Reshoring: UK businesses want to bring their manufacturing back home - and this industrial site is ready to help them.

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Nothing, it seems, shakes up the established ways of doing things quite like a global pandemic. Since the start of the coronavirus crisis, businesses have embraced a range of novel practices, from home working and Zoom meetings to social distancing. And the question of bringing previously "offshored" manufacturing back to the UK – known as "reshoring" - has become a hot topic in business, media and political circles.

Vulnerable supply chains

That’s because the pandemic subjected the UK’s critical supply chains to stress tests that, in many cases, revealed weaknesses. Demand for medical and personal protective equipment (PPE) exceeded supply, exposing the country’s reliance on imports. In the words of the GTMA manufacturers’ trade body:

“Amongst the many things we have learnt during the COVID-19 pandemic there is a wider recognition that cheapest purchase price has generated a vulnerability of supply chains with geographic disruption and reduced capacity to uplift production in the UK.” [1]

And it wasn’t only critical, health-related products that were affected. As global supply chains were impacted, both businesses and consumers experienced shortages of a wide range of goods, highlighting risks across the economy.

All of which helps to explain reports that the UK government has drawn up plans to reduce the country’s reliance on imports for critical products – potentially creating opportunities for manufacturers based in the UK.[2] In summary, supply chain resilience, not just efficiency, is increasingly viewed as a matter of national importance. As a possible foretaste of things to come, ITV News recently reported that millions of doses of Covid-19 vaccine are set to be produced in Teesside, North East England, subject to successful trials.[3]

But what do businesses think? After all, it was the business imperative to minimise production costs that drove manufacturers to offshore in the first place, and only they can bring it back.

UK manufacturers like reshoring

Evidence suggests that UK businesses were already favourably disposed to reshoring prior to the pandemic. According to a Lloyds Bank sector report from July 2019, 37% of manufacturers said they had either already reshored operations or were planning to do so within the next five years.[4]

Do you have plans to bring any of your manufacturing processes back to the UK?

Do you have plans to bring any of your manufacturing processes back to the UK

Research undertaken since the start of the pandemic suggests that the crisis has reinforced these views. In May 2020, The Engineer magazine polled its readership with the question: ‘Will the covid-19 pandemic lead to reshoring of UK manufacturing?’ ​59% of respondents said it should, while 32% said reshoring should be focused on critical supplies. Significantly, only 7% of respondents said ‘No. Offshoring to lower cost economies is the only way to compete’.[5]

So what has changed since the heady days of offshoring?

It’s clear that interest in reshoring has been heightened by the coronavirus, but the trend has deeper roots. That’s because the economics of production have been changing for some time.

The 1990s’ wave of offshoring was driven by widespread perceptions that low labour costs were of paramount importance, that the cost advantages of popular overseas locations were unlikely to change, and that significantly lower production costs outweighed the potential downsides of manufacturing overseas. Today, however, those assumptions and calculations are less clear cut. As the economies of favoured locations have grown rapidly, costs have increased, closing the gap with the UK. At the same time, manufacturing has become increasingly capital intensive, reducing the importance of labour in cost evaluations. Many businesses have moved towards evaluating the ‘full costs’ of production – incorporating costs such as freight, which have also risen. And reducing business risk has become a key consideration, by shortening supply chains and maintaining firm control of quality and IP – all of which is consistent with bringing manufacturing back home.

These new perspectives have been reinforced by changes in the market. Today, customers expect high-quality, highly personalised products with fast delivery times. It’s a trend that supports the case for manufacturing closer to the point of demand, innovating continuously and adopting advanced manufacturing technologies to maximise quality, efficiency and profitability. These are areas in which the UK excels, with world-leading manufacturing R&D focused on ‘Industry 4.0’ themes such as big data, automation and artificial intelligence.[6]

What are your reasons for bringing your manufacturing processes back to the UK?

What are your reasons for bringing your manufacturing processes back to the UK

The UK’s advanced manufacturing strengths explain some of the reasons businesses provide for wanting to reshore. In the Lloyds Bank survey, 71% said their reshoring plans were driven by a desire to improve quality, while 44% cited a wish to reduce costs – a big change from the calculations that drove offshoring in the 1990s. And now, of course, there’s the case for more resilient supply chains driven by the coronavirus pandemic.[4]

Being in the right place

None of which is to say that all previously offshored manufacturing could, or even should, be reshored to the UK. For many businesses, the case for manufacturing overseas will remain strong for a variety of reasons. In the words of one supply chain authority, the correct approach is ‘not reshoring but rightshoring’ – ‘putting things in the right place’. What can be said with confidence is that businesses increasing view the UK as ‘the right place’, based on the commercial, technological and risk factors detailed above.[7]

Reducing the cost and risk of reshoring

In spite of reshoring’s increased popularity, the fact remains that relocating production will always involve disruption, costs and risk. For those that go ahead, minimising these downsides will be a priority, especially in the context of building new facilities in a developed country with detailed regulations covering areas including planning and environmental protection.

That’s why Sembcorp Energy UK, managers of the Wilton International site in Teesside, North East England, have developed an industrial site product that’s focused on mitigating these costs and risks as far as possible. At 2,000 acres, the site has its origins in the chemicals and process sectors, with current occupants including SABIC, Huntsman and Alpek. That helps businesses investing in the site in a number of ways. Sembcorp Energy UK generates power on site, enabling ‘ready to go’ supplies for manufacturers with high energy demands. Extensive infrastructure including pipelines and service corridors is in place to deliver world-scale utilities and feedstocks to new occupants – further reducing the costs and lead times of building new facilities. And many of the site’s development plots have outline planning consent for light or heavy industry – a key advantage for businesses investing in large-scale manufacturing operations.

“It’s a ‘plug and play’ site solution that’s specifically designed to make the investment process easier for large-scale, energy intensive industrial businesses”, say Scott Taylor of Wilton International’s inward investment team.

“Because we’re an established manufacturing site, we’re well placed to meet the requirements of businesses that are currently considering reshoring operations. For example, we can supply the large-scale power, utilities, chemical feedstocks and industrial gases required by pharmaceuticals, biotechnology and chemicals manufacturers. The site also provides top-tier ‘COMAH’ safety and security – a key requirement for businesses in these sectors.”

However, Scott emphasises that Wilton International is not only about process industries. “The site’s advantages apply to companies across a range of energy-intensive sectors, including advanced manufacturing, battery manufacturing, renewables, data centres and recycling.”

As the world of business changes rapidly, companies are increasingly recognising the benefits of reshoring manufacturing operations to the UK. And the availability of ’plug and play’ industrial sites like Wilton International, with the potential to reduce relocation costs and risk, is likely to be key to sealing the business case.

Sources:
1 GTMA, Manufacturing & Engineering Magazine, 16.7.2020
2 University of Sussex, UK Trade Policy Observatory, 28.5.20
4 Lloyds Bank, Business in Britain: Manufacturing, July 2019

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