As UK manufacturing experiences an upturn, Professor John R Bryson, Professor of Enterprise and Competitiveness at Birmingham Business School, explains this unexpected phenomenon.
For decades, the media and politicians have bemoaned the demise the UK’s once-thriving manufacturing sector. However, the tide has been turning and although the country may never again see the boom years of the 1970s, today’s headlines herald a positive turnaround for manufacturing’s fortunes.
Over the last few years, the trend has been for companies to move manufacturing production overseas to more cost-effective countries, such as China. UK manufacturing may have scaled down, but it hasn't stopped and what had been perceived as a decline, now looks to have in fact been a major transformation. British manufacturing companies have been quietly restructuring away from competition based on price, to competition founded upon knowledge, innovation, quality, reputation, brand and speed of response.
Although this transformation hasn't resulted in a significant increase in employment in manufacturing firms, there is related employment in service firms that support manufacturing.
How do we explain this renaissance? The trend began in 2009, when a survey of 300 UK-based manufacturing firms found that in the previous two years, 14 per cent of those firms had brought production back to the UK. In 2013, a Manufacturing Advisory Service report noted that 15 per cent of companies were returning production to the UK.
This “onshoring” has been gradual and involves a number of processes; the repatriation of production from low-cost locations; investment in onshore production capability that boosts capacity; and a shift in companies that once sourced components from overseas returning to local producers and supply chains.
Professor Bryson explained: ‘The reasons why manufacturing is coming back to the UK are the same reasons why – for many successful manufacturers – it never strayed abroad. These reasons revolve around capability and capacity, established firms, quality, innovation, technology, design and access to key markets.’
With funding from the University's Institute of Advanced Studies (IAS) Professor Bryson is exploring the ongoing transformation of manufacturing in the UK and the US as part of its “Regeneration Economies: Transforming People, Place and Production” project. According to the IAS, there are seven drivers for this renaissance:
- Firms are moving production onshore, as cost savings have proven to be less than anticipated. Labour increasingly accounts for a small proportion of a product’s manufacturing costs. Therefore, wage inflation and escalating shipping costs are reducing the savings gained from outsourcing to locations such as China.
- Production outside the home market can lead to long product delivery cycles. Speed and proximity to market are becoming significant drivers of success.
- There have been concerns with the quality of products produced in low-cost locations.
- Issues have arisen around the loss of intellectual property.
- Firms are reluctant to tie up capital in large overseas shipments and have sought alternative local suppliers willing to supply in small batches.
- Companies are beginning to appreciate the benefits of their bringing design and development facilities under the same roof as production managers and assembly workers. This allows for a close dialogue between design, development and manufacturing.
- In the 21st Century, the cost of energy will play an important role in manufacturing, potentially displacing labour costs as the driver behind manufacturing's evolving global geography. Energy costs are involved in the shipment of products from low-cost locations to the UK and in fabrication processes.
Will this British renaissance mean declining fortunes in other global manufacturing locations? Not so, says Professor Bryson: ‘The likes of China are not suffering because of this phenomenon, because local consumer markets are growing and discovering their own local manufacturing capabilities.
‘We’ll see more local manufacturing – both in the UK and abroad – particularly as digital fabrication, or the ability to create goods via 3D printing, is more widely adopted. We’ll continue to see UK manufacturing grow. However, we won’t see a vast boom in related employment.’
So, the IAS research predicts the next few years will see a transformation in the UK’s economy as the ongoing manufacturing revolution continues. However, there are challenges to overcome if this is to be a long-term trend.
Professor Bryson added: ‘The British Government urgently needs to address the availability and cost of energy. The debate on energy revolves around homes, but perhaps the more critical debate should be based on energy and production.
‘Skill shortages and hard-to-fill vacancies are also an ongoing problem for British manufacturing businesses: manufacturing must once again become a credible career option considered by all students. In short, UK manufacturing needs to be rebranded. Therefore, the government must develop an integrated long-term policy designed to support the ongoing transformation of manufacturing sector.’
One of Yorkshire’s oldest textiles companies, Laxtons, is once again seeing growth, following years of skilled staff shortages and battling against competition from the Far East.
The business, established in 1907, has opened a commercial worsted wool manufacturing facility – believed to be the first such factory in the UK for 25 years. The venture creates or protects 12 jobs and has meant that production has been brought back to the UK from Spain, France and Italy.
Managing Director James Laxton said: ‘Bringing manufacturing back to the UK has environmental benefits as we are no longer shipping products around Europe every week, so this move reduces our carbon footprint substantially.
‘We aim to create more jobs by putting on more shifts as demand increases. We have brought manufacturing back to the UK to enhance our service with reduced lead times, improved management, better control of raw materials and higher quality.’