Firms eye SW as place to site manufacturing

THE South West has become a more attractive place to manufacture products during the coronavirus pandemic as companies seek to bring production back to the UK, a new report says.

The latest UK Attractiveness Survey, from multinational professional services giant Ernst and Young (EY), reveals 32% of the manufacturing businesses said they would be looking to “reshore” activity to the UK.

The figures are the latest evidence of the economic impact of the Covid-19 pandemic, which has created uncertainty around business investment and prompted a re-think of investor priorities.

However, the survey of 220 non-UK investment decision makers also found that only 43% of respondents are continuing with the UK investments they planned before the pandemic, down from 72% in April.

According to EY’s analysis, these figures would mean 30-45% fewer foreign direct investment (FDI) projects in the UK in 2020 than the 1,109 projects recorded in 2019 – equivalent to a fall of between 333 and 499 projects.

But in a boost to the South West, as well as businesses sharing their intention to reshore, a further 32% of respondents from the manufacturing sector said they intended to invest in the UK during the next 12 months.

The research shows this is being driven by major changes in supply chain strategies, which have become more pressing as a result of the pandemic, with 66% of all respondents – and 98% of manufacturing respondents – saying they plan to remodel their supply chains in the future.

A move to “regional” supply chains is on the agenda for 32% of all respondents and 40% of manufacturing respondents, and 30% of respondents intend to reduce their reliance on a single source country, a figure which rises to 42% among manufacturers.

Andrew Perkins, office managing partner at EY in the South West and Wales, said: “There is a real opportunity here for the UK and the South West and Wales, and an updated industrial strategy should identify the UK’s support for manufacturing and supply chain onshoring.

“Covid-19 may actually have stimulated investment activity in the manufacturing sector by accelerating technology adoption and supply chain redesign.

“Pre-pandemic, many businesses were already reviewing supply chains given trade and geo-political tensions.

“The challenges the pandemic has posed to extended global supply chains have made a rethink all the more important.

“Regionalisation, reducing dependence on one source of supply and reshoring are all driving this shift.

“UK manufacturing is already established as a global leader and the South West and Wales will have opportunities as companies look to secure resilience and pre-pandemic productivity levels with a multi-location, regionalised approach to their global supply chain.

“This resurgence is dependent on the sector in which manufacturers operate – those in automotive and aerospace are likely to continue to see reduced demand while many food manufacturers are running at capacity.

“But there is also the opportunity for companies to diversify and pivot, as we have already seen with alcohol manufacturers turning to sanitiser production, for example.”