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The inaugural UK Reshoring Index by the Coventry centre reveals increasing imports from Asian ‘low-cost countries’ (LCCs) in the last four years.
The index analysed two metrics – UK manufacturing output, and import data from 14 Asian LCCs – to track whether the UK is ‘reshoring’ manufacturing back from Asia.
The index’s manufacturing import ratio (MIR) – manufactured goods imports from Asian LCCs as a percentage of UK manufacturing gross output - reached 61% in the third quarter of 2021, a significant increase from 43% in the first quarter of 2018. A higher percentage indicates a lower level of reshoring.
This increase in the MIR marks the continuation of a decades-long trend, the MTC said, as globalisation and the free movement of goods led to British companies relocating production overseas, and consumers becoming more reliant on manufacturing goods produced in LCCs.
The increase in MIR is chiefly down to two factors, the MTC said – the pandemic’s effect on UK manufacturing, and the resilience of Asian countries.
UK manufacturing output is yet to recover from 2018 levels, the report found. In the third quarter of 2021, the latest period of data available, the figure was still 3% lower than at the start of 2018.
Growth was chiefly hampered by the Covid-19 pandemic, which put a variety of strains on the UK manufacturing sector. Tough lockdown measures forced factories to close across the country in March 2020, with hundreds of thousands of workers placed on furlough. As a result, manufacturing output declined by a third during the first two quarters of 2020.
Output was hit again during subsequent outbreaks as new variants emerged. During the spread of the Alpha variant towards the end of 2020, manufacturing firms reported high levels of worker absences. As a result, the UK became increasingly reliant on imports, with the MIR rising from 44% to 64% in 2020.
From the first quarter of 2018 to the third quarter of 2021, the total volume of imports from LCCs increased by 39%. For Chinese imports alone, the growth was 67%.
While imports from Asian countries temporarily fell during the first year of the pandemic, volumes recovered at a faster rate than UK manufacturing output. Reasons for this include the pandemic starting earlier in Asia, existing resilience from previous epidemics like Sars, and stricter measures that prevented successive Covid outbreaks. As a result, Asian countries were able to meet increased demand when the UK needed it.
Dr Clive Hickman OBE, chief executive of the MTC and chair of the Industrial Policy Research Centre (IPRC), said: “Our analysis shows that the UK continues to be too reliant on manufacturing imports from Asian low-cost countries.
“We must lead a renaissance in UK manufacturing with a renewed focus on jobs, skills and resilience to encourage the reshoring of industry. These efforts begin with a National Manufacturing Strategy to ensure that the sector is future-proofed for the decades to come.
“Focusing on building stronger links between academia and industry, boosting devolved powers to create regional industrial strategies and providing a specific funding pot for 'net zero’ manufacturing will boost the UK’s industrial capabilities, improve productivity and deliver thousands of green jobs for the future.“
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