Member Article

Is the UK market ready for a surge in re-shoring?

Re-shoring is becoming viewed as a key feature in strengthening local economies and the UK industrial base as a whole. In November 2013, referencing a Manufacturing Advisory Service report, the Financial Times commented that: “The number of companies returning production from countries such as China is outstripping those moving output overseas, according to a survey of more than 500 small and medium-sized manufacturers.”

The study found 15 per cent of companies were returning production, compared with only 4 per cent that off-shored in the past year. Its findings suggest that re-shoring had been modest in scale to date but may be gaining momentum.

More recently, research conducted by the Engineering Employers Federation in conjunction with Squire Sanders also supported the view that the gradual re-shoring of manufacturing is continuing, with companies increasingly backing the UK as a base for high quality products. It reported that one in six companies re-shored production in-house in the last three years and one in six companies re-shored sourcing to a UK-based supplier. China, followed by Eastern Europe are the areas cited as being most affected by re-shoring.

The reasons being put forward by industry are numerous, but the idea of being closer to customers is gaining popularity while the continued erosion of lower labour costs in some competitor countries makes re-shoring increasingly sound business sense.

The UK is able to take an increased share of this growing international market because of its cost stability and access to key skills together with an increase in perceived risk in some offshore locations. So while cost reduction was a key driver in a lot of off-shoring activity 15 years ago, it is no longer the only feature.

However, while this shift in strategy is to be welcomed, I think there are still some key issues to address and a number of factors which will continue to have an impact if not remedied.

Firstly, we need to see a politically united manufacturing strategy that does not change with each new government – a ’One Britain Strategy ’– which is actively promoted and is understood throughout the manufacturing industry.

The uncertainties around the cost of energy and the ongoing shortage of key skills are two areas we must urgently address. It is essential that we have more clearly defined strategies to deal with these issues as they both have the potential to threaten the future buoyancy of the sector.

Further, I think that Government should provide an enhanced level of support at the front end of new product development to provide some competitive advantage. This would really benefit UK manufacturing rather than allowing companies to develop products in China where low set up costs can be more attractive when compared to those of the UK and Europe.

Finally, the UK still requires a more balanced tax system together with a reduced regulatory burden to simplify the process of doing business with British companies.

Once demand returns the capacity is available and new projects will get the green light, but how ready is the UK to really take full advantage? I believe that only when all these issues have been addressed are we likely to become a recognisable force in manufacturing/engineering.

www.sone-products.co.uk

This was posted in Bdaily's Members' News section by Raymond Oliver .