The return of manufacturing operations from overseas to Yorkshire could generate tens of thousand of new jobs in the region, a new report claims today.
Accountancy firm EY said Yorkshire could be among the top UK regions to benefit from “reshoring”.
It has calculated that the revival of Yorkshire manufacturing could create 37,000 new jobs over the next decade.
But EY warned that the UK faces stiff competition from rival European countries and the United States which are also trying to promote themselves as destinations for inward investment.
Stuart Watson, senior partner at EY in Yorkshire, said the region has significant potential to attract reshored activity over the coming years.
He added: “Offshoring in the 80s and 90s saw a dramatic reduction in British manufacturing and a shift to services industries that resulted in a fundamental restructuring of the British economy.
“While some regions saw rapid growth and wealth creation, others suffered from high rates of unemployment.
“But the economics underpinning this trend appear to be reversing, and present Yorkshire and the wider UK with a once-in-a-generation opportunity.
“While increasing wages in developing countries are eroding their labour cost advantage, there are many more factors driving business to choose our shores.
“The desire to guarantee quality and the imperative to reduce time to market are increasingly important drivers of location decisions.”
Reshoring has the potential to inject £15bn into GDP and create more than 315,000 jobs in the UK, according to the report.
Yorkshire came second out of 11 UK regions analysed in terms of potential job creation via reshoring, behind only the North West.
EY said certain sectors could see a high proportion of reshoring activity given the right incentives.
Yorkshireman Steve Wilkinson, managing partner for EY’s UK and Ireland markets, said: “Those businesses that do relocate to the UK will predominantly be capital intensive sectors such as aerospace, defence, automotive, petroleum products and clothing, serving the European market.
“They will be businesses where quality and brand are important, and consequently the supply of a highly skilled workforce is imperative.
“When firms do choose to reshore to the UK they will tend to cluster in regions that best serve their business, in close proximity to key suppliers, infrastructure and an able workforce.”
But the report sounds a cautionary note, saying that reshoring industry and jobs back to the UK are not guaranteed.
EY said the Government has taken some important steps to ensure that the UK remains an attractive place to invest and start a business, but competition is intensifying.
Mr Watson added: “The UK is not the only country vying for reshoring investment; competition from other developed countries such as the US, Germany and France, and emerging markets in Eastern Europe puts the opportunity at risk.
“Government and business must work together to provide the correct framework so that the advantages of moving production to the UK can be realised.”
The report revealed wider benefits from reshoring beyond the immediate boost to employment and GDP.
Mr Watson said: “The UK will have a far more balanced, healthy and robust economy where consumers, manufacturers, service businesses and other sectors are pulling in the same direction.
“This will lead to a more sustainable economy which is better able to weather future global shocks, helping to set the UK on a path to where it is not only competing but winning in the race for global growth.”
Profound effects on UK economy
The practice of moving factories abroad in the 80s and 90s had profound effects on the shape of the UK economy.
Offshoring caused the balance of payments and the current account to go into deficit.
As a result, the UK has become heavily reliant on foreign capital to balance its current account deficit.
EY said when firms choose to reshore to the UK, they will tend to cluster in regions that best serve their business; in close proximity to suppliers, infrastructure and an able workforce.
The firm said the North West and South East are the UK regions that are likely to benefit most from reshoring.
The regions that will benefit the least are London and the North East, according to EY’s report.