It’s not often that I’m interested in documentaries about cushion making, but I made an exception for the recent BBC2 programme The Town Taking on China, which ended up having some interesting implications for the UK technology industry.
The premise of the series was an experiment carried out by cushion manufacturer Tony to see if his UK factory based in Kirkby could outperform its Chinese counterpart, with the objective of bringing more jobs back to the deprived Merseyside region.
I felt sure China would prevail in the experiment as hands down winner. After all, it’s been decades since the UK had a thriving manufacturing industry, as high wage and tax costs pushed businesses away from the UK and into cheaper developing regions of Asia, mainly India and China. These areas are well-known for their access to cheap, skilled labour and low overheads and so are the labour destination of choice for call centres and manufacturing.
However, I was surprised to find my assumptions were wrong and that the tide is turning. There were two main reasons for this shift. Firstly, and on a smaller scale, was the push for quality from certain buyers.
At a Frankfurt textiles fair, Tony put his China and UK teams head to head with competing stands. Although China drummed up lots of interest, the deals signed were worth less. The UK team, in comparison, managed to attract the immediate attention of a large US nationwide retailer, who just loved all things British, especially, as luck would have it, cushions with a ‘Made in Britain’ tag.
The two purchasing managers whizzed through the stand like kids in a candy shop, throwing cushion after cushion onto the floor to add to their order, to the tune of about £300,000 worth of business.
But the key catalyst for this change is from China itself due to its ageing population.
The Chinese workers at Tony’s factory have a completely different lifestyle to his UK staff. In Shanghai, workers live on-site at the factory in dorm rooms about the size of a shoe cupboard. Bathrooms are shared and meals are taken in the factory. Children and spouses live hundreds of miles away, and are only seen once a year during a month-long break.
However, a growing number of Chinese are now forgoing this intense working pattern. Forced by a need to stay at home and look after their elderly parents, they’re leaving their East coast factories and flocking back home, causing a labour shortage which has pushed up wage costs.
This has had a dramatic effect on the cost advantage China can offer over the UK for Tony’s business. When he carried out an analysis of the overall cost of making a cushion in China compared to in Kirby, he discovered that the current saving was only eight pence per cushion – and that in six months, this could be down to zero difference if the Chinese labour costs continue to increase on their current trajectory.
So it was a happy ending for Tony’s UK staff, as they were toasted the winners of the experiment, given reassurance over their jobs, and a promise from Tony that he’d sell up and move out of Shanghai as soon as he got a decent offer for the factory. The programme ended at that point, before we had a chance to revisit Tony’s Chinese staff and see their less jubilant reaction to the news.
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