Manufacturing close to home
Nothing is constant but change. So the saying goes.
Just as we get used to outsourcing our manufacturing to nations with cheaper labour costs, social change and commodity prices make the idea less attractive. This is what Accenture found in a survey of US manufacturing executives.
For the past 10 or 15 years, we’ve been protected from inflation by low cost offshore goods. But as people working in these countries demand better rights and pay, and their increasing prosperity builds demand in their home nations, scary inflation is back, hitting 4.4 per cent: the highest figure for 20 years.
As Accenture found, this creates a push for what we could call a new localism. It’s like protectionism but wears corduroy and sandals rather than a George Cross football shirt. A supply manager recently pointed out to me that while you can’t stipulate home grown goods for public sector contracts, you can build in sustainability – so items coming from the land of far away can be at a disadvantage.
These changing times create strange bedfellows. Some time ago I reported for the road transport industry. While UK truckers fumed at unfair fuel duty, I spoke to the Green Party for a pre-budget piece. Like the transport industry, it wanted to see a level playing field on fuel duty, but it wanted duty raised throughout Europe, rather than the cuts the truckers wanted in the UK.
I doubt Chancellor George Osborne considered this in his plans for today’s budget, but we might see a bent for localism creeping into corporate and government strategy in the next few years. It’s a change buyers have to consider.
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So UK inflation is caused by workers overseas wanting a living wage? Are you sure about this?
A point which might be worth noting is that the UK Retail Price Index now stands at 5.5% – the RPI being the traditional measure of inflation prior to HMG finding a measure which produces a (rather convenient, some might say) lower rate.
The problem is that even if the costs stack up to bring manufacturing back on shore, are British people attracted to jobs in the manufacturing industry ? And can our local communities tolerate the setting up of potentially polluting factories on their doorstep ? The move of manufacturing offshore was as much to do with social, as it was with economic change ?