The Advantages and Challenges of Re-shoring

    View Authors March 2014

    In the past few years ‘re-shoring’ – the physical relocation of production or supply chains from low cost economies – has become one of the most discussed issues in the debate about the role of manufacturing in the UK economy.

    EEF’s Backing Britain: A Manufacturing Base for the Future” report in partnership with Squire Sanders, provides a vivid snapshot of a broad cross-section of UK manufacturing, and identifies the core strengths of the sector, the reasons why businesses have considered or are considering re-shoring, the various advantages that the process brings and the equally diverse challenges it poses.

    Quality products, high levels of customer service and brand reputation have been key to the success of UK-based companies for many years – no less than 84% of the companies surveyed cited the UK’s reputation for quality as an advantage to being based in the country. The report’s findings underscore how important quality and brand are in giving UK manufacturers a competitive edge in a global market. And, of course, they point to the fundamental importance to manufacturers of maintaining quality and protecting brand – more than two-thirds of companies highlighted the benefit of production in the UK in terms of reducing their intellectual property risk.

    These findings resonate in Yorkshire. Guiseley-based worsted yarn spinner Laxtons brought its manufacturing back to the UK in January 2010, and is reaping the rewards with year-on-year growth, the doubling of production capacity and further plans to expand.

    James Laxton is clear about the benefits to his business and these mirror many of the findings of the report. “Our decision was based on improving product quality, cutting transport costs and improving delivery times. Critically we needed greater flexibility – both in terms of providing the very best customer service to our high-end retailer customers, but also to enable us to develop new products, the lifeblood of the business. Before we moved our manufacturing back to the UK, our development cycle was at least six months, but now from initial idea to prototype takes six weeks.”

    The EEF report also brings out the financial, legal and practical issues that businesses identify as challenges to re-shoring and the process of cutting the complexity of their supply chain. In the UK, energy costs; the skills matrix in the workforce; workplace regulation and costs; the complexity of tax; and also hurdles in the planning process can all hamper businesses looking to follow in the footsteps of Laxtons.

    “Energy supply is a major challenge”, says Laxton. “It is difficult to find premises with sufficient existing power and any new installation is expensive and time consuming, involving up-front cost and a lead time of up to 12 months.”

    He also highlights the difficulties in building a work force from scratch, with the decline of manufacturing jobs in the 1980s and 1990s meaning that expertise and skills have been lost.

    For policy-makers and legislators there are some clear messages coming from the experiences of people like James Laxton – there is more that can be done to support investment; a need to lower domestic energy taxes and the reform of the skills and apprenticeship infrastructure is long overdue. The reduction of unnecessary and complex business regulation, whether in the area of tax, pensions, employment law and immigration, property development, planning consent or infrastructure investment can make re-shoring in the UK more attractive and ensure that progress towards a globally competitive business environment continues to be made.

    *This article was originally published in the Yorkshire Post on 18 March 2014