Business Secretary Vince Cable has predicted some “surprising reversals” as manufacturers bring production back from foreign shores.
Rising transport costs, increasing wages in China and a more competitive exchange rate have made some manufacturing firms bring back volume production, and Dr Cable said there is more on the way.
Manufacturing output jumped 3.2 per cent in the month of July, the strongest rise since July 2002 but followed a drop of 2.9 per cent in June as conditions remain tough, particularly with few signs of growth in the construction sector.
The Business Secretary spoke to the Post on a visit to the Midlands in which he witnessed what he described among the best apprenticeship schemes he has seen. He said meetings with executives in the textiles sector showed that with prevailing economic conditions the appetite was there for bringing manufacturing back.
He said: “I had a dinner with a group of companies and people from the retail industry who now think a substantial amount of the textile industry will come back now because economies have changed and being close to the market is advantageous.
“We will now see some very surprising reversals.”
He added: “If it came back here it would be relatively highly-skilled now and based on creative design and advanced manufacturing techniques.”
While Jaguar Land Rover’s announcement earlier this month that it would begin car production in China for the first time served as a reminder that it is hard to ignore the Far East for even the most successful of manufacturers, the focus elsewhere has changed.
In 2000, multinational firms managed to cut their labour costs by 77 per cent by moving production to factories in China instead of the UK.
However, the ensuing strength of the Chinese economy has altered wage costs – which are a small factor in the overall cost of production in any case, in light of the increasing cost of raw materials, transportation and the complexity of supply chains. Dr Cable told the Post that there were positive signs for UK manufacturing, despite huge variation in purchasing manager index data in recent months.
He said: “I think it is coming back. The manufacturing industry contracted too much.
“A lot of people got the idea we don’t make things any more but I get a sense there is a bit of a revival.
“Manufacturing figures aren’t very good at the moment but mainly because of construction products but elsewhere we are doing well, like the car industry, with Jaguar Land Rover and its new engine plant in Wolverhampton and General Motors, BMW and Nissan all investing heavily.
“Aerospace is also doing extremely well.”
During his visit to the region, Dr Cable visited KMF (Precision Sheet Metal) in Stoke-on-Trent, the UK’s largest sub contract manufacturer of sheet metal components, and saw what he described as “probably the best apprenticeship scheme” he had seen.
KMF supplies a wide range of industries including aerospace, medical, renewable energy and telecommunications.
The firm has recently trebled its intake of apprentices, employing 22 apprentices across engineering, fabrication and welding.
Apprenticeships form a large part of Dr Cable’s industrial strategy, which he unveiled earlier in the month to improve the landscape in manufacturing and engineering.
Dr Cable added: “In my view government can’t make these things happen but when I launched the industrial strategy it was based on the idea that government can work in partnership, for example in technology and development and training and apprenticeships.”