Recently I’ve been invited to discuss re-shoring trends with MPs and stakeholders involved in the UK manufacturing policy (or better, industrial strategy) debate. The key question was whether the government should proactively encourage repatriation of businesses or leave it solely to market forces.
Intellect’s members operating in the UK electronics supply-chain are noticing a growing re-shoring trend from their customers that kept design local but off-shored manufacturing. IP protection for complex high-tech equipment (e.g. medical hardware) has become such a major threat that these companies are even prepared to pay more in order to keep production local. Close monitoring of quality standards, greater security for IP, and the convenience of close communications without language and time-zone barriers are seen as the main drivers for re-shoring these kinds of products.
The economics of advanced manufacturing are changing continuously though and OEMs must keep abreast of the changes happening in offshore locations and closer to home, to remain competitive. As automation technologies also become increasingly affordable and customised – the economics of where manufacturing is located will be comparable across the planet. Hence aspects such as availability of skills and the overall business environment will be the true differentiators that will influence corporate decision-making. There are potentially vast economic opportunities for the UK to capitalise on these trends by creating a competitive environment in which companies can sustainably invest.
In sum, the government does have a key role to play here. Measures such as corporate tax reforms, capital allowances, patent box and R&D tax credits are all steps in the right direction – however much more needs to be done to ensure the UK becomes a truly attractive location for high tech manufacturing and design. Creating a stable and certain policy environment for (smart) transport and energy infrastructures or providing incentives for the aggressive adoption of automation technologies, for example, would encourage businesses to make the most of the re-shoring opportunity.