HR & Management
SMEs set to benefit from mid-market reshoring trend
3 min read
10 October 2014
SMEs are set to benefit from mid-market firms’ decisions to reshore business functions, as companies fail to realise the benefits of moving abroad.
Research by GE Capital and Warwick Business School found a quarter of mid-market firms are considering re-shoring their movable business activities within the next three years, potentially creating 378,000 jobs.
Professor Stephen Roper, enterprise research centre, Warwick business School, said: “There are quite strong positive local effects from reshoring. One of things we know about mid-sized businesses is that they are often quite strongly linked to local suppliers. They may be trading internationally, but many of their suppliers are quite local, much more local than the suppliers of larger businesses.”
Roper said that the research team was surprised at the number of businesses expecting to move business activities back to the UK. The primary reasons for going through this process are management or control issues, advantageous business culture, productivity, rising operational costs and access to skilled labour.
“It’s about difficulties in managing overseas operations. Productivity and flexibility, issues around business culture,” said Roper, giving the example of a health and safety equipment manufacturer that benefitted from being able to do smaller production runs when it moved its manufacturing back to the UK.
The distribution of business services that are being reshored include internal business services at 23 per cent, procurement at 21 per cent, external customer facing business services at 19 per cent, manufacturing and production at 19 per cent, and product development at 18 per cent.
Roper said that these companies’ decisions to move business activities back to the UK sheds light on the difficulties involved in the off-shoring process: “Perhaps one of the lessons of this is that offshoring is actually more difficult than you might imagine. These are medium-sized companies that have quite sophisticated production and manufacturing facilities, yet it’s still quite difficult.
“Small companies should think hard [if they’re considering offshoring], I wouldn’t want to discourage them because there are huge cost advantages, but the evidence from the survey suggests it’s more difficult than companies imagine.”
The research finds that Greater London is the top destination for mid-market firms’ reshoring, with 41 per cent of firms who are considering relocating some of their business activity based in the capital. Other regions most likely to benefit are the South East (17 per cent), the West Midlands (13 per cent), the North West (11 per cent) and Yorkshire & Humber (ten per cent).
The trend is set to create an extra 126,000 UK-based jobs per year and executives that are planning to reshore activities said they expected a 12.1 per cent increase in profits.
An infographic detailing the findings of the report can be viewed here. The study was based on a survey of 1,000 directors or C-level personnel responsible for making decisions about the location of these business activities.