We spotted this trend – initially called “reverse outsourcing”, now re-labelled Reshoring – 15 months ago. See:
Reshoring is surely gathering pace.
“THE EXODUS is over. British business is coming home.
A decade ago, companies began to move to the Far East on the promise of cheap labour. Thousands were lured offshore as they sought to keep up with more nimble foreign rivals.
Today, that trend may be reversing. The boardroom buzzword is “reshoring” as a growing number of firms of all sizes look to repatriate their manufacturing operations to Britain.
Rapidly rising wages and energy costs in Asia have soured the dream for many businesses. By contrast, falling real wages in Britain are making domestic production look attractive again.
Detailed numbers are difficult to come by but Zara, the fashion chain, Symington’s, the food manufacturer, and Hornby, the model train producer, are among those that have pledged to produce more domestically.
Tony Caldeira’s textile company is another. It has been shrinking its operations in China and ramping up production in Britain.
“The tide began to turn about 18 months ago with a worsening exchange rate and increasing labour and freight costs,” he said.
Ten years ago, in the face of growing pressure to compete with more efficient foreign competitors, Caldeira closed a factory in St Helens, Merseyside and opened one in Hangzhou, a city of nearly 9m people in eastern China.
“Overseas rivals were selling goods cheaper than we could produce them. Our customers said we needed to lower our prices or they would go elsewhere. We thought, ‘If you can’t beat them, join them’,” Caldeira said.
Hangzhou is the textiles capital of the world, with about half the industry’s production emanating from within a 100-mile radius of the city, including many of Caldeira’s suppliers.
The company’s transport costs fell dramatically and it grew quickly. It moved into a new factory four times in five years, on each occasion into larger premises.
But the benefits began to decline as the value of the renminbi climbed. When Caldeira arrived in China, the exchange rate was 14 renminbi to the pound; now, a decade later, it is less than 10.
The biggest factor pushing many British companies to abandon China has been soaring labour costs. From 2000 to 2008, real wages in Asia rose 7%-8% a year, according to the International Labour Organisation. In China, pay jumped 19% a year between 2005 and 2010, according to Boston Consulting. In advanced economies, real wages increased less than 1% over a similar period.
“We redid the maths and realised it was no longer cost-effective,” Caldeira said.
The company’s Chinese workforce has been halved from 150 to about 70. In Britain, it has hired 25 cutters, sewers, warehouse workers and designers.
Caldeira doesn’t plan to pull out of the Far East altogether. China still has some benefits, and he plans to make some goods there and others back home. “For us, it is literally the best of both worlds,” he said.
James Laxton’s timing was brave, if not suicidal. In 2009, as the financial crisis was unleashing misery around the globe, he decided to shut down the overseas operations of his family’s 100-year-old wool manufacturing company and open a mill in Yorkshire.
The company’s products had been produced in Turkey and China for eight years but its foreign partners were becoming increasingly unreliable. Laxton, great-grandson of the company’s founder George, decided to try it himself.
“The issues were getting bigger and bigger. Delivery times were getting longer, the service was deteriorating and transport costs were rising,” he said.
Since opening the Yorkshire mill at the start of 2010, the company has made two further investments so it can expand and upgrade the plant. Employee numbers have grown from 3 to 25.
“The quality of our goods and services has improved and we can bring new products to market much quicker,” he said.
Bathrooms.com, a maker of bathroom products, recently cancelled orders worth £1m with Chinese manufacturers and awarded them to businesses in the Midlands.
“Instead of taking nine months from design to production, it can take as little as two months,” said Ian Monk, the company’s founder.
But it won’t be bringing all its manufacturing back to Britain. Some products, such as shower doors, are produced so cheaply in China that others can never compete.”
via China? They’ll make it cheaper in Yorkshire | The Sunday Times.
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