India and United Kingdom emerge as top non-EU outsourcing destinations

European enterprises increasingly reorganised their operations between 2021 and 2023 by relocating business activities to partners abroad, a trend primarily driven by a desire to reduce costs and sharpen focus on core competencies, according to the latest Global Value Chains survey.

International sourcing, often referred to as outsourcing, involves the partial or full relocation of business activities by enterprises to affiliated or non-affiliated partners located abroad, said Eurostat in its summary of how these movements affect production and employment within the bloc.

During the reference period of 2021 to 2023, 72.8 per cent of EU enterprises that engaged in international sourcing moved their business functions to other countries within the union, maintaining a strong preference for regional partnerships.

When looking at destinations outside the EU, the largest sourcing hubs were India, accounting for 18.6 per cent of enterprises, and the United Kingdom, which attracted 17.1 per cent of sourcing firms.

Reducing labour costs was the main motivational factor for 34.1 per cent of sourcing enterprises, while 27.8 per cent cited the reduction of other costs and 20.3 per cent pointed to a need to focus on their core business.

Enterprises that choose to source abroad most frequently move administrative and management functions, at 47.4 per cent, and information and communication technology and services, at 28.7 per cent, which reflects the increasing tradability of service functions in the modern economy.

The survey, which covered 22 EU countries and Norway, found that international sourcing led to the creation of 52,853 jobs but resulted in the loss of 152,023 positions in the participating nations.

While individual job impacts remain small, with a net loss of 99,170 jobs representing only 0.14 per cent of total employment in enterprises with more than 50 employees, their cumulative effect over time should not be overlooked, the report cautioned.

The majority of lost positions were concentrated in the production of goods and materials, which saw a drop of 53,577 jobs, and administrative and management work, where 33,818 jobs were cut.

However, these same business functions also saw some growth due to international sourcing, with gains of 12,762 jobs in administrative and management and 12,493 jobs in production.

In relative terms, information and communication technology services lost the highest share of jobs to international sourcing at 0.46 per cent, followed closely by research and development roles at 0.37 per cent.

Conversely, these high-skill sectors also experienced the largest relative gains, as 0.24 per cent of research and development jobs and 0.21 per cent of information and communication technology jobs were created by these global shifts.

The findings provide insight into how European enterprises organise their activities and how this affects jobs and production within the EU, according to the statistical office.

These figures present the first official results of the survey, which was conducted in 2024 to provide a cumulative and comparable overview of global value chains across the continent.