It’s not so many years since companies were reconfiguring their supply chains to move manufacturing to the emerging markets of the Far East.
Since then there have been plenty of examples of companies struggling to manage the long and complex supply chains that result from this.
More than one industry leader has been embarrassed at revelations about the treatment of workers in factories in the Far East. Only last week it was reported that Apple was banning “bonded servitude” at supplier factories (this is where workers have to pay recruitment fees to agents). Last year Apple opened a couple of manufacturing plants in the United States – and where Apple leads others are sure to follow.
In fact, re-shoring, also called on-shoring, has become a significant trend in the US, and, though it is talked about a lot in the UK, there has been less enthusiasm to actually do it. However, the UK has become a more attractive place to manufacture in the past couple of years.
Now, a new report from EY calculates that re-shoring could add £15.3 billion of GDP to the UK economy – and more than 315,000 jobs.
EY chief economist Mark Gregory says: “Offshoring in the eighties and nineties saw a dramatic reduction in British manufacturing and a shift to services industries that resulted in a fundamental restructuring of the British economy.
“But the economics underpinning this trend appear to be reversing and presents the UK with a once-in-a-generation opportunity. While increasing wages in developing countries are eroding their labour cost advantage, there are many more factors driving business to choose British shores. The desire to guarantee quality and the imperative to reduce time to market are increasingly important drivers of location decisions.”
EY sees it as an opportunity to rebalance the UK economy, and wants to see support for those sectors which offer the greatest return from reshoring.
This is not just confined to the UK, course. Countries such as Germany, France and the emerging markets of Eastern Europe all want a share of the windfall that reshoring promises. And that competition can only make the re-shoring options more attractive.