of a “two-way street”.

If this prediction turns out to be accurate, it will be another example of the rapidly changing global employment market that recruiters must stay on top of.