Can empty warehouses mean green shoots?
Despite dread forecasts of manufacturers shifting production to continental Europe post Brexit, there is some evidence to the contrary. Rising wages in China mean some manufacturing could be coming back to the UK – and businesses are gearing up for expansion.
‘Fancy a day out in Wolverhampton?’ asked my client, somewhat unglamorously. ‘We’re holding our shareholder annual general meeting there this year as we want to show everyone around our new factory and distribution centre’. How could I refuse such an offer on a glorious late Spring day?
One of the hidden benefits of being a Financial PR adviser is the opportunity to travel to exotic places to see one’s clients’ sites…usually vast sheds situated in new towns, on amorphous industrial parks handily located near busy motorway junctions and railway stations with the suffix ‘parkway’. The roll call is endless; Crewe, Fleet, Runcorn, Skelmersdale, Telford, Theale, Wakefield…you get the drift.
All credit to this particular client – their new site really is huge in every way; impressive inside and out, having consolidated three crumbling, inefficient old sites into one (with no net job losses as the local MD proudly pointed out). Better for customers, staff and shareholders alike. As we marched around watching various processes and tests under way, we came into the main open space within the site, the size of an aircraft hangar and curiously half empty despite towering arrays of product storage shelves and fork lift trucks buzzing around.
‘We’ve got this space reserved for manufacturing expansion’…the client elucidates; ears prick up. ‘Most of the parts that go into our core product range come from China but we’re planning to repatriate production later this year and that’s how we are going to fill up this space’. He continued: ‘the Chinese are pricing themselves out of the market with their policy of wages doubling every five years and what’s more we can now match the quality here in the UK without the hassle and cost of transport from Asia; in due course we should be running three shifts and round the clock manufacturing’. Wow.
Actually I’ve heard this one before…well the Chinese part that is. On a genuinely exotic trip to view another client’s Chinese factories in 2013, respectively located in Tianjin, Shanghai and Shenzhen. Those of a famous British engineering business, with around 60 employees in the UK and some 10,000 abroad and a classic example of how the UK came to lose so much manufacturing from the 1970s onwards as they closed UK sites and set up shop in lower cost, less strike prone countries like China. However by 2013, the issue of rising local wages was already forcing them to automate manufacturing processes more rapidly in order to continue to be competitive supplying their widgets into the local manufacturing sector. A familiar tale albeit with different outcomes (machines replacing young girls from rural China).
Back in 2018, these trends have clearly compounded in the intervening years. If the Wolverhampton example is typical then repatriating manufacturing back to the UK from previously lower cost locations abroad is only just beginning, and it will bring jobs, wealth creation and a reduction in imports…all positives for the UK economy. This should prove especially timely given the economic uncertainty around Brexit. Roll on the next site visit; anyone for Doncaster?