UK's manufacturing competitiveness lauded by global consultancy

The low earnings growth has occurred despite a surging economy with the Bank now predicting that that GDP will grow by 3.5pc this year and 3pc in 2015. The BCG report appears to suggest that the two factors are different sides of the same coin, with cheaper labour spurring investment in the UK, driving growth and helping to increase the number of jobs.

The BCG classes the UK along with the Netherlands, Indonesia and India as “regional rising stars” and says that it has emerged as “the lowest-cost manufacturing economy of Western Europe”. As well as low labour costs, BCG cites the UK’s low corporate tax rates and flexible labour market as major competitive advantages.

Taken together these trends are slowing the drive among companies to outsource manufacturing to countries in Eastern Europe, South America and Asia that were traditionally seen as being low-cost.

“Perceptions are changing in the global industries,” said Sukand Ramachandran, a partner at the Boston Consulting Group in London. “There is a growing realisation that, all other things being equal, it may be more effective to manufacture your goods close to your customers. That trend has been apparent in the US for about a year and a half and we’re now starting to see it in Europe too.”

Mr Ramachandran highlighted the aerospace and automotive industries as two in which the trend towards “onshoring” has been most pronounced. He pointed to the acquisition of Jaguar Land Rover by India’s Tata Motors in 2008. At the time this raised concerns that jobs and investment would be shipped off to Asia. In fact, the reverse has been true with the company investing in a number of facilities in the UK and creating an additional 1,700 jobs at its Solihull facility by next year.

The BCG study looked at a number of factors, including labour and energy, to compare the manufacturing costs of the 25 top exporting countries in the world relative to the US. Many of the traditional high-cost countries in Europe have lost further ground in the past decade due to weak productivity growth and rising energy costs, according to the study. These include France, Italy, Belgium, Sweden and Switzerland.

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