Analysis: Is the UK reshoring tide beginning to turn? – just-style.com

There has been a lot of talk about reshoring as one of the emerging manufacturing trends of the future, but as yet little robust evidence has been produced on the scale of any such shift, especially when it comes to clothing and textiles. But new research has attempted to put some figures onto the likely impact on jobs and output.

Recent anecdotal evidence that the ‘Made in the UK’ movement is gaining momentum includes the creation of a dedicated team to ramp up domestic sourcing at upscale fashion brand Jaeger, the launch of Best of British men’s and women’s wear collections from Marks & Spencer, and moves by sock maker Roy Lowe & Sons to restart some UK production.

But while these are among the first signs that the tide may be beginning to turn, quantitative estimates of its potential impact have been hard to find.

Until now, that is. Attempting to put some figures onto the facts, a new analysis by professional services firm PwC suggests reshoring has the potential to create between around 100,000 and 200,000 extra UK jobs over the next decade – with sectors such as textiles and clothing among the main beneficiaries.

It also calculates that this scale of reshoring could boost the level of UK GDP by around 0.4-0.8% by the mid-2020s – which equates to around GBP6-12bn at today’s values.

Specifically, it suggests that over the next ten years, the reshoring of textiles and apparel has the potential to increase annual output by something of the order of GBP1-2bn (at constant 2012 prices), with corresponding job impacts of around 31,000 to 62,000 by the mid-2020s.

And if new production is more capital-intensive than existing production, even the resulting scaled-down estimates point to an additional 20,000 or more UK textile jobs by the mid-2020s.

This almost exactly matches the 25,000 or so jobs that have been lost in the sector in the two decades that textile and clothing production has shifted to offshore locations such as China.

Renewed interest
The onshoring or reshoring of production of some goods from current low-cost locations overseas is seeing renewed interest thanks to a desire to locate closer to consumers with fast-shifting preferences; a reduction of the wage gap with emerging economies such as China; volatile international transport costs; and a desire by UK managers to better control quality, inventory levels and supply chain risks.

And it is also being pulled closer to home by the political will of retailers and brands for whom a partial UK manufacturing base is now becoming a more viable commercial option.

Indeed, a recent conference organised by the Association of Suppliers to the British Clothing Industry (ASBCI) ‘Making it in the UK – Ready or not?’ noted a remarkable change in mindset towards the idea in the space of just two years.

The clothing and textiles industry in the UK still generates gross value added of around GBP9bn (US$14.9bn) per annum according to estimates by Euromonitor, and employment of close to 100,000, plus around 40,000 self-employed workers.

Factors supporting the trend
The case for reshoring in the sector is outlined by PwC in its latest UK Economic Outlook. It leans heavily on an unpublished Alliance Project report, which was commissioned last year by Lord David Alliance, chairman of home shopping company N Brown, and the Greater Manchester Combined Authority (GMCA), with the support of Government.

Again, factors supporting the trend include fast-changing consumer preferences for fashion, the desire for more customised products with smaller production runs, and rapid increases in online shopping.

These all require much shorter lead times from the factory to the shop floor and can favour local production that can deliver shorter runs more quickly, so reducing inventory costs and avoiding the need for heavy price discounting.

Local production also allows more control and quality assurance on design features that are of increasing concern to customers in the UK and overseas, it argues, adding that good design can command a significant price premium, so offsetting any cost disadvantage of UK production.

Products most likely to benefit from any shift include high-end and some types of mid-market apparel, fast fashion, luxury goods (notably exports of designer clothes and shoes to China and other newly affluent emerging markets), and products with more added value in the manufacture process, including jersey and jacquard, embroidery and knitwear.

And any cost disadvantage to UK production is also being eroded by rising relative wage levels, energy and transport costs for China and other emerging markets, the research says – although this has less bearing on reshoring decisions than speed and convenience, the Alliance report says.

Increased automation of low-value processes can also reduce the weighting of labour costs in overall decisions on offshoring versus reshoring of production, especially in areas like hosiery and socks.

Potential for reshoring
Estimates from the Alliance Project report suggest that replacing just 1% of current textile imports to the UK with domestic production would add around 5,000 jobs – representing an increase of around 5% on current levels.

And while relatively conservative, this estimate is thought to be realistic, nonetheless, for the short term.

Sustaining this progress is what then elevates the potential for additional employment in the sector – perhaps of the order of 20,000 or more jobs by 2025 – but would require increased activity and investment within clusters of local textile producers linked to the large clothes retailers.

But of course there are still significant barriers to overcome, and any trend to reshore is still at a very early stage.

One of the hurdles that has been widely lamented is the lack of skills in the sector following decades of relative decline, leading to an ageing labour force.

There are also large imbalances of market power between large retail buyers and small textile manufacturers (mostly micro firms with less than 10 employees) who are likely to find it feasible to invest in the latest production technologies.

This means that large retailers and industry associations will ultimately have an important role to play in driving any renaissance? in UK textile production, supported by local and central government.

Other recommended initiatives include support for knowledge sharing, mapping supply chains, marketing (such as attendance at international trade fairs), access to finance or loan guarantees for investment by small businesses, and help in getting bills ?paid on time.