Customers wanting to discuss their bank balance, buy an insurance policy or upgrade their computer are no longer surprised to find themselves talking to someone in Bangalore or Johannesburg.

Growing numbers of companies are shifting huge chunks of their administrative and customer service operations overseas in a bid to cut costs. It costs up to 40 per cent less to run an operation from India than from the UK, with salary costs a fraction of those here. The Prudential estimates that it will save £16 million by 2006 by shifting part of its life and pensions call centre operation to Mumbai.

Other organisations are coming under pressure to follow suit, according to a Confederation of British Industry (CBI) poll released at its annual conference in Birmingham this week.

Until recently, the push to relocate to cheaper countries like India and China was led by companies looking for savings on manufacturing and production costs. Employees had no frontline contact with members of the public and did not need good customer skills or ability to speak English.

Now service industries, led by the financial services sector, are harnessing increasingly sophisticated telephone and computer networks to relocate back offices operations and call centres overseas. Two-thirds of organisations polled for the CBI said technological improvements made countries like India more accessible, particularly for service industries where customer service can make or break corporate reputations.

But many companies are still nervous of alienating customers by moving frontline services abroad and the results of a survey carried out last month suggest such nervousness is justified. One-third of UK consumers polled said they would go elsewhere if their bank or insurer moved customer service operations oversees, expressing concerns about language problems and cultural differences.

Andrew Veal, a director of management consultancy company Troika which carried out the research, says companies have to demonstrate that moving operations abroad does not mean worse service. "Customers are likely to be talking to a graduate in India, which they aren't in a UK call centre. Some of the operations in India are startlingly impressive."

Only 4 per cent of customers have actually switched provider in response to customer service moving abroad, says Mr Veal.

Companies are keen to stress that they are spending millions on technology so that customers will be able to dial the same 0800 number to India or South Africa or China as they would to the UK, and employees will all be linked to the same systems, ensuring seamless service. "The PCs are exactly the same wherever you are, employees log in in the same way and dial nine for an outside line," says a spokesman for the Prudential.

The Pru is now offering private medical insurance through its Pruhealth joint venture with South African insurer Discovery. Application forms are received in Belfast, scanned in and sent at the click of a mouse to underwriters in Johannesburg.

Staff in India spend weeks learning how to handle British customers with different regional accents, how to speak clear English and how UK banks, pensions and life assurance work.

Lloyds TSB, which has around 1300 workers in its credit card collection centre in Bangalore and its call centre in Mumbai, says there is no point saving millions of pounds moving abroad if the bank then loses customers. "If we do something our customers don't like, it won't be good news for us. We train our staff in Mumbai for 13 weeks and we are very careful to get the skills right. Everything functions on the same system, all our servers are in the UK and it's all seamless for customers."

Last week the bank announced plans to outsource up to 1,000 more jobs. Lloyds TSB customers with branch-based accounts now have a 1 in 8 chance of speaking to someone in Mumbai when they call to arrange an overdraft or transfer funds. Next week, the bank is displaying leaflets in its branches explaining why it is moving services to India. "There is a perception that the service won't be so good. This is not the case and we have nothing to hide."