Why Reshoring is Taking Centre Stage in 2022

With organisations increasingly motivated to reduce their carbon footprints and doing their bit for the environment, cutting down on transport distances for imports and exports is an obvious route to success; but there are other advantages to “reshoring”.

The impact of the pandemic has emphasised how fragile transport networks can be and fluctuations in fuel prices and changing macro-economic and political factors have also highlighted how the flow of supply chains can change in a very short space of time. The idea of reshoring is to try and source all the items you need for manufacturing as close to your centre of operations as possible. This means you are less susceptible to changes in the global economic environments and can take a more active role in the product development process. For example, even visiting the local factory where your parts are being manufactured is less time consuming, cheaper and creates a smaller carbon footprint compared with the equivalent international travel.

Other advantages of reshoring are reduced vulnerability to currency fluctuations and labour costs. For example, many manufacturers who rely on electronics are almost totally dependent on suppliers from Asia; but this long-distance supply chain has its own problems and with so many links in the chain that are susceptible to change can mean order delay times of over a year. Once you remove the transport and environmental costs and replace cheap labour with increased automation, it is a clear incentive for new enterprises to manufacture these components more locally. Naturally this changed behaviour will take time to develop, but local manufacturers could start by advertising their demand for UK manufactured electronic components. If this were backed up by a commitment to supporting those start-ups attempting to supply this demand, then we have the beginnings of a homegrown, high-tech electronics industry in the UK. Which is good for everyone and the planet!

Another benefit of reshoring becomes clear if we examine the impact that Brexit is having on trading with countries in Europe. Increased border controls and complex paperwork have meant that over the last six months even shipping goods in and out of Germany has become slower, more expensive and a nuisance to the consumer. Becoming less reliant on international suppliers would avoid these problems, and perversely could be one of the long-term benefits of Brexit, by encouraging local manufacturing that would not be economically viable without it.

Of course some raw materials simply do not exist in the UK, so we are always going to be reliant on some international trade and shipping. However the idea is to keep this to a minimum and encourage buying locally wherever possible. For example, Morgan IAT is proud that 60% of our supply chain come from within 75 miles of our facility. We are striving to improve on that all the time with a goal of 50% within 50 miles within the next three years. Any switch from international supply to a more local supplier in the UK will have a positive knock on effect on UK jobs, economic security and less CO2 emitted from transport. We believe strongly in supporting local companies and the local economy and this is driving us to become greener and lower our carbon footprint for the products we make. We’re so committed to this process that we are applying to become a B-Corp company which lists this as an essential metric.

It could be said that this all sounds a bit jingoistic and narrow minded, perhaps a bit too much like the satire in League of Gentlemen (“this is a local shop for local people”), but it is based on sound economic reasoning rather than any national prejudices and bigotry. It also signals a change in thinking from “going global” to “buying local” in order to save the planet, which as far as we know, is the only place humans can exist! It’s important to remember that this is how business works – it adapts to new needs and circumstances and, of course, supply and demand. Consciously (and conscientiously) reshoring is going to change the economic landscape slowly but surely. However, it will be a long process of reversing globalisation trends, and as international markets shrink, local business will have to adjust, but hopefully it will all balance out. This won’t happen overnight, which means businesses and their owners and employees will have time to adjust gradually, but it does need start happening now.

Hopefully the impact of reshoring will be visible in business growth for companies meeting local demands and those bringing their manufacturing back into the UK. Smaller industries will grow to supply the manufacturing and assembly houses with their required components. This should drive growth in the manufacturing sector across employment, upskilling, technological developments, agile response and smart factories.

We would like to see this encouraged and organised at a national level by governments able to appreciate the benefits and maybe introducing some support mechanisms to make reshoring official policy. Tax incentives and grants would go a long way to achieving this, as would a central organising body for coordinating priorities and identifying any crucial supply chains which are particularly fragile. Morgan IAT would certainly like to be part of that process and would be interested in hearing from any other partners who can also see the extensive potential and benefits of reshoring.