UK moves up global manufacturing league table

The latest BCG Global Manufacturing Cost-Competitiveness Index analysed manufacturing costs for the world's 25 leading exporting economies along four key dimensions: manufacturing wages, labour productivity, energy costs, and exchange rates. It said that because moderate wage increases over the past decade that were almost entirely offset by productivity gains, the UK's direct-manufacturing cost structure improved by up to 10% relative to other leading Western European manufacturing export economies. The UK has also improved its competitive position compared with Eastern European nations such as Poland and the Czech Republic, as well as with Asian economies such as China. "As a result," said BCG, "manufacturers of everything from toy trains to fashion garments are reshoring production. In a recent Manufacturing Advisory Service survey, 11% of small and midsize manufacturers in the UK said they had brought production back from overseas in the previous 12 months, twice as many as said they were shipping work abroad." However, it said, the UK's advantages went beyond labour costs. "Corporate taxes in the UK are the lowest in Europe, and by 2015 they will drop further, from 28 to 20% - nearly half the level of the US. Strong advanced manufacturing ecosystems that include engineering and components suppliers have emerged in Midlands and Oxfordshire for automobiles, Bristol for aerospace, and East London and Warwickshire for high-tech manufacturing." But labour flexibility gave the UK a distinct edge. "The country scores highest among both Western and Eastern European economies in terms of overall labour market regulation by the Fraser Institute, a Canadian policy research organisation. This allows manufacturers in the UK to restructure much more quickly than those in other European economies. It also makes the UK an attractive place to build factories and create jobs once the investment cycle turns back toward growth." The survey found that the manufacturing cost competitiveness of a handful of countries held steady relative to the US. BCG said: "Rapid productivity growth and depreciating currencies have helped keep costs in check in economies such as India and Indonesia – even as wages have grown quickly. In contrast to the dynamic changes in India and Indonesia, the Netherlands and the UK have seen relative stability across all the cost drivers we examined. The performance of these four countries has positioned them as potential future leaders in each of their respective regions."