The department of trade in the UK has set up a committee to study the benefits arising from outsourcing of jobs to countries such as India.

The committee will submit its report in early 2004, "by February without fail", Michael Arthur, the newly appointed British high commissioner, said in Kolkata.

While basic work on the report will be done by internal teams in the department of trade, there was a possibility that an outside agency might be involved in preparation of the document, the high commissioner hinted.

• India and Outsourcing: Complete Coverage

The UK government panel would report on whether outsourcing actually delivered any benefit to British companies and whether job losses caused by outsourcing were worth it.

The study will have immense implications for the Indian outsourcing sector as a string of outsourcing contracts has started to flow in from the UK.

Two of the three foreign banks that have set up service centres in India are from the UK. These are Standard Chartered and HSBC Bank. British Rail will also be handing out such a contract.

Arthur said the UK government was confident that several more Indian companies would buy up outfits in the UK to gain a beachhead in the EU services market, while the fund flow from the UK banking sector would also rise as merger and acquisition opportunities in the Indian banking, insurance and services sector opened up.

Labour unions in the UK are agitating against the outsourcing of British jobs to other countries.

The report is expected to address the concerns expressed by workers. The labour unions want to know if the cost of unemployment benefits will justify the job losses caused. Buyout of British firms will help divert the criticism to some extent.

Initially, outsourcing contracts were driven by convenience and there were no job losses in the UK as surplus work was transferred.

"More compelling economic reasons in recent times have intensified the trend and some jobs are now being shed through outsourcing contracts", said Arthur. 

A similar debate about outsourcing work to India from United States at the cost of US jobs had led to compilation of data which established that getting work done in India was much more cost-effective than getting it done in US.

The savings of US companies enormous and far outweighed the pains of the limited number of jobs shed in the US.

There has been no development to indicate that the findings of the UK team would be any different, top sources in a multinational consulting firm said.

Conflict of interest

• Labour unions in the UK are agitating against the shift of British jobs to other countries under outsourcing contracts.
• The study is important for India as a string of outsourcing contracts has started to flow in from the UK.
• A similar exercise in the US had established that getting work done in India was much more cost-effective.