CBI warns on exodus of unskilled jobs

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British companies will move all the unskilled labour they can overseas within a decade, the head of the UK's largest employers' organisation warned yesterday.

British companies will move all the unskilled labour they can overseas within a decade, the head of the UK's largest employers' organisation warned yesterday.

Digby Jones, the director general of the CBI, said the Government urgently needed to boost skills levels to ensure the economy continued to create more jobs than it lost overseas.

But speaking before the CBI's national conference, which starts in Birmingham today, Mr Jones launched a robust defence of globalisation and outsourcing, saying it boosted productivity and profits, enabling companies to create better-paid highly skilled jobs.

According to a survey of 150 firms carried out by the CBI, more than half say the pressure to move jobs abroad has increased in the last two years. However, Mr Jones repeatedly refused to be drawn on whether he would sanction cutting jobs at the CBI's London headquarters and moving them overseas.

A third of those surveyed said they had already moved some activities overseas and almost a quarter said they were considering doing so in the future. Of those who had taken the step, almost 90 per cent said it had been successful.

The vast majority, more than 9 out of 10, said the move was designed to cut costs, with the bulk of the outsourcing involving manufacturing jobs.

But the survey said firms were increasingly moving service functions such as R&D, IT, financial services, accounts and human resources, overseas.

"The day will come very shortly when there won't be work for unskilled people, I would say within the next 10 years," Mr Jones said. "This is coming down the track and certainly within a scholastic generation."

Ian McCafferty, the CBI's chief economic adviser, said UK companies had created roughly 400,000 jobs overseas over the last decade. He said this had led to 250,000 job losses in Britain, but that half a million jobs had been created over the same period. "It is short-sighted simply to see this as a bad thing," Mr Jones said.

"Offshoring means greater productivity and more efficient goods and services. It also means UK jobs will be of higher quality, more skilled and in many cases more secure."

But he said the 3.5 million people who were functionally illiterate in the UK would find it impossible to get work within 10 years. "We have to equip these people," he said. "We need something done urgently at the secondary level and something urgent done for the workforce so that businesses can be socially inclusive."

The survey showed red tape was a growing reason for outsourcing. Mr Jones said the rising cost of compliance with regulations was "starting to drive firms abroad". But he conceded that bureaucracy in countries such as India was immensely more complex than in the UK.

The TUC said jobs were not offshored because Britain was over-regulated. It said the union movement would resist decisions to move jobs offshore if the business case was not made.

Gordon Brown, the Chancellor, and Peter Mandelson, the incoming European trade commissioner, are among those appearing in Birmingham. The CBI will use the conference to voice businesses' growing "frustration" at the failure of the European Union to push through economic reform.

John Sunderland, the CBI's president, will tell the conference: "The vision of Europe becoming the world's most competitive economy remains very much a distant one." He will share a platform with Mr Mandelson, while Nicholas Sarkozy, the French finance minister, will also address the event.

The conference is likely to be the last before a general election and Mr Jones said the Conservatives and Liberal Democrats had been far more engaged with the CBI than they were in the run-up to the 2001 election.

Asked what business wanted to hear from Labour, Mr Jones said: "The message to Gordon Brown from every single person will be - whatever you do, don't harm the macro-economic stability of low inflation, low unemployment and sustainable growth."