North East firms pulling work back to the region as Far East loses its allure

North East firms are pulling work back to the UK as rising costs in China and eastern Europe see the potential end of the "offshoring" methods behind thousands of job losses

North East firms are pulling work back to the UK as rising costs in China and eastern Europe see the potential end of the "offshoring" methods behind thousands of job losses.

Across the region many firms have sent jobs and manufacturing contracts to low-pay factories in the likes of Poland and Asia, contributing to the North East’s historically high unemployment rate.

But now businesses have told The Journal they see a reverse in the jobs exodus with manufacturing groups increasingly realising the benefits of a domestic workforce.

Prompting this ‘onshoring’ rethink has been a rise in labour costs abroad, as well as the increasing cost of freight services.

The North East Chamber of Commerce has said more now must be done to encourage firms to follow the lead of others, including making sure councils or Government quangos do not sell off potential expansion sites for “short term gain” rather than helping firms grow.

The group is now encouraging firms to rethink their offshore workforce, especially at a time when the Made in the UK tag is helping sell British manufacturing abroad.

While much of the work returned secures jobs rather than adding to workforces, the move is expected to underpin long-term growth.

Shower manufacturer Roman sent some work to China in 2005, but has since brought that product back to Durham, handing it a much greater certianty over supply.

David Osborne, managing director, said many firms had developed a business case based on just “shipping over boxes of air and parts” then selling them on, rather than committing to manufacturing.

Reversing that trend would, he said, see a boost to many firms.

“We definitely think it was right to bring this product back in-house, we were really just importing a lot of fresh air, whereas now we manufacture this one.

“The benefits are massive to us, we have a few days lead time, rather than waiting for a ship to arrive from China and taking your chance with what arrives.

“And there is a sort of sense of nationalism in selling these. When cost is about equal, people will favour British.”

Helen Hayes, policy adviser at the Chamber of Commerce, said Roman was part of a growing trend.

She added: “Companies are becoming more aware of the true costs of off-shoring and increasingly it makes business sense to bring it back to North East.

“There has been a significant increase in freight and labour costs in East Asia and in many cases it has become much more cost effective to bring manufacturing operations home.

“We have found that by doing this, businesses get more control over product development and are better suited to meet customer needs and are more responsive to changing and updated briefs.”

The Chamber added that the potential for repatriated jobs made it more important than ever that the North East had its work force skilled up, a key aim of The Journal’s apprenticeship campaign.

“It is important that we have the skills and vocational training opportunities in the North East to ensure we have the capacity to make the most of repatriation opportunities.

“This once again highlights the need for business to work with education at all levels to ensure training and skills meet immediate and future regional business needs,” the Chamber added.

Among those who have benefitted from a Made in the UK tag is Martel Instruments in Durham. The specialist printer manufacturer sends some 85% of its work to export, a measure it said would be harder to achieve if work was sent to China. Managing director Keith Walker said: “Demand isn’t large scale now, unless you’re selling say the iPhone. But there is a growing specialist market, and having a skilled team working together outweighs any benefit of an initially cheaper workforce in say China.”

Supply chain help

Crane manufacturer Liebherr has brought supply-chain work to Sunderland.

The firm has been located in Sunderland for 25 years but has struggled to develop a local supply chain.

Liebherr found some firms provided poor quality products, and also many increased prices during the order process.

However, Liebherr has successfully sourced a sheet metal working company from Tyne and Wear to supply not only the Sunderland plant, but also the German parent company.

The firm said it has benefited through sourcing a local supplier who can improve flexibility and provide a competitive cost, benefits that could be difficult to find with a remote supplier.

It came though after a perceived lack of global ambition and a short-term attitude it said has restricted elements of the North East business community from engaging with supply chain activity.

The benefits of engagement need to be clearly communicated to encourage more indigenous firms to enter supply chains.

Showers success

Roman Baths is one of many firms to initially take advantage of lower production costs abroad.

Shower manufacturer Roman had moved their price entry range abroad in 2005, though this was the only range the company has ever manufactured outside of the UK.

However, the company has since repatriated the range to join the rest of their product lines in being manufactured in their Newton Aycliffe manufacturing plant.

This particular range was successfully integrated into their existing operational processes and supply chains.

The firm said the repatriation of this range was cost-neutral due to the increasing costs of Chinese labour and freight. These overall increasing costs meant that manufacture of the products in the North East could be done at a competitive price, allowing Roman to still provide a low cost product.

Roman is able to carefully monitor product quality as well as offer better aftersales care and there are no minimum order quantities for their customers.

The made in Britain label itself has become something of value and is viewed as a selling point.

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