Recent figures from the Society of Motor Manufacturers and Traders (SMMT) show that in the first six months of this year, UK car manufacturing reached its highest half year total since 2008, with some 793,642 car rolling off UK production lines; and this follows a stellar 2014 in which UK car manufacturers produced just under 1.6 million vehicles.
The automotive industry is one of the UK’s manufacturing success stories and highlights the wider significance of manufacturing to the UK economy.
Manufacturing may account for a much lower proportion of UK GDP than formerly, but it punches above its weight in terms of its spending on research and development (R&D), its contribution to innovation, its relatively high productivity and its contribution to UK exports. Manufacturing is also a source of high skill jobs and it contributes to a more balanced and resilient economy.
Given the benefits associated with manufacturing, there has been increasing interest in the potential to ‘reshore’ manufacturing back to the UK. To date, the evidence suggests that the reshoring of manufacturing back to the UK has been more of a trickle than a flood and certainly much less significant than it has been in the USA, where low energy costs due to shale gas have been an important factor [1]. Indeed, according to the US Reshoring Initiative, in 2013 the gain in manufacturing jobs associated with new reshoring plus new foreign direct investment (FDI) actually offset the loss of manufacturing jobs associated with continuing offshoring to give a positive net balance of around 10,000 jobs.
Most discussion about reshoring focuses on the combination of factors that are encouraging companies to re-evaluate where they manufacture. These include rising labour costs in popular offshore locations, such as China, the reduced supply chain responsiveness associated with longer supply chains, and higher supply chain risks, including, for example, quality control issues. But if the UK is serious about attracting back more manufacturing then it needs to look at its own capabilities to sustain this, rather than depend on developments taking place elsewhere. This is the theme of a recent white paper published by Cranfield University to coincide with its National Manufacturing Debate, which I attended earlier this year [2].
Among the capabilities that need to be addressed the most often cited include our labour force skills, our capacity for innovation and productivity improvement, the quality of our transport infrastructure and the availability and cost of energy. But land use and property issues are also part of this mix and can contribute to attracting manufacturing – or discouraging it
Made here now
JLL is currently supporting a new initiative aimed at highlighting the significance of manufacturing in the UK, http://www.madeherenow.com/ because we understand that manufacturing matters and that land and property play an important part in supporting the total manufacturing value chain. Industrial might be the lowest value land use among the main commercial sectors and residential, but this belies manufacturing’s significance to the UK economy.
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1. Marcus Gibson, Bringing Manufacturing Back, Civitas, October 2014
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2. Cranfield University, An analysis of the UK’s Capability to Reshore Production, May 2015