Manufacturers re-shoring production due to rising prices overseas

North East manufacturers are bringing production onshore to avoid rising operating costs overseas.

Many of the region’s leading manufacturers met to discuss industry issues at a Deloitte manufacturing dinner in Newcastle.

They highlighted wage inflation, security of supply and rising costs as key forces leading manufacturers to re-shore their activities.

Average wages in China and oil prices have tripled since 2000 meaning overseas supply chains and transportation costs now make re-shoring a much more viable option.

Simon Manning, head of manufacturing at Deloitte in the North East said: “Re-shoring has certainly become more attractive to the region’s manufacturers who are still faced with rising costs.

“Where international supply chains were once a very attractive solution, it is no longer as clear cut. As well as being good news for manufacturers, this is also a positive step for the region’s supply chain.

“Bringing activity back onshore and taking advantage of financial incentives is not without operational and logistical challenges, so manufacturers should ensure they take advice first.

“North East exports in specialised manufacturing were up 24 per cent in the last year, further demonstrating that the region’s advanced manufacturing sector is a local and national economic success story.

“However if it is to continue to grow and remain competitive, it needs to attract the brightest and most talented school leavers and graduates.”

Figures from the Office for National Statistics (ONS) show that manufacturing output, which accounts for 7 per cent of the UK economy, rose by 1.1 per cent in March following a 0.7 per cent increase in February. The figure was well above economists’ predictions of a 0.3 per cent rise.

Furthermore, financial incentives such as capital allowances and supporting innovation in the tax system mean firms in the region are reporting greater confidence, though challenges remain.

Andrew Hodgson, chief executive of SMD and vice-chairman of the North East LEP was the key note speaker at the event.

He said: “As a region, the North East needs to do more to persuade the best, most talented young people coming out of University that apprenticeships can open the door to a great career in engineering or manufacturing.

“The North East is home to some great global manufacturing companies and it was inspiring to hear their ideas and solutions to some the challenges facing manufacturing.”

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