A recent report from EEF, the Manufacturers’ Organisation, highlights that many companies are bringing manufacturing back to the UK – a growing trend that is being welcomed with open arms. Trading on home soil brings distinct competitive advantages and companies are keen to use the UK’s benign business environment to positively affect their sales and profit margins.
Tractability, cost, receptiveness, and clear market access have made the UK a magnet for potential manufacturing investment. Companies are reaping the benefits of being closer to their markets by having a much firmer finger on the pulse of their customers and day-to-day operations. Supply chains are simpler, delivery times are shorter and growth opportunities become more visible and viable to act upon.
Differentiate from overseas competitors
In order to compete with lower-cost overseas producers, UK manufacturing companies differentiate themselves by focusing on:
- Product knowledge;
- Customer service; and
- Product quality.
The importance of these is demonstrated by research carried out by EEF, which reports that 47% of companies focus on quality as one of their main competitive advantages compared with 17% that compete on price.
Back from China
EEF also reports the majority of reshored activity has been returning to the UK from China. Low labour costs were the main attraction for production in China, but as wages increase along with transportation and logistics costs, the their competitive advantage is eroded.
Be more customer-focused
Reshored companies are able to access their preferred suppliers, respond rapidly to changes in requirements and widen their access to a skilled employee base. Challenges, risks and supply chain disruptions are minimised as production schedules become more reliable and straightforward supplier communication results in fewer lost orders. This customer-focused approach puts reshored companies in an improved position to win business in an increasingly competitive landscape.
Obstactles to reshoring
The key obstacles are the high labour and energy costs in the UK. Strict planning regulations, particularly where greenfield sites are concerned, would also create problems for some. But over the last three years, one in six companies have returned to the UK by bringing their production back in-house or by changing to UK-based suppliers.
Government initiative – Reshore UK
The UK Government needs to ensure its policies keep the UK attractive enough for companies to go through the rigmarole of relocating. It has launched Reshore UK, a programme designed to help companies relocate by providing a matching and location advice service. Business Secretary Vince Cable is a keen supporter and has announced a £245 million Government supply chain fund to help rebuild British manufacturing expertise. Projects relating to the fund are expected to create 1,369 jobs and safeguard a further 2,525.
UK reshoring is still relatively small scale, with only 1,500 manufacturing jobs reported returning to Britain since 2011. But there is no denying it is a growing trend and with the UK business environment continuing to compete internationally, reshoring to UK soil will remain an attractive option.