British manufacturers are to hire more staff to cope with an expected surge in demand caused by a “re-shoring” of production to the UK.
Almost a third (32 per cent) of senior decision makers from the British manufacturing industry who currently use overseas suppliers say their business plan is to source more components from UK companies over the next five years.
Rising costs overseas (59 per cent), and simpler transport and logistics (51 per cent), were amongst the most widely cited factors by the 41 per cent of respondents who reported that the UK is becoming more attractive as a manufacturing destination compared with locations abroad.
Now a survey by inward investment programme Business Birmingham and YouGov has revealed more than half (51 per cent) plan to boost production capacity in the UK in the next five years, and nearly two-thirds of these (56 per cent) say they are likely to hire more staff.
Commenting on the findings, Wouter Schuitemaker, Investment Director at Business Birmingham, said: “Re-shoring can help us rebalance our economy, create new jobs and cut our trade deficit. It’s vital that we back our manufacturers and pull out all the stops to support those who are bringing manufacturing home.
“The West Midlands sits at the heart of the UK’s manufacturing sector, and the strength of our supply chain and R&D means that when companies like Jaguar Land Rover are looking to invest and grow in the UK, they know we can match their ambitions.
“We need to make sure that businesses along the supply chain are not burdened by regulations such as those around visas, and are not disadvantaged by high energy costs.”
Amidst the optimism expressed in the survey, respondents sounded a warning with nearly half (48 per cent) citing high energy costs, and over a third (38 per cent) citing restrictive regulations – which can range from visa restrictions to commercial legislation – as obstacles to expanding their manufacturing operations in the UK.
The research supports evidence of the re-shoring trend, which is seeing manufacturers respond to rising costs in countries like China by bringing production back to the UK. Since China’s WTO accession in 2001, real wages paid in the manufacturing sector have risen by almost 200% in US dollar terms.
The UK stands to boost its international trade balance by £20 billion and an estimated 200,000 jobs could be created over the next 10 years, as mid-sized manufacturing firms reduce levels of outsourcing production to Asia, according to research recently published by the RSA and Lloyds Banking Group.
Component manufacturers in the West Midlands are already reporting the benefits of re-shoring, as the larger companies they supply seek to bring their supply chains closer to home.
Dinos Andreou, Sales and Marketing Director at Castle Bromwich-based manufacturing firm Stadco, commented: “Manufacturers in the West Midlands are more optimistic today than we’ve been for years, and it’s a similar picture across the sector. Not only is demand bouncing back for the cars we supply components for, but the big producers are increasingly turning to local suppliers because we can supply the goods at high quality at short notice.
“When JLR needs a component within five hours we can respond – our foreign competitors can’t. We’re well prepared to meet the orders that are rolling in. There’s a deep pool of skilled labour, and the West Midlands is doing world-class R&D.”
Rowan Crozier, Sales & Marketing Director of precision component manufacturer C. Brandauer & Co. Ltd in Birmingham, added: “Not so long ago, the relative cheapness of components made abroad was the overriding factor considered by large producers in the UK. Fortunately we continued to invest in our people, and as prices have increased in China and elsewhere we’re primed for a surge in demand due to the knowledge and experience of our staff.
“The government and others need to ensure that there is proper investment in skills to make sure that producers across the supply chain can always get the talent they need to expand.
“We firmly believe that re-shoring will see more manufacturing coming back to the UK over the coming years, which can only be good news for the economy as a whole.”
Lorraine Holmes, Area Director for the Manufacturing Advisory Service (MAS), welcomed the findings: “We’ve got countless examples of local firms coming to the rescue of UK businesses that have been hit by quality issues, lead times on delivery and poor communication from foreign suppliers. MAS’ role is to help support SMEs to be globally competitive and to ensure there is capacity in our supply chains to take advantage of the re-shoring opportunity.”