Financial services union Amicus is warning that a new wave of offshore outsourcing is about to take place in the UK's financial sector, despite rising labour costs in countries like India.
Amicus says companies embarking on offshoring projects will find a very different business environment in India to the one the offshoring pioneers encountered in 2003.
Labour costs are rising by 15% a year, staff turnover is up to 70% and there is a crisis across middle management levels who are ill equipped with the right skills to manage offshoring projects, says Amicus.
David Fleming, Amicus National Officer, says: "There is growing evidence of a crisis in the Indian call centre and back office industry. Companies must take heed that the environment in India has changed markedly and the industry is struggling to live up to the expectations of the UK financial services which predicates its business case for offshoring on low cost, better quality service and labour flexibility. These assumptions are being eroded day by day."
UK bank Abbey, which opened its Bangalore facility two years ago, was one of the first British banks to offshore work to cheaper overseas centres in Asia. However rumours surfaced in October last year that the bank was considering closing its call centre in Bangalore, India and bringing the 1000 jobs it originally offshored back to Britain.
But despite the public backlash against offshoring and escalating fears about the security of customer data at overseas call centres, many financial firms are stepping up moves to offshore operations to cheaper countries.
Research released by consultancy Deloitte in November revealed that international financial services firms are expected to shift as much as 20% of their total headcount to cheap labour locations in the next four years.
Banks including Lloyds TSB, JPMorgan Chase, Wachovia, UBS and ANZ are all establishing or extending offshore centres. Last week Credit Suisse was also reported to be planning to move around 5000 IT, back office and administrative jobs to cheap offshore centres in eastern Europe, Singapore and India.