Manufacturers increasingly are moving production back to Britain as shoddy quality and higher freight prices are undermining the cost advantage of producing goods overseas.
A report into the state of the manufacturing sector by the EEF and BDO, the accountants, finds that one in seven companies surveyed had moved production back to the UK from abroad in the past two years.
Many British manufacturers have outsourced production to countries with lower labour costs, in Eastern Europe or Asia, in the past decade, a trend that has accelerated as an increasing number of British companies have fallen into foreign ownership.
But higher freight, energy and commodity costs have increased the expense of production overseas, while the recession has put pressure on companies to re-evaluate decisions on location.
According to the EEF, the manufacturers’ organisation, 14 per cent of companies have moved production back to the UK because cost savings have not been as great as expected.
Other reasons were that the quality of goods was not up to standard and that the speed of getting products to market was not fast enough.
The EEF’s survey of manufacturers presents an unexpectedly optimistic picture of the UK’s manufacturing base in a year when headlines have been dominated by concerns for jobs at Corus, BAE Systems and Vauxhall, some of the country’s biggest manufacturers.
The EEF reports that nearly seven in ten companies agree that the UK is a competitive location for their manufacturing activities.
Two years ago only 43 per cent of companies surveyed were positive about the UK’s business environment for manufacturing.
Two thirds of the 300 businesses surveyed for the report — which include makers of mechanical equipment, plastics manufacturers, food manufacturers and suppliers to the automotive industry — plan to re-evaluate their supply-chain strategies as a result of the global recession.
Tom Lawton, head of manufacturing at BDO, said: “The recession has made companies look at their whole supply chain and their costs.
“It will not be a flood back [to the UK] but quite a few companies are saying that it is possibly better now for us to source locally.”
Mr Lawton said that while many companies would still find it attractive to consider moving production overseas, a significant minority had concerns over quality and reliability of low-cost suppliers.
Three in five companies have also expressed significant or moderate concerns about the health of their overseas suppliers, with insolvencies among overseas suppliers posing a significant threat of disruption to the supply chain.
“We are optimistic that those firms who have relocated production back to the UK will stay here,” Mr Lawton said.
The weaker pound has also helped to make production in the UK more cost effective because the cost of imports has risen.
The survey reveals marked unhappiness with the UK’s tax system and regulation, with three-fifths of companies rating the tax system as bad and only 12 per cent as quite or very good.
The survey, conducted before an increase in national insurance was announced in the Pre-Budget Report, reflects other EEF surveys, which show that many UK companies are anxious about the changing corporate tax regime.
Source timesonline
