Ystrad Mynach Christmas wrapping firm beating off Far East competition
- 3 December 2012
- From the section South East Wales
Wales has lost thousands of manufacturing jobs to the low wage economies of the Far East.
But there is evidence that a combination of higher pay in countries like China and rising transportation costs mean there are opportunities to bring some of the work back.
But there are no official figures yet in Wales for what is called re-shoring.
The manufacturing organisation EEF Cymru is in the process of working out what impact is being made.
A UK-wide survey completed earlier in the year by the organisation found that four in 10 companies had brought some work back.
In the car industry, a Japanese component maker called Toyoda Gosei recently opened up a factory in Gorseinon.
It cited the unpredictability of global supply chains after the Japanese tsunami as one of the reasons the plant was located in Wales.
In Ystrad Mynach, near Caerphilly, I've found another striking example of manufacturing work coming back to the UK.
The company is International Greetings, Europe's largest producer of gift wrap, employing 500 people. The workforce swells to 700 in the summer.
What is interesting is that the managing director says it has recently beaten off competition in the Far East to win around half a dozen major contracts to supply UK high street retailers and supermarkets.
So how can a factory in the south Wales valleys compete with a factory in China making a very price-sensitive product like Christmas wrapping paper?
International Greetings actually has a factory in Shenzhen in China where it makes crackers and cards, while the gift wrap and ribbons are made in Ystrad Mynach.
The wages it pays in China are around £40 a week while in Wales the company pays a basic manufacturing wage of around £270 a week.
But the salaries in China have recently doubled, and they are expected to do so again over the next few years. The firm also says freight costs have doubled in recent years.
And another critical element is the attitude of British retailers.
They want responsive and flexible suppliers and all of those things are difficult to achieve when you are transporting goods half way around the world.
International Greetings says there is no appetite among supermarkets to store huge quantities of goods in warehouses which they have to run, which again favours local suppliers.
But that said there are still limitations. The company's Christmas crackers for example are made in China because they require plenty of labour, so it is still cost effective to make certain goods in low wage economies.
Also there is the challenge of staying as efficient as possible in the UK, which usually involves major capital investments.
However, the production of Christmas wrapping paper is the last thing many people would have expected to come to Wales, and the reasons for it may bring some festive cheer and optimism for other manufacturers.