Positive news for UK manufacturing as reshoring gathers pace

British manufacturers are to hire more staff to cope with an expected surge in demand caused by a “reshoring” of production to the UK, according to a new report.

Almost a third (32 per cent) of senior decision makers from the British manufacturing industry who currently use overseas suppliers say their business plans to source more components from UK companies over the next five years.

Rising costs overseas (59 per cent), and simpler transport and logistics (51 per cent), were amongst the most widely cited factors by the 41 percent of respondents who reported that the UK is becoming more attractive as a manufacturing destination compared with locations abroad.

Now a survey by Business Birmingham and YouGov has revealed more than half (51 percent) plan to boost production capacity in the UK in the next five years, and nearly two-thirds of these (56 per cent) say they are likely to hire more staff.

Commenting on the findings, Wouter Schuitemaker, Investment Director at Business Birmingham, said: “Re-shoring can help us rebalance our economy, create new jobs and cut our trade deficit. It’s vital that we back our manufacturers and pull out all the stops to support those who are bringing manufacturing home.

“The West Midlands sits at the heart of the UK’s manufacturing sector, and the strength of our supply-chain and R&D means that when companies like Jaguar Land Rover are looking to invest and grow in the UK, they know we can match their ambitions.

“We need to make sure that businesses along the supply chain are not burdened by regulations such as those around visas, and are not disadvantaged by high energy costs.”

Amidst the optimism expressed in the survey, respondents sounded a warning with nearly half (48 per cent) citing high energy costs, and over a third (38 per cent) citing restrictive regulations – which can range from visa restrictions to commercial legislation – as obstacles to expanding their manufacturing operations in the UK.

The research supports evidence of the re-shoring trend, which is seeing manufacturers respond to rising costs in countries like China by bringing production back to the UK. Since China’s WTO accession in 2001, real wages paid in the manufacturing sector have risen by almost 200% in US dollar terms.

The UK stands to boost its international trade balance by £20 billion and an estimated 200,000 jobs could be created over the next 10 years, as mid-sized manufacturing firms reduce levels of outsourcing production to Asia, according to research recently published by the RSA and Lloyds Banking Group.

Component manufacturers in the West Midlands are already reporting the benefits of re-shoring, as the larger companies they supply seek to bring their supply chains closer to home.

Commenting on the report, Ms Lee Hopley, Chief Economist at EEF, the manufacturers’ organisation, said: “We are hearing more reports of companies looking to source materials and other services in the UK. This is another sign of industry’s growth potential and builds on the latest positive indicators from Monday’s PMI.

“There are many reasons for a shift back to Britain, including improving the security of supply chains, the focus on innovation and quality and the rise in employment and transport costs in emerging economies.

“But whatever the reason, policy-makers need to make sure the UK is a competitive location for investing in modern machinery and innovation, if we are to capitalise on this trend.”