For many years, numerous British firms have chosen to locate an aspect or even their entire manufacturing operations overseas as a means of reducing costs. This, for the most part, is due to employment laws in countries such as China and India allowing companies to pay workers less per hour than in the UK, making productivity more profitable.
However, as the wage gap between China and the UK has started to decrease, many firms are choosing to “re-shore” their manufacturing operations and take advantage of the industrial boom currently prevalent in the UK.
According to a survey conducted by trade body EEF, in association with law firm Squire Sanders, around one in six companies have chosen to bring manufacturing back to the UK in the past 3 years compared to only one in seven in 2009 – a trend which experts predict will increase in the future.
Chief executive of EEF, Terry Scuoler, says; “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.”
The survey also found that companies which re-shored production had, for the large part, benefited from the decision with 40 per cent of respondents reporting a rise in turnover. Furthermore, 60 per cent had experienced a moderate increase in profits, leading to employment growth to keep up with demand.
Unfortunately, although EEF revealed that six per cent of companies surveyed intend to re-shore production within the next three years, there remain several key issues which make Britain an unattractive destination.
The major worry for most businesses questioned on this matter was the rising cost of energy, whilst many also voiced concerns regarding the diminishing number of UK skilled workers – something which has been highlighted as a major inhibiter to growth by economists and analysts since the end of the recession.
Business Secretary Vince Cable welcomed the findings of the survey at EEF’s national manufacturing conference on Tuesday, at which he pledged the government’s support in helping “rebuild British manufacturing prowess, which we will exploit to bring more work to these shores.
“Britain winning back business on the basis of quality and good performance is a good characterisation of the sort of industrial strategy that I have been promoting.
“We are now seeing a number of encouraging signs of production returning to the UK,” he said.
With Britain becoming an increasingly powerful player in manufacturing, this trend can only add to growth, job creation and demand for industrial property. However, the issue of a shortage of skilled workers remains a difficult obstacle to overcome.
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