UK manufacturers ‘relocating’ supply chains after pandemic and Brexit

British manufacturers are bringing production back to the UK in an attempt to resolve supply chain disruptions caused by the coronavirus pandemic and Brexit.

Three-quarters of companies have increased the number of UK suppliers in the past two years, according to a survey by manufacturers trade group Make UK.

Almost half of the companies said they intend to further expand their UK supply base over the next two years. Conversely, more than 10 percent said they plan to reduce their reliance on Asian suppliers over the same period.

Successive economic shocks, including the Ukraine war, are forcing manufacturers to reverse a decades-long shift to offshore supply chains as producers increasingly face delays in the arrival of components and materials, Make UK said.

It said the breakdown of key just-in-time supply chain processes meant British companies were shifting from low-cost production sources in Asia to suppliers closer to their home countries.

Verity Davidge, policy director at Make UK, said the era of globalisation may have passed its peak, with “disruptions and volatility in global trade quickly becoming the norm”. “For many companies, this will mean giving up on timely processing and accepting ‘just in case’,” she added.

Business leaders said Whitehall officials were increasingly concerned about the UK economy’s resilience to future macroeconomic shocks, with the food, manufacturing and energy sectors the biggest concerns.

Make UK is calling for a cross-industry and government-backed working group to assess the resilience of UK supply chains and develop an action plan to protect the economy from any major future disruption.

Given the geographic spread of the UK’s largest manufacturing centres outside London and the South East, a boost to domestic supply chains will also help meet the government’s upgrading and skills agenda.

Matt Lacey, sales and marketing manager at British manufacturer HV Wooding, said more British companies were using their companies as subcontractors as production was shifted from Asia.

“There is a race to the bottom when it comes to pricing, but not the cost-effectiveness of overseas manufacturing. People are now focusing more on flexibility in order volumes and lead times.”

Katie Reed, marketing manager at BEC Group, a south England-based tool maker and plastic injection manufacturer, said the group had seen a “substantial” increase in demand over the past month from companies looking to restart their operations.

“People don’t know when they will come in. They want to strengthen their supply chain,” she said.

Research by Make UK shows that more than 90% of manufacturers say the pandemic has disrupted supply chains, with similar figures citing Brexit as the cause.

Andrew Kinder, industry team leader at commercial cloud software company Infor, who participated in the survey with Make UK, said: “There has been a long-standing belief in lean, on-time [processes] Offshoring is questioned as volatility and uncertainty replace predictability and reliability. ”

Manufacturers have also increased the number of different suppliers to offer more options in the event of further disruption.

Stephen Blythe, business manager at British contract electronics manufacturer Jaltek, said the company could benefit from shorter lead times and a more skilled workforce for domestically produced goods and materials.

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