Posts Tagged ‘Mexico’


When was the last time you had a pay rise? Many people might answer that question by saying “about five years ago.” Envy the Chinese, or Poles, or Mexicans, or Indians. According to PwC, they are likely to see their wages shoot up. This is set to be a very important development, with implications for investors and businesses seeking new opportunities. But maybe workers in the west don’t need to be too envious, the pay gap will still be pretty enormous. It’s a very important trend all the same.

Between now (2013) and 2030, real wages in the US and the UK are expected to rise by about a third. Let’s hope that’s right – relative to what we have seen over the last half decade that would be a result. But over that same time frame, average wages in India could more than quadruple in real dollar terms and more than triple in the Philippines and China.

Let this chart do the talking:


So what are the implications? First of all see the expected rise in wages across these countries in the context of re-shoring. See: Is manufacturing coming home? It will clearly provide the impetus for companies re-shoring their manufacturing closer to where most of their customers are.

What we may see, as wages rise in China, is not only more manufacturing in home territories, but nearby too. Opportunity, as they say, knocks for Poland and Mexico.

Looking further ahead, PwC says places such as Turkey, Poland, China, and Mexico will therefore become more valuable as consumer markets, while low cost production could shift to other locations such as the Philippines. India could also gain from this shift, but only if it improves its infrastructure and female education levels and cuts red tape.

From a corporate/investment point of view, who will be the winners and losers? PwC reckons western companies who may emerge as winners will include retailers with strong franchise models, global brand owners, business and financial services, creative industries, healthcare and education providers, and niche high value added manufacturers.

As for losers: well, watch mass market manufacturers, financial services companies exposed in their domestic markets, and for companies that over-commit to emerging markets without the right local partners and business strategies.

© Investment & Business News 2013


There are those who are a tad cynical about talk that the UK economy is recovering. They look at debt – household and government debt – and with a somewhat sardonic smirk, say “Yeah sure, the UK economy is recovering.” But if you sign up to a school of thought that there has to be something real behind an economic recovery, then there is evidence that something real is there, slowly charging a real recovery, And this something real is based on companies bringing their manufacturing back home to Blighty.

John Lewis is at it. Its boss Andy Smith has said that he wants to see sales of UK-made products increase by 15 per cent across the retail chain in 2015, taking them to a value of around 12 per cent of the company’s turnover, or £550 million. He said: “We think our customers want to buy British if they can…A big area for us is home-based: our fitted kitchens are made in Birmingham, we have beds made in Leeds. We want to help British manufacturers to grow their share as much as we can.”

Earlier this month a report from YouGov on behalf of Business Birmingham found that a third of British Businesses, which currently use overseas suppliers, are planning to source more products from the UK.
There is no one reason. Businesses cited rising costs from overseas manufacturers and simpler transport and logistics as drivers for reshoring. Right now, the move back to the UK is modest. There is little sign of a new manufacturing boom. But everything starts small and if the surveys and anecdotal evidence prove right, the boom may yet follow.

But the UK – or indeed other developed economies – is not going to be the only winner. A recent survey produced by SCM also found that companies are bringing manufacturing closer to home but not always to home, with counties such as Mexico and Poland benefiting from the reshoring trend.

However, the SCM survey also found that much of the reshoring is symbolic. Kevin O’Marah at SCM said: “Our data and interviews with more than two dozen executives show that reshoring is symbolic. It does not represent the rebirth of American or European manufacturing.” The SCM survey suggests that reshoring is being driven by automation, and there ain’t many new jobs in that.

That may be true, and it is certainly the case that reshoring to the UK will not lead to a new jobs boom, but then again it will help.

Looking further ahead, the jury is out on what effect 3D printing will have. Will it destroy jobs, as commonsense might suggest, or create jobs, as businesses find it is viable to make products for consumers to order, tailoring them to individual customers?

© Investment & Business News 2013