BRINGING the manufacturing of goods back to the UK, or reshoring, could add £15.3bn of GDP to the economy by 2025 as the advantages of the developing world lessen.
Over 315,000 new jobs could be created for the country as the labour, transport and regulatory costs of producing goods in places like China and Thailand increase, pushing manufacturing back to the UK.
According to research from EY, the north west will benefit the most from this trend with £2.4bn added to the region’s economy and 46,200 jobs being created. The south east (outside London) and the West Midlands would also be lifted.
“Those businesses that do relocate to the UK will predominantly be capital intensive sectors such as aerospace, defence, automotive, petroleum products and clothing, serving the European market,” said EY UK and Ireland managing partner Steve Wilkinson.
Reshoring faces challenges, however, as Germany, France as well as a number of emerging Eastern European countries vie to become the key manufacturer for the European market.
“To address businesses’ key concerns, the government should focus on reducing labour costs and building up key skills, widen access to finance measures, support innovative business and reduce capital costs through tax breaks,” says EY in its report out today, Reshoring manufacturing – time to seize the opportunity.
London will likely benefit little from reshoring – due to the higher cost of land and labour which blocks all by the most high-end manufacturers from operating there. But the UK’s economy could rebalance towards the regions and diversify as regional investment grows and expands into sectors like automotive and aerospace.
“By supporting those sectors which offer the greatest return from reshoring in terms of employment and GDP, the UK will have a far more balanced, healthy and robust economy where consumers, manufacturers, service businesses and other sectors are pulling in the same direction,” said EY’s chief economist and author of the report, Mark Gregory.
“This will lead to a more sustainable economy which is better able to weather future global shocks, helping set the UK on a path to where it is not only competing but winning in the race for global growth.”