As UK Unemployment falls and Wages rise, Companies Refocus on Benefits of Outsourcing

The mid-March labour market release from the Office of National Statistics (updated on April 20th 2016) showed that unemployment in the three months to January 2016 fell by 28,000 and the unemployment rate remained steady at 5.1%. This is the lowest level for 10 years, and a rate of unemployment that has now remained unchanged for three periods.

Meanwhile, wage growth edged up slightly to 2.2% excluding bonuses. This was higher than expected and, although below the level of the second quarter in 2015, confirms the recent upward trend in wage inflation and keeps wage growth above the average of the last four years.

These economic numbers combined are unlikely to worry the Bank of England, which has signaled its intention to hold the base rate at the record low of 0.5% until inflationary pressures increase. While low interest rates are good news for businesses, the ability to continue to grow could be hampered by a tightening labour market. Vacancies will be harder to fill, and, in order to attract the best employees, companies may find themselves having to increase wages further. In these circumstances, despite low interest rates and favorable financing costs, margins could begin to contract.

In such an economic environment, it is little surprise that the latest Deloitte CPO (Chief Procurement Officer) Survey finds that top business priorities include cost reduction initiated and enhanced by non-core, core, and transactional outsourcing. CPOs are particularly concerned that their teams lack the skills needed to deliver strategy. Outsourcing of non-core operations allows greater resource to concentrate on strategic goals, while outsourcing core activities enables access to talent pools that would otherwise be unavailable. These findings are echoed by the National Outsourcing Association. In its 2016 Outsourcing Yearbook, it has published the findings of its UK survey that shows:

• 70% of companies polled expect to increase outsourcing in 2016
• 35% of companies cite cost reduction as the primary motive for outsourcing
• 23% cite improvement of the customer experience as their most pressing reason to outsource

Access to new technology, experience, and expertise are also among the main reasons that increasing numbers of UK companies are outsourcing.

Briars Group provides tailor-made services in the fields of people, finance, tax, and technology to organisations seeking to expand operations in their home territory or elsewhere. Briars offers a seamless turn-key solution that is compliant and ensures consistency, with more than 1,000 satisfied clients located across the UK, Europe, North America, and the Far East.