Yorkshire and Humber could be amongst the top UK regions to benefit from the positive impact reshoring could have on the country’s economy over the next tern years, according to new research from professional services firm EY.
The report, Reshoring – Time to seize the opportunity, calculated that reshoring could contribute £1.7bn in GDP and 37,900 jobs to the Yorkshire and Humber economy over the 10 year period to 2025.
The region came second of the 11 UK regions analysed in terms of potential job creation via reshoring, behind only the North West (£2.4bn, 46,200 jobs), and joint fourth with the East Midlands (£1,7bn GDP, 35,100 jobs) by GDP that could be added by reshoring, behind only the North West, the South East (excluding London) (£2.0bn GDP, 35,500 jobs) and the West Midlands (£1.8bn GDP, 35,000 jobs).
Reshoring has the potential to contribute a total of £15.3bn of GDP and more than 315,000 jobs to the wider UK economy, presenting a once-in-a-generation opportunity, according to the report.
Stuart Watson, Yorkshire and Humberside senior partner at EY, said: “These results are hugely encouraging for the Yorkshire region, which clearly has significant potential to attract reshored activity over the coming years.
“Offshoring in the 80s and 90s saw a dramatic reduction in British manufacturing and a shift to services industries that resulted in a fundamental restructuring of the British economy. While some regions saw rapid growth and wealth creation, others suffered from high rates of unemployment.
“But the economics underpinning this trend appear to be reversing, and present Yorkshire and Humber, and the wider UK with a once-in-a-generation opportunity.
“While increasing wages in developing countries are eroding their labour cost advantage, there are many more factors driving business to choose our shores. The desire to guarantee quality and the imperative to reduce time to market are increasingly important drivers of location decisions.”
While the cost advantages of producing goods in the developing world are lessening, wages are still significantly below those in the UK, therefore it is unlikely that reshoring will occur across the board.
However, the report says that certain sectors could see a high proportion of activity reshored given the right incentives.
Steve Wilkinson, UK & Ireland managing partner, Markets at EY, said: “Those businesses that do relocate to the UK will predominantly be capital intensive sectors such as aerospace, defence, automotive, petroleum products and clothing, serving the European market.
“They will be businesses where quality and brand are important, and consequently the supply of a highly skilled workforce is imperative.
“When firms do choose to reshore to the UK they will tend to cluster in regions that best serve their business, in close proximity to key suppliers, infrastructure and an able workforce.”
But the report heeds a cautionary note, saying that reshoring industry and jobs back to the UK are not guaranteed. The Government has taken some important steps to ensure that the UK remains an attractive place to invest and start a business, but competition is intensifying.
“The UK is not the only country vying for reshoring investment; competition from other developed countries such as the US, Germany and France, and emerging markets in Eastern Europe puts the opportunity at risk.
“Government and business must work together to provide the correct framework so that the advantages of moving production to the UK can be realised,” added Mr Watson.
“While steps have been taken to make the UK more attractive to businesses looking to reshore, such as reducing the headline rate of corporation tax to the joint lowest in the G20, providing competitive reliefs for innovative and high tech industries, and introducing UKTI’s ‘Britain is Great’ campaign, more can still be done,” he said.
Beyond the positive effects on employment and GDP, the research also reveals the wider benefit that reshoring could bring, helping to rebalance the UK’s economy between regions and sectors.
Mr Watson said: “Re-shoring is a growing trend that has the potential to bring significant advantages to Yorkshire and Humber, and wider UK economy.
“By supporting those sectors which offer the greatest return from reshoring in terms of employment and GDP, the UK will have a far more balanced, healthy and robust economy where consumers, manufacturers, service businesses and other sectors are pulling in the same direction.
“This will lead to a more sustainable economy which is better able to weather future global shocks, helping to set the UK on a path to where it is not only competing but winning in the race for global growth.”