Nice Wok If You Can Get It for Leeds
Years of inflation in Chinese wages and freight costs have chased several US manufacturers back home from China. Now a British food producer is delivering arguably the ultimate blow to the one-time factory of the world – it is transplanting noodle-making from Guangzhou to Leeds.
The phenomenon of "re-shoring" is gaining traction globally as the cost of doing business in China, including transport, catches up on developing markets. The differential is shrunk yet further in Britain by the renewed weakness of sterling.
Symington's, the maker of Ragu pasta sauce and Golden Wonder's pot noodles, says it is bringing noodle manufacturing on to British soil, cancelling its Chinese contracts and creating about 50 jobs in the process, in the latest sign that offshoring – popular in recent decades as a means of exploiting lower labor and land costs – is falling out of favor in the UK as it has in the US.
Henrik Pade, business development manager at Symington's, said the move was driven by the need for quicker response times – when a retailer requests more stock they do not want to wait for a container ship to trawl across the sea – and cost.
"We can produce for roughly the same cost today in Yorkshire as we are out of China," said Mr Pade. "If you go back in time, it would probably have been 30-35 per cent less." This comes after years of wage inflation of 10-20 per cent in the heartland of China's factories in the Pearl River Delta.
According to EEF, the UK manufacturers' association, there is a "fairly consistent trickle" of manufacturers returning some production to the UK: a survey carried out in 2011 showed one in seven bringing some work back onshore.
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Examples in the clothing industry include High Street retailers TopShop and River Island, while several industrials have been stepping up their purchasing of parts and materials from domestic suppliers, reviving hopes that a "rebalancing" of the economy towards production industries and away from financial services could become a reality, research has shown.
Lee Hopley, chief economist at EEF, said companies were re-shoring because after factoring in the expense of transport, the overall cost of goods from China and other once low-cost markets was increasing and there was more focus on quality and shortened supply chains.
"Companies want to make sure the whole supply chain is robust and resistant to supply shocks because they have seen significant disruptions. They are competing on service and quality and less on pure cost," she added.
Mr Pade said: "What we are doing is not unusual. In this case we are talking about a simple product, but you hear about US computer producers coming up with the same argument.
"Everybody prefers to do manufacturing on their own doorstep rather than far away, which means you need to have a financial incentive to outsource."
In the US, productivity-adjusted labor costs are approaching levels close to China, according to projections from Boston Consulting Group, while natural gas costs are lower.
However, Ms Hopley said it was still "two-way traffic", with the balance of investment remaining firmly weighted outside the UK "because that's where the customers are and parts of the supply chain are in these countries."