UK manufacturing could receive a significant boost in the aftermath of COVID-19, with many retailers planning to relocate the production of their goods over the next 12 months.
Research by professional services firm Alvarez & Marsal (A&M), in partnership with Retail Economics, found that 70 per cent of Europe’s 30 largest retailers have conducted a review of their supply chains because of the pandemic.
More than half of those surveyed (55 per cent) have already begun to diversify their supply as a result, with 29 per cent planning to do so within the next year. This could represent a £4.2 billion boost to domestic manufacturing, equivalent to the UK’s entire current clothing manufacturing output.
Erin Brookes, Managing Director and Head of Retail and Consumer, Europe, at A&M, explained:
“COVID-19 has brought about a fresh set of financial and logistical challenges which retailers must overcome while accommodating permanent shifts in consumer behaviour.
Our research shows that despite these new pressure points, most retailers are responding at speed, creating new growth opportunities within their domestic economies and protecting against future risk.”
In addition to the challenges of COVID-19, the research shows that pressure to improve sustainability is also a key driver of plans to on-shore supply chains. Nearly half of the retailers surveyed (46 per cent) said they already source more from their domestic economies to meet environmental, social and corporate governance (ESG) targets. A further 39 per cent said they intend to do so in the future.
The findings are supported by a separate piece of new research conducted by EY, which found that a third of manufacturers are planning to re-shore activity to the UK in the wake of the pandemic, despite the UK’s attractiveness for foreign direct investment (FDI) falling overall. A similar proportion of manufacturers said they intend to invest more in the UK over the next 12 months.
Alison Kay, EY UK&I Managing Partner for Client Service, commented:
“There is a real opportunity here for the UK. COVID-19 may actually have stimulated investment activity in the manufacturing sector by accelerating technology adoption and supply chain redesign.
“Pre-pandemic, businesses were already reviewing supply chains given trade and geo-political tensions. The challenges the pandemic has posed to extended global supply chains have made a rethink all the more important. Regionalisation, reducing dependence on one source of supply and re-shoring are all driving this shift.”