11 Aug 2022

UK falls behind on reshoring, reliance on Asian imports grows

The Manufacturing Technology Centre has released its inaugural UK Reshoring Index. It indicates that the UK has fallen behind on reshoring manufacturing as reliance on Asian manufacturing imports has grown. The UK is becoming more reliant on manufacturing imports from Asian low-cost countries.

MANUFACTURING IMPORT RATIO INCREASES: The MIR – a measure of whether the UK is reshoring manufacturing back from Asia – reached 61% in Q3 2021, a significant rise from 43% in Q1 2018. A higher percentage indicates a lower level of reshoring.

UK ADDICTED TO ASIAN MANUFACTURED IMPORTS: The UK has become increasingly reliant on manufacturing imports from Asian low-cost countries over the past four years, despite supply chain disruption due to the pandemic.

PANDEMIC HITS UK MANUFACTURING OUTPUT: With tough lockdown measures and subsequent COVID outbreaks, UK manufacturing output is yet to recover from 2018 levels. In Q3 2021, the latest period of data available, the manufacturing output figure was still 3% lower than Q1 2018.

ASIAN COUNTRIES RESILIENT AS IMPORTS SKYROCKET: Due to reliance from previous pandemic, imports from Asian countries temporarily fell during the first year of the pandemic, volumes recovered at a faster rate than UK manufacturing output. From Q1 2018 to Q3 2021, the total volume of imports from LCCs increased by 39%

The index comes as The Industrial Policy Research Centre (IPRC) launches its Manufacturing Strategy, outlining steps to boost UK manufacturing output.

The analysis shows that the manufacturing import ratio reached 61% in Q3 2021, a significant increase from 43% in Q1 2018, indicating a lower level of reshoring despite the pandemic supply shock.

The index analyses two metrics – UK manufacturing output and import data from 14 Asian low-cost countries (LCCs) – to track whether the UK is reshoring manufacturing back from Asia.

UK has become increasingly addicted to Asian manufactured imports

The index’s manufacturing import ratio (MIR) – manufactured goods imports from Asian LCCs as a percentage of UK manufacturing gross output – reached 61% in Q3 2021, a significant increase from 43% in Q1 2018. A higher percentage indicates a lower level of reshoring.

Growth was chiefly hampered by the COVID-19 pandemic, which put a variety of strains on the UK manufacturing sector. Tough lockdown measures forced factories to close across the country in March 2020, with hundreds of thousands of workers placed on furlough – in April 2020 alone the figure was 911,000. As a result, manufacturing output declined by a third during the first two quarters of 2020.

Output was hit again during subsequent COVID outbreaks as new variants emerged. During the spread of the Alpha variant towards the end of 2020, manufacturing firms reported high levels of worker absences. Output fell by more than 5% in Q1 2021, the only quarterly decline since the start of the pandemic.

Consequently, the UK became increasingly reliant on imports to make up for this fall in output. This is reflected in the index: throughout 2020 the MIR from 44% to 64%.

Dr Clive Hickman OBE, Chief Executive of the Manufacturing Technology Centre (MTC) and Chair of the Industrial Policy Research Centre (IPRC), said: “Our analysis shows that the UK continues to be too reliant on manufacturing imports from low-cost Asian countries. We must lead a renaissance in UK manufacturing with a renewed focus on jobs, skills and resilience to encourage the reshoring of industry. These efforts begin with a National Manufacturing Strategy to ensure that the sector is future proofed for the decades to come. Focusing on building stronger links between academia and industry, boosting devolved powers to create regional industrial strategies and providing a specific funding pot for Net Zero manufacturing will boost the UK’s industrial capabilities, improve productivity and deliver thousands of future green jobs.”