UK manufacturing jobs to come home in next decade

Advances in production technologies, as well as rising costs and regulations abroad, will “fundamentally change” the economics of manufacturing, a study by the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) found.

“This will mean more will be made at home and exporting will be replaced with owning or controlling factories in target markets abroad,” it said. For the UK, the changes is likely to result in jobs that were outsourced overseas coming home and overseas manufacturers setting up UK factories.

“With a strong vision and purposeful intervention, the decline in manufacturing employment could be arrested and some increase in manufacturing employment, of the order of 100,000 to 200,000, could occur over the coming decade,” the RSA said in its study, conducted with Lloyds Banking Group.

About 2.5m people are employed in the manufacturing sector, which accounts for 10.5pc of national economic output.

Localisation of production would also help lower Britain’s persistent trade deficit, as UK-made goods would replace imported ones. “This could reduce the UK’s trade deficit by a third,” the RSA said. “Based on 2011 trade figures this would amount to an expansion of approximately £30bn in domestic production paralleled by a similar change in the trade deficit.”

The report will be welcome news to George Osborne, who wants to create “a Britain carried aloft by the march of the makers”.

However, to make the most of the opportunity, UK manufacturers need to exports more now “to increase market access” and to retain “highly-skilled employees”. The Government should continue efforts to improve tax and patent law, and to “fix the skills shortage problem, through work on the image of manufacturing”.