News & Views

Bringing it back home

More interest in shifting production to the developed nations could help Britain - but skills shortages may limit the gains

In the past few years more than 60 UK manufacturers have lost patience with their Chinese suppliers and brought production back home. Few seem to have regretted the move.

Back in 1999 the renowned toy maker Hornby joined many other British firms and closed its factory, in Margate, Kent, with the loss of 400 jobs. All manufacturing of Scalextric, Corgi and Airfix models moved to China. But this failed to turn out as well as hoped. Problems with its main supplier left Hornby unable to meet demand for train sets. Chinese wages kept rising. A rapid jump in oil prices led to rising transport costs.

In 2012 Hornby decided to move an initial 10 per cent of production back to Britain. Under the plan, Airfix Quickbuild, a new model aircraft range, is being manufactured in a plant in Newhaven, East Sussex. Richard Ames, Hornby’s chief executive, believes having production a lot closer to the head office has enabled the company to adjust more quickly to changes in demand. “It’s more important to secure the supply chain than to squeeze every last dollar out of the price,” he says.

Hornby’s experience is far from unique. It adds to evidence that so-called “reshoring” could provide a boost for UK manufacturing over the next few years, even if the scale of investment and new jobs is limited by negative factors including serious skills shortages in areas such as precision engineering and manual craft skills.

Finding high-reliability suppliers is a vital part of the reshoring movement

But reshoring must overcome many hurdles. It often involves companies re-starting production from scratch. A prospective “reshorer” must locate a source of raw material, identify a suitable manufacturer and make sure it employs a skilled workforce with a reputation for quality. In Hornby’s case, it teamed up with Plastech, also based in Newhaven, and a supplier of tooling and injection-moulded parts.

Mark Thompson, Plastech’s head of UK operations, turned out to be a big fan of the Airfix brand. The Quickbuild project resulted in improved quality, reduced lead times, next-day deliveries and flexible stock holding. Plastech is producing 8,000 kits a week in what has become a reshoring success story.

Interestingly, the Hornby case study shows that contrary to what is often assumed, price – specifically rising wage costs in China – has not always been the number one factor in reshoring British production. Instead, the priorities have been to secure better control over the supply chain, ease of communication and a greater focus on quality.

Doug Liversidge, chairman of Yorkshire-based Surgical Innovations, is thankful his company took the decision to bring production home from China. He said “Our directors were away for 10 days at a time, often returning exhausted. It was becoming a never-ending management headache. Bringing manufacturing back from China has paid off for us. We have since trebled our workforce here in Leeds and our quality has significantly improved.”

Manufacturing experts foresee significant opportunities for UK manufacturers in sectors such as heavy building products, which are becoming too expensive to transport from China, and in auto components, given the recent strong growth of leading UK-based car producers including Jaguar Land Rover and Nissan. However, today a “British-built” car typically contains only one third of locally sourced parts. The remainder has to be imported.

Huge opportunity for new production in automotive components, says car producer Jaguar Land Rover

If this figure could be increased to 60 per cent it would represent an opportunity for component suppliers worth up to £2bn a year in extra sales. Dave Allen, purchasing director for JLR, says: “The current success of the UK automotive sector presents a renewed opportunity for automotive suppliers to invest in the UK, and to increase local sourcing of the high-value components that the UK’s world-class vehicle makers require.” Accordingly, companies such as auto components maker manufacturer RDM expect to develop new business, on the basis of re-shored production from China. Coventry-based RDM recently opened an advanced engineering centre, creating 25 jobs, and aims to increase annual sales from about £10m last year to £25m by 2018.

Outside the vehicle industry, a lot of hope is being pinned on reshoring textiles production, once one of Britain’s greatest industries Here, there are many problems: a dearth of manufacturing facilities with modern tooling equipment; an ageing workforce; seriously undercapitalised firms; and often relatively small sales in home markets. But there are some grounds for optimism.

Take Camira Fabrics, which supplies hard-wearing fabrics for office chairs and seats on trains. Long-dissatisfied with the quality of foreign-made textiles, Camira created a joint venture with Holmfirth Dyers, like Camira based in West Yorkshire. The result was Park Valley Dyers, the first dye house built in Britain for almost 20 years. Helped by investment in modern machinery, the joint venture is turning out high-quality fabric to feed into the UK supply chain, providing jobs and saving the need for imports.

At the luxury end of the market is handbag manufacturer Mulberry, which employs 650 in the UK. Most of these employees are in two plants near Bath, Somerset, with the second having opened last year. Output from the new factory has meant the “UK-made” proportion of handbags and other items sold by Mulberry has risen. But the biggest obstacle to making a success of this has been the shortage of craft skills. Novice fabric cutters, for example, can require months of training to achieve a consistently high standard.

Finance director Roger Mather says: “The key challenge is finding the high-level craftsmanship needed. We have had to train workers from scratch and the government has contributed £2.5m under the Regional Growth Fund. When you are buying into Mulberry, you are buying a bit of England: Made in England is a very powerful selling point.”

Most surprising of all, perhaps, was the notion that a low-cost yet sophisticated consumer electronics product could again be manufactured in bulk in Britain. Production of the Raspberry Pi, a £16 computer designed to help children learn how to write code, was switched from China to Britain, says co-founder Eben Upton, when “we discovered we could build at the same cost in the UK”.

The challenge is to find the required levels of craftsmanship – handbag manufacturer Mulberry

Manufacturing of the products is now taking place at a factory in Pencoed, Wales, run by Sony, the Japanese electronics group. The move has created 70 jobs. Such has been its success that the plant has increased output from 18,000 units a week to 80,000.

Mr Upton adds: “[The Sony plant’s] expertise in rapid prototyping and production engineering has allowed us to proceed from first prototypes to full mass production over a period of less than four months, with an unprecedented level of confidence in product quality and delivery schedules.” It is doubtful whether that would have been possible if production had been sited in China.

A report last year by EY, the consultancy, was guardedly optimistic. “In the right conditions, reshoring could bring £15.3bn of [value-added output] to the UK economy, equating to 315,000 jobs,” the study said. While this may take time, sales of British-made products have been growing among consumers in Asia, Africa and South America. Many of these people are increasingly eager to buy goods associated with status and quality – and they often equate these characteristics with the “made in Britain” label. If this trend continues, it could provide another boost to the overall re-shoring momentum.