ABS Professor examines relevance of reshoring for Business
There have been a number of reports looking at what firms intend to do as regards reshoring or onshoring but little in the way of hard data on what’s actually happening.
That’s why the new report by SGH Martineau entitled ‘Bringing Manufacturing Back’ undertaken with Professor David Bailey at Aston Business School and Dr Lisa De Propris at the Birmingham Business School survey is so interesting.
While two thirds of firms surveyed for the report said that reshoring simply wasn’t relevant for them, of the third that did see it as relevant, over a half were either doing it or actively considering it. That’s the first time we’ve seen a genuine figure as to what’s actually happening on the ground.
David Bailey, Professor of Industrial Strategy at the Aston Business School, said; “Overall numbers of firms may still seem low in comparison with some other surveys – around 16% of all firms are actually doing reshoring and 5% actively considering it – but this seems a more realistic figure than some other surveys which have suggested that as many as a third of firms are looking at it. The latter doesn’t correlate with what seems to be happening on the ground. The trend is less pronounced than some have claimed but there still seems to be something happening”
Interestingly a third of firms who said that they were reshoring had brought back business from Asia, a half from BRIC countries, and over 20% from Europe. What’s driving this reshoring trend?
“Top of the list are transport costs and quality issues, followed supply chain resilience, then exchange rate shifts, rising wages overseas, the need for rapid turnaround, and the need to offer a service alongside manufacturing” said Prof Bailey.
“The significance of supply chain resilience is notable, and makes sense in the wake of major disruptions with the earthquake and tsunami in Japan, and flooding in Thailand. Firms appear to be re-evaluating the risks that extended supply chains are exposing them to”.
On barriers to further repatriation, labour costs are unsurprisingly the top issue. That’s no surprise given that much of this activity was anyway shifted overseas in search of low labour costs. Other key issues include access to finance (again no surprise), the availability of skilled workers, the extent to which the shift overseas has already gone, and energy and raw materials costs.
The latter features strongly and is in sharp contrast with the US where repatriation has in part been encouraged by cheaper energy. Here, energy costs are seen as a barrier to further reshoring.
Meanwhile, the level of support from government or taxation regime here aren’t seen as major barriers to reshoring, and in fact firms reshoring had received support from a range of actors including UKTI, the Regional Growth Fund and MAS.
“What this does suggest is that policy interventions can actually help and if we really want to push reshoring further we could think about further support to ‘bring it home’” Bailey added.
Notes for Editors
Professor David Bailey can be contacted on 07981 925713.
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