One in six UK manufacturers moving operations back home

A survey by manufacturing UK manufacturer's body EEF (formerly the Engineering Employers' Federation) reveals that one in six UK manufacturers had brought their manufacturing operations back to the country from overseas over the last three years.

Manufacturing had mostly been brought back from China, with Chinese wages having increased rapidly in recent years, and the cost savings that were earlier on offer in regions like the Far East now less attractive.

UK manufacturers were also keen on protecting quality and reducing transport costs.

Eastern European countries were the next most common area for repatriation of manufacturing operations.

According to the EEF, in 2009, one in seven companies had brought manufacturing back to the UK.

According to Terry Scuoler, EEF's chief executive, the trend was gradual, with five in six companies choosing to keep their operations overseas, but it was encouraging, The Guardian reported.

He added, while it would always be two-way traffic, the need to be closer to customers, to have ever greater control of quality, and the continued erosion of low labour costs in some competitor countries meant that in many cases it made increasingly sound business sense.

The paper quoted Lee Hopley, EEF's chief economist, as saying, while the difference in wages paid in the UK and China was still enormous the gap was closing and overall the cost advantage of basing manufacturing operations in China had been eroded, when elements including transport and logistics were included.

Around 40 per cent of companies that had re-shored production, saw turnover increase as a direct result, with 3 per cent reporting a fall.

Around 60 per cent reported a moderate increase in profits and employment.

Hopley went on to add that there were still some major areas of concern limiting re-shoring, including the high cost of energy faced by UK based manufacturers as also a perceived shortage of skilled workers.

Meanwhile, UK business secretary, Vince Cable, is expected to say tomorrow that the government would do more to "rebuild British manufacturing prowess, which we will exploit to bring more work to these shores".

At EEF's national manufacturing conference in London, Cable is expected to say, "Britain winning back business on the basis of quality and good performance is a good characterisation of the sort of industrial strategy that I have been promoting. We are now seeing a number of encouraging signs of production returning to the UK."