The people of Britain voted to leave the European Union in a monumental referendum last June 23, 2016. There are already talks of its effects in the BPO industry.
The Decline of the Pound
Already, the pound dropped to its lowest value since 1985. Canalys is a leading global technology market analyst firm. They predict that the result of this decline will immediately lead to higher technology prices and less IT spending.
“Canalys now expects IT spending to fall by up to 10% in 2016. This is based on the public sector and businesses cutting expenditure to reduce risk.” said Matthew Ball, Principal Analyst in an article by infotechlead.com
It is also anticipated to be even worse by 2017 with an estimated drop of up to 15%. There will certainly be a change in the BPO industry when this happens. The National Association of Software and Services Companies (NASSCOM) called Britain’s exit as a ‘phase of uncertainty’ in the near term. 2016 will be a rough year for Britain economically speaking. Although most experts say that it will eventually bounce back in the long run so there is little need for panic.
Britain’s Exit’s effect on the BPO Industry in India
India is also seen to be affected by this decision. Earlier this month, India’s external affairs minister Sushma Swaraj said that India preferred Britain to stay within the EU.
“We have always held that, and articulated too in the past, that Britain is the gateway to the European Union”, she said.
The instability of the British pound can be a bad thing for BPO companies such as TCS, Infosys, HCL, Tech Mahindra and Mindtree profit-wise. These IT and BPO companies gain around 20-30% of their revenue from Europe alone.
Prabhu Srinivasan is the Chief Strategy Officer at Intelenet Global Services. He says that
The UK has traditionally been a passport and a financial hub for Indian firms to access European shores and conduct business with European financial markets by virtue of having operations in London. So, there will be some immediate adverse reactions as it is likely to see some more fluctuations in the forex market.
These effects are predicted to happen within the coming years. Experts also point out that in the long term, India has much to benefit from this exit. With Britain no longer relying on the EU, they will most likely outsource to India and other non-EU affiliated countries.