Page last updated at 10:42 GMT, Wednesday, 30 December 2009

Firms move production back to UK

The EEF said manufacturing was central to rebalancing the economy

Manufacturers are moving production back to the UK amid concerns about poor quality and higher freight costs, a report has said.

One in seven companies has moved its manufacturing operations to the UK from abroad in the past two years, a report by the EEF and accountants BDO said.

The EEF said the UK had become "increasingly competitive and efficient" over the past few years.

The EEF represents thousands of manufacturing companies in the UK.

"Many companies have taken advantage of the low-cost emerging markets, both as market opportunities and also as a means of reducing costs," the EEF's chief economist Lee Hopley told the BBC.

"If you look at how UK manufacturers compete in global markets, it's about quality, it's about customer service and it's about delivery times.

"If lower labour cost producers can't provide what they need when they need it, then the alternative is to produce in-house and bring production back to the UK, which some are clearly doing."

'Absolutely central'

Many UK firms have outsourced production in the past decade to countries in Eastern Europe or Asia, where labour costs are lower.

Entrance to Honda plant in Swindon
We will have cut 1,300 jobs [in the downturn] and we anticipate not cutting any more at all
Ken Kier, Honda UK managing director

But the EEF's survey of 300 manufacturers showed that firms were now returning production to the UK for a number of reasons: cost savings failing to meet expectations, a poor quality of goods produced and the slow speed of getting products to market.

Nearly 70% of companies said the UK was a competitive location for manufacturing, up from 43% two years ago.

Ms Hopley said manufacturing was "absolutely central" to rebalancing the economy.

"As we look ahead to 2010 - where growth is actually going to come from in the UK economy - I think a lot of that is going to be export-driven as world trade picks up and the global economy returns to growth, and obviously manufacturing plays a big part in that," she said.

Meanwhile, the managing director of Honda UK told the BBC that the company was not planning any more job cuts.

"We will have cut 1,300 jobs [in the downturn] and we anticipate not cutting any more at all," Ken Kier said.

He added that he was not expecting 2010 to be as good as 2009 for various reasons, including the stopping of the scrappage scheme, the increase in VAT and any changes imposed by the government following the general election.

But he went on: "We now have the level of workforce that we need to meet the demand that even in next year's circumstances, we know we can achieve."

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