One in six firms bring production back to the UK

Will Green is news editor of Supply Management
3 March 2014

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3 March 2014 | Will Green

One in six firms has reshored production back to the UK in the last three years, according to a report.

The same proportion of companies has reshored sourcing to a UK-based supplier, and the main reasons for the trend are improved quality, followed by fewer delivery issues and lower logistics costs.

The report, titled Backing Britain – a manufacturing base for the future, found the number of firms reshoring had increased compared to 2009, when one in seven firms said they had done so, and of those who did, 40 per cent saw turnover increase and 60 per cent see profit and employment rise.

Compiled by EEF and law firm Squire Sanders, the survey of 271 companies also found 6 per cent of firms planned to reshore production within the next three years.

Terry Scuoler, EEF chief executive, said: “The trend may be gradual but it is highly encouraging to see more reshoring continuing. While it will always be two-way traffic, the need to be closer to customers, to have every 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.

“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.”

The report said half of companies saw quality as their main source of competitive advantage, followed by customer service and on-time delivery, with just 17 per cent citing cost.

The country from which most production is being returned is China, followed by Eastern Europe.

Meanwhile, the latest Manufacturing Advisory Service (MAS) Barometer showed 86 per cent of SMEs were planning to invest in capital equipment over the next year, with the average spend being £121,000.

Two-thirds of firms were planning to buy new plant and machinery, around a half intended to upgrade IT and communications, and nearly a third planned to improve premises.

The main reasons for spending were boosting efficiency and quality (35 per cent), followed by developing new products and processes (30 per cent) and expanding capacity (22 per cent).

Some 19 per cent of firms planned to approach banks to fund purchases, with more manufacturers instead choosing grants (27 per cent) and the government’s Regional Growth Fund (21 per cent).

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