Could Brexit deliver Osborne’s “March of the Makers”?

I was in conversation yesterday with the CEO of a UK-based technology company who is currently using manufacturing plants in Shenzhen. Inevitably, I asked whether the devaluation of the Pound meant it might make sense to consider repatriating manufacturing (by which I mean assembly, as microchips are largely not made in the UK of course).

His reply put the hopes of Brexiteers in stark relief with the reality of the opportunity for the UK.

When initially looking for suitable manufacturing, they did trials with US and German PCB fab and assembly contractors, finding significant quality issues with both. In addition, commercially they wanted the entire supply chain which meant unsustainable margins going forward and a lack of control. Meanwhile, the UK was simply not possible as after exhaustive search, there were no assemblers who could manufacture the board size in question (the core product is a fair bit larger than any of the PCB assembly lines or ovens in the UK).

His reason for going to Shenzhen was simply they have the capability, capacity and deliver the quality needed to produce a globally competitive product. China is today less the “sweat shop”, more the technology “sweet shop” of the world.

In short, even if he wanted to, the CEO cannot manufacture in the UK, not due to some arcane financial problems or trade treaties — it simply lacks the capabilities he needed.

So what prevents the UK from developing the right capabilities for the future to survive the economic shock of Brexit? Unfortunately some of these capabilities are going to take as long as (if not longer than) the government’s answer to the doctor shortages to resolve. A strong, properly funded apprenticeship culture and education stream is needed, as exists in other successful Western European countries such as Germany and Switzerland. It is the only way to assure the engineering and technical talent needed to build high tech manufacturing capability without breaking the Brexiteer promises to reduce immigration. This is a government responsibility, not employers’ as the current administration thinks is possible. On this count, the UK can learn much from successful European partners.

The other side of this coin is the capability and investment in capacity of UK manufacturers. This is a chicken & egg conundrum — tech manufacturing will continue going to Shenzhen until countries like the UK can prove they are a credible alternative. The investment, marketing, and service capability needed to make this a reality will take more nuance and time than is afforded by the current Trade minister who is doing his best to use a stick rather than carrot approach to achieve this goal.

The UK as the 5th largest economy in the world (oh, sorry, I meant 6th largest after the last week’s rout on the pound) will not be able to turn on a dime — it will need time and investment by all interested parties to survive this shock. It also requires more than platitudes and aspiration from government. It needs real investment, policy and incentives, otherwise even the most jingoistic CEOs will continue to have no alternatives but to go abroad for capability and capacity.