Small and medium sized enterprises are bringing production back to Britain at an increasing rate, geared by the UK’s ‘technical edge’ and diminishing cost advantage overseas.

One in six companies “re-shored” manufacturing in the last three years compared with one in seven in 2009, According to a survey by trade body EEF.

Terry Scouler, EEF’s chief executive, said that although the trend was gradual, with the large majority of companies still choosing to keep their operations overseas, it was an encouraging move forward.

He said:

 “While it will always be two-way traffic, the need to be closer to customers, to have ever greater control of quality, and the continued erosion of low labour costs in some competitor countries means that in many cases it makes increasingly sound business sense.”

Production was most commonly brought back from China, followed by Eastern European countries.

The survey, which was co-produced with law firm Squire Sanders, found that 6% of companies planned to bring production back to the UK in the next three years. The main reason given for moving production back was to improve the quality of products, with other factors including speed of delivery, certainty and cost.

For around 40% of companies that had re-shored production, turnover increased as a direct result, with 3% reporting a fall. Around 60% reported a moderate rise in profits and employment.

This is particularly good news for contractors, who found their workload significantly reduced when companies began to move production offshore to cheaper countries.