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How the summer Budget will affect the UK outsourcing industry

by Jeremy Coward

Chancellor of the Exchequer George Osborne has proposed the terms of his new summer Budget, relishing the fact that his party no longer has to negotiate with the Liberal Democrats. Dramatic cuts to welfare have been taking most of the headlines, but what aspects of the new Budget will impact on outsourcing activity in the UK?

Apprenticeships prioritised, despite scepticism

The creation of new apprenticeships was a key issue in the Budget, with Osborne sticking by his pledge to provide three million new apprenticeships during this parliament. As he put it, “It is to our national shame that we are almost the only advanced country in the world where the skills of our 16-24 year olds are no better than our 55-64 year olds.”

The new apprenticeships are to be funded, in part, by the introduction of a levy on large employers. The levy will support all post-16 apprenticeships in England; funding will be directly controlled by employers via the “digital apprenticeships voucher,” the intention being that firms committed to the training will “get back more than they put in.”

It will be interesting to see what impact this new policy has on the outsourcing industry. At the National Outsourcing Association (NOA) Symposium, recent NOA research was released revealing that neither buyers nor suppliers of outsourcing were prioritising apprenticeships in order to tackle skills shortages. These findings were reflected by a live poll of the NOA Symposium audience.

Unpredictable reactions to the minimum wage hike

In a short article for the FT, economics journalist Tim Harford has speculated that, rather than agreeing to pay £9 an hour, businesses in the UK may instead opt to invest in robotics, offshore key functions or even move overseas entirely.

At 2014’s World Economic Forum in Davos, David Cameron pledged to make Britain “the re-shore nation,” claiming that multitudes of UK businesses are bringing their business processes back onshore, not for cost savings but for the higher worker productivity offered in the UK. Many will now be wondering if the minimum wage hike will be conducive to this plan.

Emphasis on skills and infrastructure

“Skills and infrastructure” is a phrase that rings throughout the wording of this summer’s Budget –investment in both will be key to the economic prosperity of the UK and its outsourcing. There does, however, seem to be some disparity between the views on those in the government and those in the outsourcing industry on where to invest, particularly where skills are concerned, as the NOA’s research demonstrated.

Although there’s no specific mention of it in the Budget, it is also likely that the government will turn further to public sector outsourcing in order to cut the country’s deficit, as the coalition did last term.

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