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Outsource magazine: thought-leadership and outsourcing strategy | August 22, 2017

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Reshoring: the TUC perspective

Reshoring: the TUC perspective
Outsource Magazine

The last 30 years have seen a steady decline in manufacturing in the UK and, increasingly, the transfer of back-office jobs overseas. Some argue that this is natural as heavy or low-skilled industries move production to countries where costs are cheaper, and that offshoring – the term which describes a company relocating from a higher-cost to a lower-cost country – is a natural product of globalisation.

However the TUC believes that there are several holes in this argument. Labour costs are only one factor used by companies when deciding where to locate their operations. Proximity to market, the availability of skilled workers, and government support for industry in particular countries all play a part. Business is increasingly about systems and the way in which global supply chains fit together, and decisions are not as straightforward as simply seeking the place where a company can pay the lowest wages.

Of course, in those industries which are price- and wage-sensitive, rising salaries in developing Asian countries mean that a country offshoring to that part of the world may increasingly be paying wages which rival those in the West, along with high transport costs as they have to ship products back to Western markets.

This has led to the concept of ‘reshoring’, where companies that have offshored reconsider the value of this practice and, on wider reflection, decide to bring production back home to the UK.

It is not known how much reshoring is actually taking place currently. Anecdotal evidence suggests it is a real phenomenon, but it would be wrong to exaggerate the amount of it happening. Rather than getting too hung up on either offshoring or reshoring, the TUC believes that time might be better spent thinking about how to develop and maintain existing operations in the UK, and attract job-rich industries to these shores.

The TUC would, naturally, like to see as many jobs in the UK as possible. We have repeatedly said there is no future for the UK in low-cost, low-value manufacturing and services, but there is no reason we cannot be competitive players in high-skill, high-value sectors.

The UK is an excellent home for business. We provide access to UK and continental European markets, we have a strong manufacturing and commercial heritage, we have a culture of innovation and we have a proven commitment to the rule of law.

But we could do more to encourage business in the UK. The TUC has championed the cause of apprenticeships because they give young people who do not go to university a greater likelihood of job security and decent wages. But not only do apprentices work for young people: they are good for UK plc. As our reputation for having a quality skilled workforce grows, more companies will wish to reshore to the UK – and more inward investor companies will wish to come here too.

Apprenticeships, support for science, clusters between companies and top universities, and increasing incentives for companies to undertake research and development can all help the best organisations to thrive in Britain.

The best companies also work with their unions, who can reflect back what is happening on the shop floor and so aid better decision-making.

These are just some of the policies that can help prevent offshoring – and perhaps even tempt those who have moved abroad to reshore back home.

About the Author

Frances O'Grady 150Frances O’Grady is the General Secretary of the British Trades Union Congress (TUC).

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