Manufacturers are moving production back to the UK from overseas amid concerns over quality and the high cost of freight.
One in seven firms surveyed in a report by the manufacturing group EEF and accountants BDO said they had switched back to the UK in the last two years.
Companies have been attracted by cheaper labour in Eastern Europe or Asia, but the EEF said 14 per cent had moved production back to the UK because the cost savings had not been as great as expected.
Increased freight, energy and commodity costs have made producing goods overseas more expensive for manufacturers.
Other reasons to return to the UK were that goods from abroad were below quality standards and that products were not delivered to market quickly enough.
Nearly seven in 10 firms agreed that the UK was a competitive location for manufacturing, compared to just 43 per cent two years ago.
The report surveyed 300 businesses, including the makers of mechanical equipment, plastics, food and those supplying goods for the automotive industry.
It found that two thirds planned to re-evaluate their supply chains as a result of the global recession.
The weakening pound has also provided a boost to the UK as a competitive place to produce goods as it has made importing products more expensive.
EEF chief economist Lee Hopley said: “If you look at how UK manufacturers compete in UK global markets, it’s about quality, it’s about customer service and it’s about delivery times.
“And 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.”
According to the report three in five companies also had concerns over the financial well-being of their overseas suppliers as insolvencies would cause significant disruption.