Cost reduction is the main driver of outsourcing

Between 2021 and 2023, 72.8% of EU enterprises that engaged in international sourcing moved their business functions to other EU countries. Outside the EU, the largest sourcing destinations were India (18.6%) and the United Kingdom (17.1%).

The main motivational factors for international sourcing included reduction of labour costs (for 34.1% of sourcing enterprises), reduction of other costs (27.8%), or focusing on their core business (20.3%).

Enterprises that source abroad most frequently move administrative and management functions (47.4%) and information and communication technology and services (28.7%), reflecting the increasing tradability of service functions.

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Source dataset: gvc_sobfbp

These figures present the first official results of the Global Value Chains (GVC) survey carried out across 22 EU countries and Norway. This article presents a handful of findings from a more detailed Statistics Explained article on international sourcing, business functions and global value chains.

Job impact of international sourcing

During 2021-2023, enterprises in 22 EU countries reported that due to international sourcing 52 853 jobs were created (0.08% of all jobs in enterprises with 50+ employees) and 152 023 jobs were lost (0.22%). While individual job impacts remain small (99 170 net jobs lost, or 0.14% of total jobs), their cumulative effect over time should not be overlooked.

Overall, the majority of lost jobs were in the production of goods and materials (-53 577 jobs; -0.30% of all production jobs) and administrative and management work (-33 818 jobs; -0.33%). However, these business functions also created new jobs in the EU due to international sourcing, with gains of 12 762 jobs (+0.07%) in administrative and management, and 12 493 jobs in production (+0.13%).

In relative terms, information and communication technology services lost the highest share of jobs to international sourcing (-0.46%; -15 308 jobs), followed by research and development jobs (-0.37%; -4 858 jobs). However, these sectors also experienced the largest relative gains, as 0.24% of research and development jobs were created by international sourcing (+3 135 jobs) and 0.21% of information and communication technology jobs (+6 869 jobs).

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Source dataset: gvc_sojobbf

For more information

• Statistics Explained article on international sourcing, business functions and global value chains
• Thematic section on globalization of businesses
• Database on globalization of businesses
• Globalization dashboard

Methodological notes

• The data presented in this article cover 22 EU countries (all EU countries except for Estonia, Croatia, Cyprus, Luxembourg and Slovenia, which are exempt from collecting these data under the European Business Statistics regulation).
• Global Value Chains (GVCs): cross-border activities required to bring a product or service from conception through the different production and delivery phases to final consumers. To stay competitive, enterprises increasingly organise their production globally in GVCs by breaking up their value chains into smaller parts supplied by a growing number of providers located worldwide.
• Business function: a grouping of common tasks that an enterprise must carry out regularly, either internally or externally, to bring goods or services to market.
• International sourcing: the total or partial movement of business functions (core or support business functions) currently performed in-house or domestically sourced by the resident enterprise to either non-affiliated (external suppliers) or affiliated enterprises located abroad.

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