UK Law and Practice Contributed by: Richard Brown, Louisa Chambers, Adam Wyman and Michael Ross, Travers Smith LLP
who cannot find a way to pass on these costs. IT con - tracts are typically shorter, with more flexible termina - tion and/or charging rights; however, now there will be a focus on payment mechanisms and indexation clauses more than ever. Lastly, the introduction (as a result of Brexit) of a UK points-based immigration system has made it more difficult and costly for UK outsourcing providers to recruit staff from the EEA. This has had an impact across a wide range of sectors, including services requiring technically skilled staff such as computer programmers. Businesses employ various ways to obtain skills from overseas workers – for example, entering into a form of agency agreement with an over - seas business that then provides developers from all over the world, rather than the classic “outsourcing” model. The UK government is working to reform this points-based immigration system to reduce overall migration, whilst also seeking to make policy changes to address perceived skills gaps in the UK economy. 1.2 Business Process Outsourcing (BPO) Cost reduction through increasing efficiencies and productivity in business operations – while allowing businesses to focus more on their core functions – remains one of the key drivers for BPO. According to Grand View Research, the global business process outsourcing market is projected to grow at a com - pound annual growth rate of 9.8% from 2025–2030, with the finance and accounting segment accounting for 21% of the revenue share in 2024. The rise of AI has also seen many organisations outsourcing cus - tomer care processes to service providers who can provide AI technology to assist with customer service queries, with the customer services segment project - ed to grow at a compound growth rate of 11.2% from 2025–2030 (see 1.3 New Technology for more detail on this). Demand for BPO services in the public sector rose during recent years, with government contracts being a significant source of revenue for the industry. Before coming into power in July 2024, the Labour Party pledged to “bring about the biggest wave of insourcing of public services in a generation” and, as reported in the Local Government Chronicle , more recently in a Local Government Association confer -
ence in July 2025, the Deputy Prime Minister at the time said the government was “working to undo the ideological presumption of outsourcing by default as part of our plan to make work pay”. The effects of this shift in attitude are yet to be seen, with the govern - ment stating that the best time to achieve value for money for publicly run services will be when exist - ing contracts expire or are terminated for a failure to deliver. Outsourcers currently supplying services to public sector bodies should be aware that when these contracts expire, public sector bodies will be required to undertake a proportionate public interest test to understand whether that work could be more effec - tively done in-house and the contract may also be subject to mandatory re-tendering requirements under public procurement rules (see 2.2 Industry-Specific Restrictions ). The location of service providers has also shifted, with “nearshoring” being an increasingly popular alterna - tive to offshoring. Nearshoring is a form of outsourcing where companies partner with a service provider in a country in the same region. By way of an example, countries such as Romania and Bosnia have become nearshoring centres for business in Western Europe. However, despite cited benefits of nearshoring being cultural familiarity and mitigated risks, it is expected that offshoring is likely to remain the most cost-effec - tive – and therefore popular – solution. Changes to the UK immigration system (as outlined in 1.1 IT Outsourcing ) continue to make it challenging to recruit staff, including call centre staff. 1.3 New Technology Robotic process automation (RPA) and cloud-based services continue to have a major impact on the out - sourcing sector. Despite high initial set-up costs, auto - mation is often considered a solution for improved productivity, increased employee satisfaction and enhanced customer experience. However, adoption of RPA through outsourcing is becoming increasingly sophisticated, shifting to a more granular focus on overcoming implementation challenges and develop - ing smarter solutions. The use of AI has also become widespread, with much higher acceptance than in previous years, as businesses in diverse sectors (eg, insurance and hospitality) look to AI to optimise busi -
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