Reshoring to create between 100,000 and 200,000 jobs

Wednesday 12 March 2014

Plans to reshore UK businesses are likely to create plenty of opportunities for contractors, with PwC expecting the move to lead to around 100,000 and 200,000 extra jobs.

Spanning multiple industries from manufacturing to business support services, the vacancies will give the British jobs market a major boost.

The economy will also benefit from the move, with PwC expecting the scale of reshoring to improve GDP by around 0.4 to 0.8 per cent leading up to the mid-2020s. This equates to approximately £6-12 billion at today's value.

John Hawksworth, chief economist at PwC, said: "Since the 1990s, there has been a major trend in the UK and other advanced economies for businesses to offshore activities to lower cost emerging economies. However, there are signs that the tide may be beginning to turn, with examples of ‘reshoring’ back to the UK starting to crop up in a range of different industry sectors."

According to PwC, this reflects a growing desire among businesses to be located to consumers, whose preferences are quickly changeable.

A reduction in the wage gap between the UK and emerging economies such as China is also a factor contributing to reshoring. Previously, labour costs were lowered by outsourcing overseas, but this is no longer the case.

Bringing business back to Britain will also give executives greater control over product quality, inventory levels and the supply chain.

"This trend to reshore is still at a very early stage, but our analysis suggests that the impact on jobs and output could build up gradually to material levels over the next decade or so. Of course, some jobs will also still be offshored over this period, but it should be much more of a two way street going forward," Mr Hawksworth said.

Furthermore, opportunities are expected to be created in internationally mobile services activities. PwC claims up to 20,000 jobs could become available over the next decade in research and development, business support services and telecommunications.

The body is encouraging policymakers to encourage the establishment of centres of excellence to support this.

Upgrading infrastructure will also be integral to ensuring reshored businesses are able to operate successfully.

Mr Hawksworth added improving skills and "maintaining an internationally competitive tax regime in the UK" will be important.

It is the manufacturing sector that is likely to benefit the most from reshoring activities. Already job creation is improving in the industry. Indeed, jobs growth is now at its fastest pace in three years, according to the Markit/Chartered Institute of Purchasing and Supply Purchasing Manager's Index.

Production and new business are increasing at above-trend rates, helping to bolster employment opportunities. Average selling prices are already on the up, increasing for the eighth consecutive month in February.

However, demand is outstripping supply and candidate availability is a problem for the sector. A slight gain in backlogs of work was noted in February but a lack of skills is making it hard for firms to increase their capacity sufficiently to address this.

By Victoria McDonnell

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