UK dubbed “rising star” for low-cost manufacturing

Posted on 19 Aug 2014 by Victoria Fitzgerald

Britain’s direct-manufacturing cost structure has improved up to 10% compared to other Western European manufacturing export economies, according to the BCG Global Manufacturing Cost-Competitiveness Index.

Wage increases since 2004, the lowest corporate tax levels in Europe and strong advanced manufacturing ecosystems are cited as reason for the improvement.

In addition, the UK has developed its competitive stance compared Eastern European and Asian countries like Poland, Czech Republic and China.

Consequently, manufacturers are reshoring production, with a MAS survey reporting that 11% of SMEs had brought production back from overseas in the previous 12 months.

Britain also surpasses the competition on in its labour flexibility, which lets UK manufacturers restructure at a faster pace than its European counterparts, as well as making the UK an attractive nation in which to build factories and create jobs.

Jane Cox, partner at law firm Weightmans, on how the news may affect the UK manufacturing workforce.

???????????“This is still a turbulent time, but from a legal perspective we have seen that the government’s pledge to cut red tape for employers seems to be having a positive impact on manufacturers by reducing their administrative burden and allowing them to focus on their core business.

“We have also seen recent legislation focus on increasing flexibility within the UK workforce, particularly with regard to parental leave. This will hopefully prove to be a benefit not only to employees and their families; but also to manufacturers, who should find it easier to retain more of their workforce and maintain the all-important work/life balance for their employees.”  

Sukand Ramachandran, partner and managing director in the London office of BCG said: “Global automakers are also taking advantage of the UK’s new position as one of Western Europe’s cheapest manufacturing locations.

“Since 2010, car companies have announced £10b investments, including expansions by Nissan, Honda and the BMW Group’s MINI.

“UK auto output has already increased by around 50% since 2009, and the Financial Times projects that it will grow by another one-third by 2017, to two million vehicles.”

Harold L. Sirkin, a BCG senior partner and co-author of the report said: “Many companies are beginning to see the world in a new light.

“They are finding that many old perceptions of low-cost and high-cost countries are out of date, and they are starting to realign their global sourcing and production networks accordingly.”