For decades the move to overseas manufacturing was seen as inevitable, irreversible and possibly even desirable. The allure of cheaper foreign-made goods proved too strong and gradually caused manufacturers to shift their production abroad.
The exodus had a devastating impact on domestic manufacturing, which declined from about 30% of national GDP in the late 1970s, to 14% before the recession, to just north of 11% today. But as hypnotising as overseas manufacturing once was, there are growing signs that the trend has started to reverse.
The Made in Britain brand may be heading for a genuine revival as more UK companies choose to swap their international suppliers for UK-based ones and move more of their operations back to the UK. Last week’s manufacturing figures - which saw orders and output rise at their fastest pace in nearly 20 years - were just the latest indicator of this shift.
In recent months, we have seen a string of high-profile high-street names publicly profess their conversion to Made in Britain. John Lewis recently announced its aim to increase sales of UK products by at least 15% over the next three years to £550m and repatriate certain manufacturing operations. Billionaire Arcadia owner Sir Philip Green made a stir last year when he announced plans to increase the number of British factories in his supply chain by 20%. Even Tesco has now suggested it is keen to abandon the bottom line in favour of sourcing from British farms, and has started investing in British agriculture to boost its competitiveness.
These major players, though, have actually been relative newcomers to the repatriation game. It’s actually the blossoming SME community that has been driving the reorientation.
A survey by the Engineering Employers Federation (EEF) conducted this time last year found that 40% of British companies had brought at least some of their production back to UK shores. With SMEs accounting for 57% of all UK manufacturing, they were a critical component of the change.
But why, especially given their often smaller margins, have SMEs chosen to spearhead the Made in Britain revival? Is there really any reason to believe this upswing will not soon be washed away by the tide of globalization? We spoke to the SME owners domesticating their supply chains and manufacturing operations to find out.
Why are SMEs sourcing more of their goods from the UK?
“The smaller retails have always been relatively tied to UK-based manufacturing but it’s in recent years that they have become much more willing to shout about it,” says Kate Hills, founder of Make it British, a website encouraging the production and sale of UK-made goods.
“It’s the big companies that are belatedly trying to muzzle in there and trying to paint themselves with ‘Brit Wash’.”
Since setting up her website more than two years ago, Hills says she has seen an explosion of consumer interest in British-made goods, and more UK businesses wanting to source from other UK companies. Since she started her site, Hills says enquiries and traffic are both up 220%.
On the business front, a shifting global political and economic climate and a spate of friendly government policies have worked to promote the change.
According to the Department of Innovation, Business and Skills, the “underlying international trend has been encouraged by growing wage rates in China, as well as the increasing price of oil, which have pushed up transportation costs and therefore focused manufacturing closer to the point of sale”.
The government has also ploughed resources into smaller-scale UK manufacturers, recently sinking £200m to promote technology innovation and a further £300m to boost high-tech learning and research. Even more has been done to boost regional growth funds, which encourage the growth of smaller-sized UK manufacturers.
In certain sectors, the overall result has been a declining price differential between international and UK suppliers.
Ian Hobson is the founder of Acton-based ChargeBox, which provides mobile device charging hotspots to clients including Westfield, Selfridges and P&O Ferries. The company has now overwhelmingly stopped sourcing from China. It still can’t source 100% from British shores, but says that its reorientation has been fuelled by a diversifying UK manufacturing base which has begun producing a wider range of goods more cheaply.
Metalwork components are still at least 20% cheaper in China, Hobson says, but that price gap narrows as you move up the production ladder.
“What we have seen in the skilled aspects, like circuit boards, is that the competition is much stiffer, especially if you are willing to shop around the growing number of UK-based producers,” says Hobson.
“We are seeing the rise of very viable UK alternatives and I fully expect that this trend will continue.”
The shrinking margins also pushed Kent-based alternative detergent company EcoEgg to bring back its production to UK shores.
“When we started in 2008, EcoEgg’s products were made in China because it was 40% cheaper than producing them in the UK,” says Rob Knight, co-founder of EcoEgg.
“But we decided to bring manufacturing back to the UK in 2012, in part because the difference in costs between production in the UK and production in China narrowed. It is now closer to 15%.”
Aside from growing price competitiveness, repatriating production also helps companies to improve their quality controls and delivery times. Both changes can prove profitable as they reduce the need to replace faulty stock, and can boost demand.
This summer UK bathrooms retailer Bathrooms.com brought back 25% of its manufacturing. It is investing £2.5m in the move but estimates that within as little as 12 months some of its divisions will see revenue increases of 50% in a year without any price increase. It believes it can do this by growing demand for higher-end goods and by slashing order and delivery services, which will be cut by 80%.
Gatwick-based The Arabian Tent Company, which makes luxury tents for outdoor events and festivals and caters for around 300 events every year, is clawing back its production from India and says that the added quality controls are allowing it to grow much more quickly, thereby countering any product price increases.
“When we started 10 years ago, we made absolutely everything in India - it seemed the obvious choice for a company called ‘The Arabian Tent Company’ and as I had some contacts over there, it was possible to organise relatively easily,” says Arabian Tent Company founder Katherine Hudson.
“But we had issues with quality and we are now trying to bring things back to the UK more and more.”
Hudson loved the detail and clothing designs she got in India, but repeatedly found that tent frames and soft coverings were delivered in different sizes, while some orders had other faults. Fixing them would be lengthy and expensive and very damaging for a small company with limited stock. Eventually Hudson started investigating options closer to home. She has now taken on more UK staff and is thrilled with the flexibility this affords her business.
The need for tighter quality controls is being felt across the board, but is most acute at the higher end of the market and in service-orientated sectors.
ChargeBox says that, increasingly, price fails to be a factor when choosing suppliers.
“The product can be £5, £50 or £500 more expensive, but that is not the point,” says Hobson. “What is important to us is to have a reliable product that we can change quickly. If we didn’t have this freedom, we would risk losing out.
“Sourcing our products from UK suppliers meant that when Apple decided to change its chargers for the iPhone 5, we were able to refit its outlets quickly.” On top of this, having more UK-produced components helps to reduce the regulatory headache associated with installing high-tech products in public places like shopping malls.
As technology advances, these checks will become ever-more stringent and make it even more important to know exactly where your parts come from, explains Hobson.
The customer is always right?
If it was not for a genuine consumer interest in British-made goods – both in the UK and overseas - it is unlikely quite so many SMEs from so many different sectors would be thinking about bringing their manufacturing and supply chains closer to home.
The shift is perhaps most evident in food but is permeating across the retail landscape. Earlier this year a study by market analysts IGD found that Brits are now nearly 150% more likely to buy British food than they were just five years ago. Market researchers Mintel also said back in March that 49% of Brits now believe that British food is better quality, an increase from 40% in 2012. Almost 34% also said that buying British is their number one concern when shopping.
This complements industry findings that show more than half of consumers think all British brands should bring manufacturing back to the UK.
The repatriating trend is linked to the growing demand for environmentally-friendly and socially-responsible products, which has endured even as the economic crisis continued to eat away at consumer power. A recent study by research firm Nielsen showed that the number of Brits willing to pay more for such goods tripled in two years, rising from 8% in 2011 to 25% today.
Certain shocks can also cause temporary boosts to UK-made products. Following the April Bangladeshi factory collapse, in which more than a thousand workers died, demand for UK-made clothes quickly rose.
“Moving to the UK was the right thing to do from an ethical point of view,” says EcoEgg’s Knight. “Being an eco-friendly company making eco-friendly products [meant that] shipping goods half way around the world was not the right thing to do. The company is now proud to say the products are made in the UK and our customers appreciate that.”
It’s not just Britain that is responding well to British-made goods. They can be a pull in Europe, the Middle East and Asia, especially when it comes to higher-end luxury goods like cars or designer clothes.
“UK-made goods are seen positively overseas and it helps exports in the EU and particularly in the Middle East where the Made in Britain logo is seen as a big pull,” says ChargeBox’s Hobson.
Other markets, particularly those in the Americas, are less interested, he admits, although he attributes this to certain foreign governments favouring their own domestically-produced goods.
So what does the future hold for British-made products?
The combination of consumer demand and the changing global marketplace means that new companies are increasingly considering manufacturing in the UK right from the get-go. They still do their market research and investigate multiple international operations, but the UK will now be regarded as a serious contender for manufacturing. As more orders are placed and more interest is shown, it is likely more manufacturers will rise up to fill the demand.
Tech firm Binary Distributions, which makes educational coding keypads and hardware, has just launched this summer. After investigating components from markets including the US and China, the firm decided to make its product as UK-centric as possible, even if it still could not source all its electronic components here.
As the product is designed to fill the gaping hole in British tech education and to teach UK youngsters how to code, Binary Distribution’s managing director Jon Silvera believes it would be hypocritical to allow foreign firms to grow fat off his profits.
“It’s not flippant to say we wanted to make as much of the FUZE [coding board] locally as possible. We’re based on a Business Enterprise Farm in Buckinghamshire. The case is made here, as are the boards, and everything is assembled by us here on the farm,” he says. “Even the packaging is completely recyclable and supplied by local businesses.
“We have always been conscious of the benefits of keeping things local, both to the environment and to doing our bit to help the economy. So could it be cheaper? Yes, of course it could. But should all of the revenue and jobs be outside the UK? We don’t think so.”
With so much willpower shifting to the Made in Britain side, the past flight of manufacturing overseas and the internationalisation of supply lines may not be quite so irreversible any more.