Out-Law News | 12 Nov 2014 | 4:11 pm | 2 min. read
It said the measures, set to be published early next year, would be aimed at getting UK manufacturers to engage more with UK-based suppliers rather than contract with suppliers based elsewhere in the world.
Measures to be outlined in the new action plan will include steps to help suppliers tap into a better skilled workforce and in harnessing innovation and research. The plan will also help businesses operating in the UK manufacturing supply chain gain better access to funding, the government said.
"Every successful company is only as good as its supply chain," deputy prime minister Nick Clegg said. "The last four decades have seen the UK’s manufacturing base increasingly forced to compete with low-cost economies for investment, jobs and growth. Some businesses have struggled and it has resulted in a hollowing out of the UK’s domestic supply chains with over half the supplies used in British manufacturing coming from overseas. This cannot go on."
"That’s why I’m acting now so we can get off this merry-go-round where every time a manufacturer shifts production overseas, the local companies that support them begin to disappear too," he said. "These supply industries are huge, important sectors in their own right – our steel makers, petrochemical companies, glass producers all the way down to car seats manufacturers – all of which employ thousands of people and generate millions for our economy but they need our support."
Specialist in manufacturing supply chain contracting Jayne Hussey of Pinsent Masons, the law firm behind Out-Law.com, said: "One of the issues, as I see it, is that UK manufacturers are unable to access bank funding because the contracts they are tendering for often don’t contain sufficient security with respect to volume requirements of the customer."
"For example, contracts which give no guaranteed minimum volume commitments or where orders can be cancelled at any time with little or no compensation mean that it is difficult for those seeking bank funding to demonstrate to the bank that they will be able to recover investment costs through volumes/security of purchasing commitment. There needs to be a more collaborative approach through the UK supply chain so as to give more visibility and certainty on demand cycles," she said.
Earlier this year, a Labour party-commissioned study into the UK's advanced manufacturing and its supply chain found that a flourishing domestic supply chain can help the largest UK advanced manufacturing companies compete in a global market.
Jaguar Land Rover executive director Mike Wright, who conducted the review, said the interests of large and small UK companies operating in industries such as car manufacturing, life sciences and aerospace should not be "set ... against each other".
"Proximity and adjacency are important: they help strengthen relationships and communication, allow for shared resources and spill-overs, and enable shorter and more efficient logistical chains," Wright said. "We are more likely to have successful large firms if we have a thriving UK-based supply chain, and vice versa. We should never set the interests of large and small businesses against each other. Not only are they interdependent – suppliers want anchor clients, who in turn want to be close to their suppliers – they also both benefit from the same investment environment."
According to a study by manufacturing industry body EEF published earlier this year, an increasing number of UK manufacturers are 're-shoring' production back in-house or to UK-based suppliers from suppliers based overseas.