Scotland's financial sector is "gaining overall" from the global trend to outsourcing, Scottish Financial Enterprise claimed yesterday, as India threatened to grab several hundred jobs from Glasgow.
The transfer of 2000 insurance and pension processing jobs from Resolution to Capita Group, including 1550 in Glasgow, will lead to up to 500 jobs being switched to India over the next three years.
It follows a similar threat by Prudential two months ago to transfer to Mumbai up to 1000 of its 2600 jobs at Craigforth, Stirling, in a "review" of its IT operations and the processing of mature life and pensions policies.
Resolution said yesterday that it would close its Birmingham centre, allowing Capita to concentrate in Glasgow its customer-facing (voice contact) and IT operations, while offshoring back office functions, for its raft of assorted closed funds. However, it would retain some 250 marketing, actuarial and finance roles at the St Vincent Street headquarters of Scottish Provident and Scottish Mutual, as well as the 350 jobs at Resolution Asset Management in Bothwell Street.
Amanda Harvie, chief executive of SFE, insisted that while job losses were serious for the people involved, "from the Scottish perspective it is positive in that higher value jobs are going to be staying in Scotland".
Harvie added: "Outsourcing certain areas of activity has been a trend across the global industry, and Scotland overall has gained from that opportunity. For example, we now have the largest concentration of asset servicing activity."
Scotland could and should not compete on cost, she added, but on added value. On whether that meant a threat to thousands of other jobs in the life and pensions sector, Harvie said: "Individual companies have different policies, Resolution have made it clear that customer-facing roles are not going to be offshored."
That leaves plenty of scope, however, with Prudential under City pressure to deliver huge cost savings in the UK, and chief rival Aviva switching 1000 jobs to India last year.
Although neither Standard Life nor Aegon UK has hinted at interest, Scottish Widows has been testing the offshore waters in a limited pilot. Its parent Lloyds TSB did, however, set a trend in March when it closed an Indian call centre employing 600, and routed customers back through its UK centres including Glasgow, which employs 750.
At Royal London (Scottish Life), spokesman Alasdair Buchanan commented: "Resolution has acquired a lot of different businesses, it is running a lot of closed books on different systems. It is much more likely to look to do an outsourcing deal than the likes of ourselves, Standard, Widows or Equitable, all of whom have grown the business in-house."
Aviva, by contrast, which grew through acquisition of the likes of General Accident, last month announced a deal to outsource 1000 back office jobs to Swiss Re by 2009, saying it would enable the decommissioning of no less than 220 separate systems.
Buchanan added that Resolution's business model was to buy closed books and run them as cheaply as possible. "For us, running a portfolio of businesses on a limited number of platforms, there is no great value in outsourcing it and paying somebody else to do it."
At Resolution in Glasgow, head of new business Hugh McKee stressed that Scottish Provident was still open for business, largely in its successful protection market as well as in guaranteed investment bonds sold through the branches of its former parent, Abbey National.
McKee said: "Within Resolution there will remain people responsible for the direction and development of the service, working very much with Capita. We will also be re-energising the new business side of it."
Industry sources say ScotProv has been injected with new purpose since Abbey sold it to Resolution last year. However, it followed a legacy of neglect of the life businesses under bank ownership, which began within a year of Abbey acquiring it for £1.9bn in 2001.
In July 2002, the architect of the deal Ian Harley was ousted as chief executive.
Abbey at that time employed 2500 people at Scottish Mutual in Glasgow and 1500 at ScotProv in Edinburgh, but key management roles for insurance and asset management were soon switched to London.
In October 2003 Abbey ran a pilot project to offshore 100 ScotProv jobs to India, as it drew up plans to close down the insurer's Edinburgh offices and move most of its £29bn of funds out of Glasgow.
By the end of 2004, Abbey had been sold to Spanish bank Santander, which was reported to be ready to sell off the life businesses. The short-list of potential bidders included Resolution, founded by former Scottish Amicable director Clive Cowdery, which had just pulled off its first deal to buy a closed life fund.
For the next year, Santander proclaimed its belief in Glasgow, but last year came the £3.6bn deal to sell the life businesses to Resolution, catapulting Cowdery's start-up into the FTSE-100.
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