UK increasingly competitive on manufacturing costs

The study of the world's 25 leading export nations reveals that the UK manufacturing costs are lower than France and Germany. Meanwhile, five economies traditionally regarded as low-cost manufacturing bases—China, Brazil, the Czech Republic, Poland and Russia—have seen their cost advantages erode significantly since 2004. The erosion has been driven by a confluence of sharp wage increases, lagging productivity growth, unfavourable currency swings, and a dramatic rise in energy costs. The UK is now the 12th cheapest manufacturing country out of the 25 analysed by BCG. The report said the UK had achieved steady productivity growth. "As a result, the cost structures of Indonesia and India have improved relative to Asia's other major exporters, while the UK and the Netherlands have boosted their cost competitiveness relative to other exporters in western and eastern Europe." "Many companies are making manufacturing investment decisions on the basis of a decades-old worldview that is sorely out of date," said Harold L. Sirkin, a BCG senior partner and a coauthor of the analysis. "They still see North America and western Europe as high cost and Latin America, eastern Europe, and most of Asia—especially China—as low cost. In reality, there are now high- and low-cost countries in nearly every region of the world." BCG has developed a new tool – the 'Global Manufacturing Cost-Competitiveness Index' – that tracks changes in production costs over the past decade in the world's 25 largest goods-exporting nations. The index covers four direct economic drivers of manufacturing competitiveness: wages, productivity growth, energy costs, and currency exchange rates. The 25 countries account for nearly 90% of global exports of manufactured goods.