TRADE UPDATE: A call to return to UK manufacturing
There have always been idealistic rumblings about the need/desire to bring manufacturing back to the UK, and events in 2020 and early 2021 have certainly magnified the issue. The COVID-19 pandemic, humanitarian concerns and the uncertainty brought about by Brexit are some of the key factors that have led to a cry for returning more manufacturing to the UK. Hannah Staunton, Commercial Manager at D2M Innovation, product design specialists, gives her thoughts to the return to UK manufacturing.
Have Brexit and Covid-19 made UK manufacturing more viable?
Running a product design consultancy that specialises in innovative new consumer products, we’ve never had so many clients (both entrepreneurial and small businesses) wanting to find a UK manufacturer over an overseas one. However, with the news that China’s economy is bucking the global trend, is it naïve to believe that we can bring manufacturing home?
Why has China been the obvious choice to manufacture consumer products?
China has spent decades setting itself up as the hub of global manufacturing. The tales of poor quality, that made it the butt of ‘made in China’ jokes in decades past, are no longer pertinent. China now has an incredible infrastructure of suppliers, of both components and materials, and manufacturers with extensive knowledge and abilities. Until recently, these facts alone meant that it was pretty hard to beat China on unit price when it comes to manufacturing consumer goods. But are things changing?
The impact of COVID-19 on manufacturing new products in China.
Since early 2020 we’ve noticed several key changes in our manufacturers in China. COVID-19 outbreaks and lockdowns are still occurring and factories close with very little notice. Many are now, quite understandably, focussed on producing PPE due to the vast demand for it. As a result, some factories don’t have much capacity for new products, or have closed their sampling rooms, especially if initial production runs are small. Alongside this, it is obviously difficult to fly to China at the moment, which has an impact on developing relationships with manufacturers and managing sampling and production.
The cost of shipping has gone through the roof.
Manufacturing and selling a commercially viable product isn’t all down to the components, materials and manufacturer. One key element to a venture being profitable is the shipping costs. Until recently, when balanced against other higher costs in the UK, shipping costs from China have been low enough to ensure that production in China remained the obvious choice.
However, there has been a massive shortage in containers, which has led to a backlog of goods in China and huge increases (of up to 10x) in the cost of containers. This is driving up the landed unit cost of products manufactured in China. These recent articles by the BBC and Bloomberg explain the situation more fully but suffice to say, whether this will be a long term issue or not, with all the uncertainty we are facing on a global scale, businesses and start-ups are keen to find alternative solutions to avoid these excessive costs and manufacturing in the UK is an obvious one!
Moral objections against China
There are also perceived moral objections due to the reporting by the western press of the situation in Hong Kong and in Eastern China regarding the treatment of the Uighur people. These issues, coupled with the rhetoric coming out of the US following the trade dispute and the friction between the UK government and China regarding Huawei’s involvement in 5G, have also contributed to more people wanting to manufacture locally.
The reality of manufacturing in the UK.
Having said all this, the reality is that the vast majority of suppliers and manufacturing partners are still in China and, in our experience, Chinese manufacturers are the most responsive. It remains difficult to find manufacturing partners in the UK who will even quote rapidly and the costs are often prohibitively high. Not only this, but UK manufacturers are now swamped due to an increase in demand!
It is so hard to know, with the ever changing global economic, political and health landscapes, what the long-term effects will be on both Chinese and UK manufacturing. We still maintain longstanding relationships with some excellent Chinese manufacturers who have supported our clients for years. We have also had some successes recently with finding partners in the UK for businesses wanting to relocate their production and the search continues for high quality, responsive and cost-effective options to ensure that businesses old and new can continue to grow and develop new products in spite of everything.