The UK reshoring trend: A trickle or tidal wave?
The UK reshoring trend is gathering momentum within certain sectors of the economy, so what lies behind this trend towards bringing production back to the UK?
The business facts are clear enough: this is being driven by shifting consumer preferences, shorter product development cycles, a closing of the wage gap with low cost economies, volatile transport costs and a desire by management to improve quality and reduce supply chain risks.
So who is doing it? According to a study of almost 300 businesses by the EEF manufacturers’ organisation, one in six British companies has reshored production in the past three years. The EEF said the trend was set to continue, with 6 per cent saying they planned to reshore production in the next three years. UK Trade and Investment, estimated recently that 1,500 jobs have been reshored since 2011. Now this is a relatively small trickle within the scheme of things (approx. 2.6m currently employed in the UK manufacturing sector) however it is a start nonetheless.
How do we turn the trickle into a tidal wave? I do not believe that the UK’s infrastructure is a barrier as it is modern and well invested but I do believe that the UK’s energy costs are limiting reshoring opportunities. They are not globally competitive and you only have to look at the US for a direct comparison. 80,000 manufacturing jobs have been reshored to the US in the past three years directly on the back of the US’s reduction in energy costs, driven by the boom in shale gas.
Reduced energy costs alone will not be the panacea for manufacturing but sat along side the other benefits above it will provide a positive and sustainable business landscape in which longer term business strategies such as reshoring can be truly considered. So maybe not so much ‘from trickle to tidal wave’ but rather ‘from shale to tsunami’?