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Special Report: Scotland still hot spot for customer contact centres

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16th Nov 2006
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Scotland's call and contact centre industry is holding its own in the face of the continuing growth of competition from India according to a new report.

There are over 60,000 people employed in the call centre industry across a range of sectors in Scotland, compared to 56,000 employed in 2003, 46,000 in 2000 and 16,000 in 1997.

An investigation into the offshoring of financial services business processes' by Professor Philip Taylor and Peter Bain from the University of Strathclyde was commissioned by Scottish Development International.

"There is a trend on a UK basis of jobs being moved, or offshored, to India with up to 40,000 people on the subcontinent serving the UK market. But this is not reflected to such an extent in Scotland, where the impact of job loss from overseas relocation has been less than in other parts of the UK and, despite some high profile job losses, the sector is continuing to grow here," said Professor Taylor.

"However, despite rising labour costs, overheating in many Indian locations, labour supply problems and other issues the overall cost savings that can be gained from moving to India remain substantial at between 25-40 per cent. Clearly, India will continue to provide a pole of attraction for companies seeking to cut costs and maximise profits. Nevertheless, it remains the case that many companies, including HBOS and RBS, are not convinced by the overall business case of relocating call centre services to India."

"Clearly we need to be wary about making predictions. All companies we surveyed that have migrated call centre services acknowledged that offshoring would continue, but this does not mean an 'everything will go' scenario for Scotland by any means," he said.

Professor Taylor stressed that despite the continuing growth of the Indian market there could be new opportunities for the industry in Scotland. "Scotland can demonstrate real strength in financial services. Although the industry will continue to be vulnerable to the threat of offshoring there are positive signs.

"As a destination that is relatively low cost and high skill in relation to other European locations, it can position itself as competitive not in terms of cost alone, but taking account of a range of factors such as linguistic capability, low turnover of staff and high levels of education," he said.

"It is clear that as Indian BPO companies expand and embrace the global service delivery model, some will be looking to establish European operations following the examples of HCL and ICICI."

Recently there has been concern that Scotland’s call centre market would suffer after a senior policeman said that centres had been infiltrated by organised crime, a charge more commonly aimed at their Indian counterparts. Staff are planted inside offices or by forcing current employees to provide sensitive customer details. The information is then used to steal identities and fraudulently set up accounts or transfer money.

"I would say approximately 10 per cent of Glasgow call centres have been infiltrated in the past and we are working very hard to reduce that number,” said Detective Chief Inspector Derek Robertson of Strathclyde Police. "We know of organised crime groups who are placing people within the call centres so that they can steal customers' data and carry out fraud and money-laundering.

“We also know of employees leaving the call centres and being approached and coerced, whether physically, violently or by being encouraged to make some extra money. And, of course, you also have the disgruntled employee who may turn their hand to fraud just to benefit themselves.”

But there are still examples of Scotland bringing call centre business in, especially when the Scottish Executive is prepared to bankroll it. US payment services firm First Data announced this week that it is to open a new contact centre in Glasgow, creating 430 financial services jobs over the next five years. The move was facilitated by a £2.3m grant under the Scottish Executive’s Regional Selective Assistance scheme.

Martin Togneri, chief executive of Scottish Development International, which has worked closely with First Data on its plans said: "First Data is a key target to secure for Scotland. Its decision to locate here will help to reinforce and build the strength and breadth of the financial services industry in Scotland, sending a positive message to the industry worldwide and enhancing Scotland's profile as a very attractive location for financial service companies."

Scotland’s deputy first minister, Nicol Stephen, said, “The decision by First Data to locate in Scotland is very much welcomed. This is an excellent project and has been won in the face of strong international competition. This will provide first class job opportunities for Glasgow as Scotland's financial services sector continues to grow.

"This will provide first class job opportunities for Glasgow as Scotland's financial services sector continues to grow," Mr Stephen continued. "I am delighted that the Scottish Executive has been able to support this exciting project with a £2.3 million Regional Selective Assistance grant. First Data's decision also reflects the hard work of everyone involved at Scottish Development International and Scottish Enterprise Glasgow, who have helped win this development for Scotland."

First Data International provides services to payment card issuers in nearly 70 countries, including electronic processing, cash machine and point of sale management, switching and authorisation, fraud and risk management, customer management, contact centre services, card personalisation and printing. The firm has 6,700 employees in about 70 countries and serves 1,900 card issuers and their customers.

Simon Rubin, managing director of First Data's operations in the UK, said: "We were keen to identify a location that would offer us the ability to recruit additional teams of high calibre contact centre personnel as well as give us the opportunity for further expansion. Glasgow, with its vibrant financial services district, is well suited for our needs.”

The financial services sector is a key part of Scotland’s economy, generating £5bn a year, nearly 6 per cent of the Scottish GDP. The sector has grown by 36.5 per cent over the past five years – almost four times faster than the overall Scottish economy and twice as fast as the whole of the UK financial services industry.

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