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UK now a competitive centre for manufacturing

A new report looking at global production strategies has highlighted the UK as a key manufacturing hub, where increases in productivity mean that it is able to compete against the low-cost economies. These dramatic shifts in manufacturing costs are driving companies to change their global production strategies.

The report from Boston Consulting Group (BCG) and titled "The Shifting Economics of Global Manufacturing: How Cost Competitiveness Is Changing Worldwide" shows that the UK has emerged as one of Western Europe's lowest cost manufacturing locations, and that many of the old perceptions of low-cost and high-cost countries are now out of day. As a result many companies are starting to realign their global sourcing and production networks.

The report builds on earlier BCG earlier BCG research into changes in direct manufacturing costs among the world's 25 largest goods-exporting nations since 2004. That research, released in April, found that several economies still often perceived as low-cost manufacturing nations-such as China, Brazil, Russia, and the Czech Republic-are no longer much cheaper than the U.S. In some cases, they are estimated to be even more expensive, according to the new BCG Global Manufacturing Cost-Competitiveness Index. The index also found that the competitiveness of historically high-cost nations, such as the U.S. and the UK, has significantly improved.

The BCG Global Manufacturing Cost-Competitiveness Index is a new tool that sheds light on the shifting cost dynamics of global production. The index compares changes in direct costs between 2004 and 2014 in the world's 25 leading export economies along four dimensions: manufacturing wages, productivity, energy costs, and currency exchange rates. An interactive graphic on bcgperspectives.com shows how the cost position of each of those 25 economies has changed between 2004 and early 2014 relative to the others.

The new report analyzes the factors driving the cost shifts in greater detail in several economies, such as Australia, India, Mexico, and the UK, and the impact of changing costs on those nations' manufacturing competitiveness.

Several countries, such as the UK, that have most improved their competitiveness over the past decade are already attracting new manufacturing investment and jobs, while investment is declining in some of those that have lost ground in the BCG index.
 

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