UK re-shoring drive still pushing ahead: report

Posted on 3 Mar 2014 by Callum Bentley

The greater push for re-shoring UK production and UK-based suppliers is taking hold as another major report from EEF and global law firm Squire Sanders highlights.

According to the report Backing Britain – a manufacturing base for the future one in six companies have re-shored production back to the UK in the last three years. This compares to one in seven companies in 2009. Furthermore, the UK based supply chain is also benefiting from this trend with one in six companies turning to a UK supplier for parts and components.

The survey also shows this gradual trend is set to continue with six per cent of companies saying they are planning to re-shore production in the next three years.

Commenting, EEF Chief Executive, Terry Scuoler, said: “The trend may be gradual but is highly encouraging to see more re-shoring continuing. While it will always be two-way traffic, the need to be closer to customers to have ever greater control of quality, and the continued erosion of low labour costs in some competitor countries means that in many cases it makes increasingly sound business sense (to re-shore).

“It is now key that government policy supports the most competitive business environment possible so that we continue to see more high value innovative manufacturers invest in and sell from the UK.”

Cipriano Beredo, partner and global leader of Squire Sanders’ manufacturing industry group, added: “Companies in both the UK and the US that have previously off-shored low cost production may no longer be reaping the same benefits.  While moving any manufacturing across borders is a significant decision for management, the report shows that this is not motivated solely by cost, but often to improve the quality of what is being produced and enhance customer service.

“In the US re-shoring has been driven by the reduction in energy costs, driven by the boom in shale gas.  In addition, the US also benefits from a more flexible labour market than the UK and Europe.

“However, while energy and labour costs are not currently primary drivers of re-shoring in the UK, many of the other factors driving re-shoring in the US are also compelling reasons to re-shore in the UK. Those factors include improved quality, shorter supply chains and greater control of brand.  Ultimately businesses will succeed where there are incentives to innovate and grow and improvements in the business climate will ensure that UK manufacturing continues to compete on a global stage.”

The extent to which manufacturers are increasingly innovative and focused on quality and brand reputation is highlighted by the fact that half of companies see quality as their main source of competitive advantage. This is followed by customer service and on-time delivery whilst, in contrast, only 17% of companies are seeking to compete on cost.

The increasing pride in UK capabilities and as a business environment in which to manufacture is shown by the fact that 84% of companies see the UK’s reputation for quality as an advantage to being based here.

Despite the increasingly positive brand reputation of manufacturing in Britain and the UK as a business environment, the survey also showed that disadvantages still remain. This is especially important given the competition for location of production and internationally mobile investment. The cost of energy and availability of suitable skills were cited by half of companies as the biggest negatives to increasing their manufacturing activity in the UK respectively, whilst 44% of companies cited a lower tax burden as the biggest change in government policy they would like to see.