Pink elephants can't halt the jobs stampede as UK plc outsources to India

Union activists stamped their feet and paraded a 10ft pink elephant in protest, but there was precious little they could do to stop what is becoming a modern-day business phenomenon.

Almost every week another blue-chip British company announces it is outsourcing jobs to India. At BT's annual meeting last Wednesday, the Communication Workers Union vented its anger at plans to employ 2,200 people there. But the very next day Tesco joined the likes of British Airways, Prudential, HSBC and Powergen by announcing its own plans to move 350 jobs to Bangalore.

The combination of low wages and a skilled labour force means companies can no longer afford to ignore the savings that can be made in India.

IT group LogicaCMG is to be the next big company to launch an expansion programme in India. It already employs 350 people in Bangalore, developing software and providing customers with telephone and internet support. By the end of the year it intends to increase the workforce to 500. According to Bob Fawthrop, the company's managing director of global outsourcing, LogicaCMG will employ "at least" 1,500 in the country by 2005.

"We are saying to our customers: we will deliver a service to you wherever you are," he explains. "We will use a blend of different people to offer the cheapest cost. There is no risk to the customer. It is our risk."

India's potential was first identified by General Electric in the mid 1990s when it shifted thousands of back-office jobs to the subcontinent. According to the consultants McKinsey, 203 of the Fortune 1,000 companies have now outsourced there. And what has today become a $1.5bn (£945m) industry for India is predicted to grow to $21bn by 2008, accor- ding to property consultants Cushman & Wakefield.

The biggest attraction is the savings to be made on wage bills: an Indian worker is paid on average a fifth of the salary of a British worker. But the Indian government and business community have been quick to develop the new industry. For the past few years the Confederation of Indian Industry (CII) has sent an annual delegation of senior businessmen to Britain. During their last visit, earlier this month, CII members met British business leaders and even managed a few minutes with the Trade and Industry Secretary, Patricia Hewitt.

Sunil Bharti Mittal, chairman of Bharti Enterprises, a leading telecoms operator in India, says: "This was my third CII visit to Britain and I have seen a dramatic improvement in how businesses view India. The Indian brand is getting recognised. We don't have to sell it that hard now. Companies realise there are huge costs to be taken out; there is a big soft belly to be punctured. Will the unions put up resistance? Yes. But eventually companies will realise that there are smarter ways of doing things."

However, there are signs that India is starting to fall victim to its own success. Unemployment, which kept a lid on wage inflation, is falling, and some companies are reporting difficulties in recruiting staff. Indian firms are beginning to outsource to other countries, notably China. LogicaCMG's Mr Fawthrop confirms that his company is also looking at opportunities in China, through "an Indian business we have contact with".

But whether jobs are lost to India or China, unions in Britain plan to campaign hard on the issue of outsourcing. On BT, the Communication Workers Union says: "We have no argument with India or Indian workers. Our issue is with BT.

"BT is a UK company that derives its profits from UK customers and is therefore obliged to support the UK economy ... Savings made by moving work to India are minimal when compared to the billions the BT board lost while pursuing its recent ill-thought-out overseas acquisition strategy."