More than a quarter of respondents (26%) to the Manufacturing Advisory Service’s latest Barometer stated that concerns over the cost of offshore production was the principal reason for reshoring, followed by improving quality (20%) and reducing lead times (18%).
Reducing costs is the main driver for small to medium sized manufacturers looking to bring production back to the UK.
However, the cost of domestic labour continues to remain the biggest barrier for producing within the UK according to manufacturing SMEs, with nearly one in ten also concerned about the availability of the right skills.
Steven Barr, Head of the Manufacturing Advisory Service, commented: “There is certainly a growing desire from our companies to take production home, with 15% of firms reporting that they have or are in the process of bringing production back. This is compared to just 4% that have offshored in the last year. This marks a major change in approach from five years ago when the Far East and Eastern Europe seemed to be the destinations of choice.”
He continued: “Buyers have realised that there is more to the ‘landing’ price than meets the eye, with delays in logistics and issues around quality adding a whole layer of hidden costs. It appears that bringing production back is having a really positive impact on the bottom line, with 68% of firms that have reshored in the past twelve months reporting an increase in sales.”
Business Minister Michael Fallon said: “These findings are another sign that the economy is heading in the right direction and confidence is returning as we move from rescue to recovery. The number of firms looking to bring production home is particularly welcome with the additional investment and jobs this could bring.
“The Government is committed to helping SMEs grow which is why we are saving companies around £1 billion through removing unnecessary red tape, cutting corporation tax, and establishing a business bank to diversify the choice of lending available to SMEs.”
The Barometer, which featured the views of more than 500 manufacturing SMEs from across England, reinforced the recent feel good factor, with 56% enjoying an increase in sales over the last six months – a 3% rise on the previous quarter.
Encouragingly two thirds of firms are expecting to grow between now and April 2014, whilst 39% are planning to take on new staff.
There also appears to be a pattern of steady growth in companies embracing new technologies (42%) and those investing in machinery and premises (51%). The latter represents a 10% increase from the same period last year.
Steven continued: “The recent Foresight Report detailed the need for industry to move to more advanced, higher value manufacturing and this is being reflected in the Barometer.”
He concluded: “We have seen a two-year high in the number of firms investing in new technologies and this tells us that manufacturers are not only optimistic about the next six months, but also have one eye on the longer-term picture.
“It’s important to note that there has been a slight reduction in the number of companies looking to recruit, which could reflect the fact many firms chose to retain skills during the recession and still feel they have enough capacity to cope with their anticipated expansion.”
The publication of the latest MAS Barometer marks the start of the first ever Manufacturing Matters week, which is looking to showcase England’s manufacturing SMEs – a sector that currently accounts for more than 110,000 businesses and 1.1 million jobs.