Mid-sized firms ‘could return more manufacturing to UK’

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Britain could miss out on the chance to return more offshore manufacturing to the UK without greater support for mid-sized firms, new research says.

Increasing fuel costs, new technology and growing environmental concerns are fuelling a growing trend for manufacturing goods closer the countries where they are sold. According to a report from the Royal Society of Arts (RSA), this trend could reduce theUK’s trade deficit by a third.

But without action – particularly to support those medium-sized firms that are small enough to adapt quickly but large enough to make significant investment – that production could go to France or Germany, leaving Britain’s long-term manufacturing decline to continue, the study said.

‘Mid-sized firms haven’t been focused on enough over the last 30 years,’ report co-author and Cambridge University public policy lecturer Dr Finbarr Livesey told The Engineer.

‘We tend to talk about small companies or multinationals and so a lot of our focus and support tends to go to either end.

‘The kind of changes that are coming imply a need for agility, to be close to the customer and still have available funds to invest in new production technology. Mid-sized companies have those criteria to a larger extent than the smaller or larger ones.’

The report argues that manufacturers are facing increased oil prices, rising labour costs in countries such as China, a growing emphasis on sustainability and reducing emissions and the development of technology such as 3D printing that can make complex and low-volume production cheaper and more efficient

This combination of factors, it says, is creating tipping points in industries including electronics, fabricated metals, machinery, plastics and rubber, and furniture, that will see more manufacturing carried out locally over the next 10 to 15 years.

The impact of successful onshoring could be to increase the UK’s domestic production by £30bn, reducing the trade deficit by a third, although the number of jobs created would be limited to between 100,000 and 200,000 because of the nature of the manufacturing and the need for high productivity and automation technology.

The report points to the recent return of companies such as Apple and GE to manufacturing facilities in the US, and the success of the Rasberry Pi Foundation in building its miniature computer in the UK as examples of the growing trend for so-called onshoring.

In response, the government needs to make sure it is providing enough tailored support to the companies best positioned to take advantage of this opportunity, which the report identifies as firms with those with a turnover between £25m and £500m and with between 100 and 2000 employees.

This includes not only creating a stable tax policy to encourage firms to invest and addressing skills shortages, but also ensuring schemes such as the Catapult Centres and the Small Business Research Initiative (SBRI) cater for mid-sized firms’ needs.

Livesey said that although countries like China were also using new technology, and emissions regulations in developed countries could place extra burdens on companies, the combined advantages of manufacturing closer to consumers at a time of rising costs meant there was still an opportunity to increase onshoring.

The report, Making at home, owning abroad, was written by Livesey and Julian Thompson, director of enterprise at the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA), and supported by Lloyds banking group.