UK manufacturers lured overseas

Labour costs in China are a fraction of those in the UK

By BBC News Online's Briony Hale

It should not really have been a surprise that Dyson plans to shift its vacuum cleaner manufacturing from the UK to Malaysia in order to slash costs.

Nor should the latest figures that Britain's manufacturing industry suffered its sharpest decline in a decade last year come as a shock.

You either take action or you watch your company fold

Hal Cripwell

But while unions have ranted against Dyson's "betrayal", many British companies have long accepted that moving production abroad is the way ahead.

Hal Cripwell, an ex-managing director of an electrical appliances factory, lost his job when his company decided to import products from China rather than using local factories.

But he is resigned rather than bitter, admitting that it was the only way for the firm to stay in business.

No option

"There was no alternative; if you can't compete your company will gradually lose customers, become unprofitable and be forced to close," he told BBC News Online.

"People accepted that there was no choice.

Scalextric: made in China

"People accept it's just the effect of globalisation and the state of the industry."

The factory workers had been making items such as plugs and sockets for about 20 years.

But competition from abroad was on the rise, with foreign companies forcing prices down every year. Prices are more than 50% lower than they were seven years ago.

"If foreign manufacturers are offering your customers cheaper prices, then you are forced to lower your own price, and profits are squeezed lower and lower," said Mr Cripwell.

It's just the effect of globalisation and the state of the industry

Hal Cripwell

"If you see a trend of profits going down and down, you either take action or you watch your company fold."

Despite improving productivity, the chance of much lower labour costs in the Far East seemed to be the only way of substantially reducing overheads.

And that opportunity clinched it, resulting in the closure of the Kent factory.

M&S jumps ship

Many multinational firms opted to make the same decision years ago.

A wide range of British industries - including textiles, electronics, toys and cars - have all moved their manufacturing bases outside of the UK, making it increasingly difficult to find merchandise bearing the "made in England" label.

Most M&S clothes are made in Eastern Europe and North Africa

But some remaining bastions of Britishness have been making the move in more recent years.

Marks & Spencer, for example, was one of the last British clothing companies to shift the bulk of its manufacturing abroad.

And Hornby - the maker of model trains and Scalextric, completes its first year of making its toys exclusively in China at the end of March.

"Globalisation was a fact of life that wasn't going away and we couldn't stand on the shore like King Canute," says a M&S spokeswoman.

Taking the plunge

"Our competitors were offering customers better prices than we could hope or imagine so we bit the bullet."

The UK will never again compete on cost alone in a world where many goods can be made more cheaply elsewhere

Digby Jones
CBI chief

Less than three years ago, about half of M&S's clothes were still supplied by manufacturers in the UK.

Now the majority are imported from North Africa and Eastern Europe, although it still buys more British-made clothes than many of its rivals.

The decision to source more clothes from abroad was a key factor in helping Marks & Spencer tackle its rising financial problems and dwindling high street popularity, according to the spokeswoman.

Essential for survival

While unions are fighting the job cuts, British industry bodies have been more realistic about the inevitable shift towards manufacturing overseas.

"The UK will never again compete on cost alone in a world where many goods can be made more cheaply elsewhere," said Digby Jones, head of the Confederation of British Industry at the end of last year.

Manufacturing is essential rather than optional to a healthy economy

Digby Jones

But he also stressed the importance of not letting the UK manufacturing sector decline altogether.

"It is a myth that the UK can survive on services alone," he said, "manufacturing is essential rather than optional to a healthy economy."

The CBI and other industry bodies are hoping that the sector can be kept alive by developing more specialised high-technology products.

But there are few signs of a turnaround in the 20 years of decline in the UK's manufacturing sector .

Things have got even worse in recent years, due to the strength of the British pound which is undermining competitiveness even further.

And companies such as Anglo-Dutch food giant Unilever and car makers Nissan and Honda have already warned that they may be forced to go elsewhere unless the UK embraces the euro.

About 3.8 million people were in manufacturing jobs in the UK last November, 150,000 fewer than in the previous year. This year, the most pessimistic forecasters expect another 180,000 jobs to go.