Source [https://globalconnections.hsbc.com/global/en/articles/alternatives-to-china-manufacturing]
"If current trends continue, we'll be looking at bringing more back," says Tony Caldeira. China's appeal as a manufacturing base is on the wane. One producer believes more businesses will follow his lead and return to UK manufacturing as an alternative.
Caldeira is bringing manufacturing home to the UK. UK manufacturing is a move that would have been unthinkable to Tony Caldeira just four years ago, when he opened his 25,000 square metre production unit near Hangzhou, on China's east coast.
The Liverpool-based cushion designer and manufacturer has been hit by soaring wages in China. Like other producers, he has had to cope with qualified employees demanding 50% wage rises, and the defection of scores of employees after the Chinese New Year celebrations.
Asian alternatives?
Vietnam, Bangladesh or the Philippines – the next stop for some China-based producers – are not options for Caldeira. He believes the concurrent boom years of China and India were a one-off event, never to be repeated elsewhere.
"China had the cluster model, the infrastructure, the stability and a steady trade flow," he says. "There's more risk in some of the newly emerging economies. "And the fabrics we use are woven in China – so they would need to be shipped to the other country to be sewn, and then shipped back. Bear in mind that the labour cost on our most expensive cushion might only be 10 to 15% of the product cost."
Home thoughts - UK Manufacturing
For Caldeira, it makes sense for more cushions to be produced at the company's base. "The UK is a leader in home fashion. Our big Commonwealth markets, such as Australia, Canada and South Africa, tend to look for products that were in demand in Britain six to 12 months earlier."
Caldeira's Chinese base, established as a joint venture, continues to run but with only a third of the one-time 200 workforce. So far, 20 new jobs have been created in Liverpool's production lines and warehouses.
"If current trends continue, we'll be looking at bringing more back," says Caldeira. "I think we may find many businesses with Chinese production following in our footsteps."
'Half chips, half rice'
Caldeira started the process by buying out his Chinese business partner. Unused factory space should not be an issue: "The financial situation in China means a lot of SMEs there are looking to rent space, because they can't get long-term finance."
Tony Caldeira counsels other businesses to take a similarly cautious approach. "There are so many 'known unknowns' in the current economy that flexibility is the key. The companies that will be around in 10 years' time are those with a flexible outlook.
"We will certainly be taking it step by step in terms of moving production. It will be a 'half chips, half rice' approach for the foreseeable future."
"If current trends continue, we'll be looking at bringing more back," says Tony Caldeira. China's appeal as a manufacturing base is on the wane. One producer believes more businesses will follow his lead and return to UK manufacturing as an alternative.
Caldeira is bringing manufacturing home to the UK. UK manufacturing is a move that would have been unthinkable to Tony Caldeira just four years ago, when he opened his 25,000 square metre production unit near Hangzhou, on China's east coast.
The Liverpool-based cushion designer and manufacturer has been hit by soaring wages in China. Like other producers, he has had to cope with qualified employees demanding 50% wage rises, and the defection of scores of employees after the Chinese New Year celebrations.
When you factor in the other variables at the top end of quality, the cost difference of manufacturing in the UK becomes more or less neutralBut other factors, such as rising shipping costs and the strong renminbi, have had an equal impact. "The duty on finished products coming from China is 12%; the duty on raw materials is only 8%," says Caldeira. "When you factor in the other variables at the top end of quality, the cost difference of manufacturing in the UK becomes more or less neutral."
Asian alternatives?
Vietnam, Bangladesh or the Philippines – the next stop for some China-based producers – are not options for Caldeira. He believes the concurrent boom years of China and India were a one-off event, never to be repeated elsewhere.
"China had the cluster model, the infrastructure, the stability and a steady trade flow," he says. "There's more risk in some of the newly emerging economies. "And the fabrics we use are woven in China – so they would need to be shipped to the other country to be sewn, and then shipped back. Bear in mind that the labour cost on our most expensive cushion might only be 10 to 15% of the product cost."
Home thoughts - UK Manufacturing
For Caldeira, it makes sense for more cushions to be produced at the company's base. "The UK is a leader in home fashion. Our big Commonwealth markets, such as Australia, Canada and South Africa, tend to look for products that were in demand in Britain six to 12 months earlier."
Caldeira's Chinese base, established as a joint venture, continues to run but with only a third of the one-time 200 workforce. So far, 20 new jobs have been created in Liverpool's production lines and warehouses.
"If current trends continue, we'll be looking at bringing more back," says Caldeira. "I think we may find many businesses with Chinese production following in our footsteps."
'Half chips, half rice'
Caldeira started the process by buying out his Chinese business partner. Unused factory space should not be an issue: "The financial situation in China means a lot of SMEs there are looking to rent space, because they can't get long-term finance."
Tony Caldeira counsels other businesses to take a similarly cautious approach. "There are so many 'known unknowns' in the current economy that flexibility is the key. The companies that will be around in 10 years' time are those with a flexible outlook.
"We will certainly be taking it step by step in terms of moving production. It will be a 'half chips, half rice' approach for the foreseeable future."