Evidence of reshoring
In the US, recent research by Barclays showed that firms were expected to have moved the equivalent of 350,000 jobs back to the US, primarily from Asia in 2022. This compares to 260,000 in 2021 and just 6,000 back in 2010.
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A recent UK report by logistics platform ShipBob, indicated that two in five small businesses were considering a switch to UK manufacturers.
Reshoring is definitely being talked about. Mentions in company documents have been increasing since Q1 2020, when the Covid-19 pandemic took hold. Countries were competing for ventilators and supplies of PPE, while production hubs imposed export restrictions. This highlighted the perils of critical supply chains being reliant on a single, or small number of overseas production bases, as well as being dependent on international trade and cooperation for these critical supplies. Mentions of 'reshoring' peaked in Q2 2022, perhaps as a result of the war in Ukraine and escalating tensions between the US and China over Taiwan, with heightened concerns over a shift in the geopolitical landscape and faltering international cooperation.
There is a clear benefit for countries and firms to bring critical supply chains and infrastructure requirements, such as energy and the manufacturing of medical supplies, pharmaceuticals and defence technology and equipment onshore. However, firms across a range of industries are talking about reshoring. Pharmaceuticals and healthcare-related industries top the list but there are also automotive firms, including those focused on alternative fuel vehicles, there are technology and biotech firms as well as batteries and semiconductor firms.
*Excludes professional services
Protecting IP will be particularly important for high tech manufacturing firms, engineering firms as well as biotech, pharmaceuticals and life sciences manufacturers who all invest heavily on research and development.
Who is actually doing it? …and why?
In January 2021, British bus maker Alexander Dennis (ADL) announced it will manufacture the chassis for both its single- and double-deck electric buses in the UK. Previously, the chassis were made in parent company BYD’s factories in Hungary and China and shipped to the UK for assembly. The change will mean the complete vehicles will be made in Britain, despite both Hungary and China having lower production costs than the UK.
In 2020, Walsall-based automotive parts manufacturer Albert Jagger reshored production of almost a quarter of a million fastening components as it was no longer cheaper to source from China. After finalising the reshoring process, they secured multiple contracts, allowing them to expand their operations and double production capacity. In order to maximise output, they invested in their factory in order to accommodate their new layout, roof, flooring and lighting requirements. They also committed £320,000 of capital expenditure for two high precision advanced manufacturing machine tools. These machines required a new skillset and staff were trained on their operation and programming.
Electric bike manufacturer Volt 'reshored' production from Poland to Milton Keynes due to uncertainties around tariffs post-Brexit. Volt initially set up production in China but moved to Poland in 2017 as the EU mooted the possibility of anti-dumping duties on e-bike imports from China. When the UK triggered Article 50 and began the process of exiting the EU, uncertainties around duties returned and the decision was made to move production to the UK, close to their key consumer market of London. Volt opened a new purpose-built 20,000 sq ft production facility in Milton Keynes, a city that is establishing itself as an innovation and tech hub, with a growing cluster of tech manufacturing firms including component part manufacturers. However, Volt continue to rely on component parts manufactured abroad.
There are examples but reshoring has yet to become widespread. Of course, not everything will come back to the UK but where manufacturers are considering dual-sourcing strategies, the UK can be an appealing option and not just for UK firms.