UK manufacturers look to bring production back to reduce costs

Cost reduction continues to be a driver for small to medium sized manufacturers seeking to bring production back to the UK, new research showed.

Over a quarter of respondents (26 per cent) to the Manufacturing Advisory Service's latest Barometer stated that concerns over the cost of offshore production was the principal reason for reshoring, followed by improving quality (20 per cent) and cutting lead times (18 per cent).

The cost of domestic labour, however, continued to remain the biggest barrier for producing within the UK according to manufacturing SMEs, with nearly one in 10 also concerned about the availability of the right skills.

Engineering Capacity, a directory of manufacturers' subcontractors in the UK, quoted Steven Barr, head of the Manufacturing Advisory Service, as saying, there was a growing desire among British companies to take production home, with 15 per cent of firms reporting that they had or were in the process of bringing production back. This was against 4 per cent that had offshored in the last year.

He added, this marked a major change in approach from five years ago when the Far East and Eastern Europe seemed to be the destinations of choice.

He said buyers had realised that there was more to the 'landing' price than met the eye, with delays in logistics and issues around quality adding a whole layer of hidden costs.

He said, it appeared that bringing production back was having a positive impact on the bottom line, with 68 per cent of firms that had reshored in the past 12 months reporting an increase in sales.

Business minister Michael Fallon said the  findings were another sign that the economy was heading in the right direction and confidence was returning as the economy moved from rescue to recovery.

He added, the number of firms looking to bring production home was particularly welcome with the additional investment and jobs it could bring.

Meanwhile, RTT News reported British manufacturers' credit costs increased in the fourth quarter following an increase in demand for funds, a survey conducted by EEF, the manufacturers' association showed today.

A balance of 11 per cent of companies posted increased credit costs, the highest since the end of 2012.

According to Lee Hopley, chief economist at EEF, the higher cost of credit should not be seen as a sign that the government's Funding for Lending Scheme had failed.

He said in the coming quarters EEF hoped to see the scheme deliver greater availability as well as a lower cost of borrowing for SMEs.

According to the survey, manufacturers with no need to borrow declined to 40 per cent, the lowest in the survey history.