The reshoring of jobs from low-cost, high-volume countries, such as India and China, is gathering pace as companies look to improve quality and reassess their financial, logistical and distribution needs.
A recent report by consultancy firm PricewaterhouseCoopers (PwC), entitled ‘Fit for Business’, shows nearly two thirds of 384 non-financial companies operating in the eurozone reshored some activities during the past year, with production operations being the most relocated activity, followed by tax, legal and information technology.
The research shows nearly half of respondents said they planned to reshore production activities in the next 12 months, although the trend is for companies to reshore one or more activity, rather than entire operations.
Nick Sheridan, a European equities manager at Henderson Global Investors, says: “Companies are now seeing the benefits of productivity and cost management by having their supply chains located in domestic markets.”
Italian companies are the most likely to have reshored activities, with 44 businesses having brought back some activities during the past year, compared with Ireland (22), Spain (32) and Germany (30).
In its March 2014 UK Economic Outlook report, PwC estimated reshoring could create between 100,000 and 200,000 extra UK jobs in the next 10 years and boost annual national output by roughly £6-12bn at today’s values by the mid 2020s.
It said traditional manufacturing sectors, such as textiles, electrical equipment and machinery, look set to benefit from reshoring, with business support services and telecommunications possibly gaining new business.
UK food manufacturer Symington’s and mobile phone business EE have brought some activities back home, while retailers such as River Island and Topshop have reshored some operations, due to the need to be able to respond quickly to changing consumer fashions and concerns about the security of supply chains.
The reshoring trend certainly dovetails neatly with the UK government’s wish to rebalance the economy away from its reliance on the service sector for jobs and growth, now that manufacturing has shrunk to roughly 10 per cent of GDP.
Paul Stephany, Newton portfolio manager, UK equities, says: “Against this background, reshoring could give manufacturing a much needed boost. Potentially it could boost the equity performance of many companies, particularly those in the industrial sectors.”
In terms of the US, PwC’s March 2014 Economic Outlook estimated reshoring had transferred about 80,000 manufacturing jobs back to the country, partly to support its booming shale energy sector.
Professional services firm Grant Thornton believes reshoring could have a dramatic impact on the US economy.
Source Article from http://www.ftadviser.com/2014/11/19/investments/reshoring-gathers-steam-SvnquvWd0uHVaiNnvAKmvN/article.html
