Tuesday March 18, 2014
What is reshoring? What’s behind it and what will happen as a result? Here we give a quick overview and explain why employers need to act now to make the most of this development.
Reshoring - the act of returning outsourced work to its country of origin – has featured in the news a great deal recently. Many have commented on the trend and some have made future predictions – notable among them, the manufacturers’ organisation EEF who have written a report, ‘Backing Britain’, which highlights the increase in the number of companies who are reshoring and examines the factors governing businesses’ decision of whether to locate production in the UK or overseas, and PwC who have also written a report on the subject, predicting that reshoring could create up to 200,000 jobs in the UK by the mid-2020s.
What has caused this change? A number of contributing factors have been identified - the rising cost of overseas labour and transportation have eroded the financial advantage of offshoring at a time when the benefits of manufacturing in the UK - the shorter supply chains which allow quicker turnaround times and greater flexibility/responsiveness, and the better standard of quality - are being better communicated and better appreciated.
The Government is also playing a part in encouraging reshoring. Through UK Trade & Investment, in partnership with the Manufacturing Advisory Service, a new body has been set up, Reshore UK, to advise companies on reshoring and support them with the process. UK supply chains are also being championed through the Advanced Manufacturing Supply Chain Initiative (AMSCI) which encourages supply chain companies to compete for funding to support research and development, skills training and capital investment.
However, although there have been some reshoring successes, it is worth noting that although a number of companies have reshored or are planning to do so, these represent just a fraction of UK manufactures and there are still a lot of companies who are choosing to offshore. Furthermore, there are significant barriers to reshoring. The costs of labour, energy and raw materials in the UK are relatively high, but perhaps the most worrying factor is the lack of skilled labour. The government and industry may be working together and making significant investment to create jobs in the UK but their efforts will be redundant if we do not have the right people to fill them.
Unfortunately, there are no quick-fix solutions to this problem. For employers, training should be a priority, for both their current workforce and potential employees of the future. This could mean, for example, providing funding for university programmes or sponsoring talented individuals. Companies should also be strongly marketing their employer proposition. Building strong talent pipelines will ensure that when the jobs are created, there will be candidates ready to apply.
The reshoring trend has fantastic potential for fuelling future economic growth but let’s not forget that it’s in its nascent phase; there has not been enough prior investment in skills training thus far and without it, the argument for reshoring will be an even more difficult one to make.