Manufacturers bringing skills back home, says VC

THE North West could see a resurgence in manufacturing as existing firms look to bring outsourced production back home, according to a venture capitalist.

North West fund manager Enterprise Ventures, which manages the £30m venture capital pot of the North West Fund, said it has witnessed an increase in companies looking to bring manufacturing elements back to the UK to respond more quickly to changes in market demand.

Chief executive Jonathan Diggines said that firms are looking to shorten their supply chain in order to make improvements over quality, protect their own intellectual property and reduce working capital.

He said: “We are seeing companies starting to question the seemingly automatic, knee-jerk decision to outsource production to the Far East. Instead, they are seeking funding to support or re-establish manufacturing in the UK – perhaps as a dual sourcing exercise at this stage.

 “Rising freight and labour costs are making Asia less attractive as a manufacturing location, however the critical factor, for the firms we have spoken to, is the long lead time involved in bringing stock and vital components from the Far East.

“Current tough market conditions mean that businesses must be able to act quickly, to grasp any opportunities that arise – often to beat the competition to exploit a niche, which will not sustain a six-week delay.”

Jaguar Land Rover, BMW, Toyota and Nissan are large-scale international businesses which have committed to new plans for manufacturing in the UK during 2011. EV believes that in 2012 smaller firms will now follow suit.

Diggines said: “Local manufacture allows firms to be far more flexible and responsive to customer demand – which can be vital when the market is so unpredictable.

“They don’t have to take the risk of carrying too much stock. They can also respond more quickly to rapidly changing circumstances.

“Many of these businesses are in industries where trends and fashions play an increasing role and, in these economic conditions, they must be able to react and operate in an environment of continual change.”