Will government respond to calls to promote reshoring?
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The reshoring trend, systematically explored and publicised by Aston’s Professor David Bailey since 2013, is the subject of new research from EY confirming his findings about successes and possible pinch points. Readers new to the subject could also turn to Bryan Luoma for his concise overview of out-sourcing problems.
Following a link received recently, we read the cautious comments of Cathy Taylor, EY’s senior partner, who notes that: ‘the economics underpinning the off-shoring trend appear to be reversing’.
Examples of this trend in the region have reported on a sister site, including Coventry’s RDM Automotive and Birmingham’s Brandauer – both reshoring and multi-skilling. As Cathy Taylor writes, reshored firms find that a ‘cluster’ in the appropriate sector will offer close proximity to key suppliers, infrastructure and a workforce with the relevant skills and these are to be found in areas like Coventry and Aston/Hockley/Newtown.
Cathy Taylor reports estimates that re-shoring could add £15.3bn of GDP to the UK economy and equate to more than 315,000 jobs across the UK. The five regions that EY found offering the greatest re-shoring potential are the West Midlands, East Midlands, North West, South East, Yorkshire and the Humber.
She notes that while increasing wages in developing countries are eroding their labour cost advantage, other factors are leading business to choose British suppliers. These include the desire to guarantee quality, the imperative to reduce time to market and highly skilled workforces. We also note references on our sister site to a flexible approach, enabling modifications or new products ordered to be designed and processed in good time.
Ms Taylor calls for government to provide the correct infrastructure framework, and to reduce the headline rate of corporation tax to the joint lowest in the G20, providing competitive relief for innovative and high tech industries.
Will this government backing materialise, or can manufacturing prosper on its own merits?
Despite David Cameron’s Davos commitment to ‘reshoring’ British jobs, last year Francis Maude appointed an offshore and outsourcing expert, Peter Swann, to supervise the export of jobs of civil servants who provide back-up facilities such as pay roll and contract details to Whitehall offices. David Hencke recorded in the Tribune that these jobs handling sensitive personal pay roll details, and possibly criminal and police records, are to be moved offshore by private companies under a Cabinet Office initiative to save money. Within a year, it started a closure programme of sites affecting more than 500 jobs in Sheffield, Cardiff, Newport and Leeds and is looking to relocate the work to India. Other centres such as Blackpool, York, Newcastle and Peterborough were also to lose staff. Tech-Eye noted earlier that David Cameron – rather than upskilling British people – has backed a specific form of on-shoring: bringing workers from across the world to the UK.
Encouraging last words from Professor Michael D. Johnson, Department of Engineering Technology and Industrial Distribution, Texas A&M University, briefly in the FT:
“My colleagues and I have found that importing goods from China to developed countries (for example, the US) entails numerous increased costs: transportation, inventory carrying, and production and logistics oversight. The combination of these increased costs, just-in-time manufacturing needs, and increased developing country labour rates contribute to the economic viability of localised flexible manufacturing facilities serving developed country markets”.
Posted on February 18, 2015, in Economy, Government, Lobbying, Planning, Taxpayers' money and tagged Brandauer, Bryan Luoma, EY, infrastructure framework, just-in-time manufacturing, localised flexible manufacturing, Onshoring, Professor David Bailey, Professor Michael D. Johnson, RDM Automotive. Bookmark the permalink. Leave a comment.
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