New report casts doubt on extent of UK reshoring
31 October 2014
We are given to believe that UK 'reshoring' - jargon for bringing manufacturing back home - is well underway; but what are the real statistics telling us?
On Friday (October 31) some of us might have been 'spooked' by other than the occasional trick-or-treaters. A new report from think-tank Civitas, - Bringing Manufacturing Back - is the tide of offshoring beginning to turn towards reshoring? - also sparked a few unpleasant surprises this Hallowe'en.
Authored by former Financial Times journalist, Marcus Gibson*, the report used the database resource of UK SMEs compiled under the 'Gibson Index' (founded by Marcus Gibson in 2004), which contains profiles of the 49,000 most important SMEs in the UK. For the purposes of the report, certain companies identified by UKTI-Manufacturing Advisory Service staff plus additional SMEs emerging from Google Alert-type searches, were added to the Gibson Index list.
From this comprehensive database, the research determined that, as of August 2014, just 64 UK SMEs had engaged in any reshoring activity. Moreover, only a proportion of the reshoring of production from China/Asia by UK companies is coming back to the UK. Some is likely to move to eastern Europe.
The report argues that the extent of reshoring in the UK may be five or more years behind that of the US, where the sentiment against offshoring is now strongly critical, and even aggressive. However, America’s sharply decreasing energy costs in recent years should also be considered a factor in their accelerated reshoring. Proportionately high energy costs and onerous carbon emissions obligations in the UK are major concerns for UK manufacturers seeking a level playing field with their foreign competitors.
The UK has limited spare manufacturing capacity, thanks to the ravages of the Blair/Brown years, when the services sector was king and buoyed the economy until its almighty downfall in 2008. The critical shortage of skilled manufacturing workers that ensued may well cripple future efforts to reshore production in the UK.
According the Civitas report, as much as 95 percent of light UK manufacturing firms have disappeared across various sectors since the mid-1990s. Recovery and restoration of the UK’s manufacturing capacity and workforce to the scale and numbers of that period now seems unlikely. Indeed, overall efforts to ‘rebalance’ the economy by the current administration may need a generation to take effect.
With the proportion of UK manufacturers in foreign ownership being much higher than in the rest of Europe, much of the supply chain has now left the UK and the report believes that re-creating a UK-based component supply will be difficult.
Factors now strongly influencing the revival of manufacturing in the UK are likely to be the availability of highly skilled engineering staff, an increase in production capability, the emergence of new markets at home, the level of wage costs and the refocusing of investment into UK manufacturing rather than UK property markets.
You can read the full report here.
*Marcus Gibson is a specialist writer/researcher, formerly with The Financial Times, who focuses on high-potential small companies, technology and academic enterprise in the UK. In 2004 he started Gibson Index Ltd, a company that has pioneered a uniquely comprehensive index of 49,000 small UK technology companies across 54 trade sectors, and also a widely read monthly newsletter.
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