The manufacturing sector in the UK economy today accounts for 12% of the national output falling from a peak of 46% in 1948. However it is still worth £400 billion pa (ONS ,2019). The focus shift in this Post-War period has been from a UK manufacturing sector producing high volumes of cheap commodity products to one specialising in high technology premium quality products.
The UK has moved from a manufacturing sector ensuring mass employment in large enterprises to one comprising small and medium sized companies with lean manufacturing and employing a much smaller but highly skilled labour force. The manufacture of those high-volume commodity products was “off shored “ to Asia and Eastern Europe from 1978 onwards and unit cost became the main imperative. The attractiveness of cheap product overcame the inconvenience and risk of long supply chains and carbon generation was not even a consideration. Improvements in intercontinental logistics especially reliable and cheap containerised shipping mitigated much of this risk.
Skilled and semi-skilled Jobs in manufacturing were replaced by minimum wage jobs in the service sector which in turn grew to over 75% of UK economic output. By 2019 the UK was not just a nation of shopkeepers as Napoleon had derided it but also of burger bars, building societies and coffee shops.
This month (August 2022) the city of Birmingham has been show cased as the host city for the spectacularly successful Commonwealth Games. Simultaneously, in its backs streets and the hinterland of the Black Country an unseen revolution has been taking place. These streets and industrial estates were once known as the workshop of the world. The Midlands once manufactured everything from tanks and aircraft, small arms and ammunition. Bikes, cars, vans and trucks and all the components that went into them. Screws, nuts and bolts, thousands of small metal goods including jewellery and the medals for the games. Year after year long established companies closed as their products failed to compete with Asian alternatives. Now is appears that the ugly twins of Covid and Brexit riding on an ill wind has at least brought someone some good.
The Covid pandemic has demonstrated the risk and cost of lengthy supply chains. As one Birmingham CEO stated recently ‘Cheap prices are no help if you can’t get the product!’
A continuing consequence of Covid has been not just the dramatic increase in costs (300%) of containerisation from China but also the unreliability of Chinese suppliers. The pandemic reduced factory capacity and China inevitably gave preference to their own home-based customers over exports to the West. The shortage of semiconductors/micro chips being a case in point. Brexit has made just in time trade with our closest neighbours in the EU more difficult and this situation will be made worse by new full customs checks. Increased paperwork, lengthy forms, the now impracticality of shipping mixed loads and changes in VAT payment have all contributed to this trade friction with UK’s previous single market partners. These are the reasons why the Midlands industrial hinterland is buzzing with new activity as customers return to it for industrial goods previously ‘off shored’.
‘On shoring’ is the new buzz word. The desire for reliable just in time service and short, risk-free supply chains is over riding the cost differences with Asia. In any case this cost gap has narrowed from 30%-50% pre-2019 to 5%-15%today. In return for long term commitments from returning customers manufacturers are investing in automation and robotics to enhance their competitiveness in the long term.
The additional benefit which is now a very current issue is the poor carbon footprint of long-distance supply chains. The climate change consequences of heat, drought, flood and fire over the last 2 years have visited the effects of climate change upon Europe and the USA. It cannot be ignored and neither can the commercial decisions that contribute to climate change.
The green economy is vital to our continuation as a species, well being and prosperity. Avocet Battery Materials (ABM) is rapidly becoming an essential component in the supply chain for electrification of vehicles. As the only battery tab manufacturer in the Western World ABM’s green tabs will provide UK and European battery cell producers with that vital local short supply chain supply of a key component.
Located on the northern flank of the Midlands industrial area, ABM may not share the long history of its manufacturing cousins in Birmingham but it does share their vision for UK manufacturing and for its new resurgence. ABM’s sister company Avocet Precision Metals shares ABM’s ethos and is also committed to a short supply chain just in time service of precision metals to its manufacturing customers.