Kearney: Why Nearshoring Isn't the End of Globalisation

The UK manufacturing sector is experiencing a fundamental transformation as rising costs, supply chain disruptions and evolving global trade dynamics drive companies to reconsider their operational strategies.

In fact, according to research from Capgemini, businesses are set to invest US$650bn in reshoring initiatives over the next three years, 

This shift towards nearshoring represents more than a temporary response to recent challenges—it signals a permanent restructuring of how UK manufacturers approach global supply chains.

A perfect storm of pressures

UK manufacturers are grappling with a confluence of challenges that have fundamentally altered the cost-benefit equation of global sourcing.

The recent increase in employer National Insurance contributions has compounded existing pressures from persistently high energy bills and acute labour shortages.

These domestic challenges, combined with ongoing supply chain uncertainty and what Nigel Pekenc, Partner at Kearney, describes as "the overturning of decades of global trade norms," are pushing more businesses to explore nearshoring strategies.

"These challenges are driving more businesses to explore nearshoring in its many varieties to improve control, reduce risk and respond faster to changing demand," Nigel explains.

It's a shift that reflects broader recognition that traditional global supply chain models, while cost-effective, often leave manufacturers exposed to significant operational risks.

Reshaping globalisation

Contrary to predictions that nearshoring would spell the end of globalisation, the reality is far more nuanced.

Nigel emphasises that nearshoring is "reshaping, rather than reversing, globalisation". Instead of dismantling international networks entirely, manufacturers are adopting a more sophisticated approach that strengthens global ties whilst improving supply chain efficiency.

This evolution sees companies retaining economies of scale in key upstream processing steps whilst establishing more value-adding manufacturing stages closer to end markets.

Nigel continues: "This trend is being further accelerated by decades of inflation in traditionally lower cost production locations and as companies shift from relying on large factories in one location to finding smaller pockets of efficiency across their wider supply networks."

The practical reality of nearshoring

For UK manufacturers, nearshoring is transitioning from contingency planning to core operational strategy.

Nigel notes that "nearshoring is moving from just a contingency plan to becoming a core part of how UK manufacturers structure their operations". By relocating production stages such as assembly or final manufacturing closer to home, firms are significantly shortening lead times and building in the flexibility to respond rapidly to potential market disruptions.

The benefits extend beyond mere proximity.

"Bringing operations closer to home also gives manufacturers greater oversight," Nigel notes. "It's easier to make large-scale product adjustments, coordinate with suppliers and maintain quality control, which are the kind of advantages that help keep manufacturers competitive."

He emphasises that, in an age of growing demand volatility and supply dislocations, re-engineering supply chains "offers a chance to build resilience through adaptability and closeness to market needs over the blunt instruments of stockpiling and supplier queue-jumping".

There's also a growing sustainability incentive driving the shift. Shorter supply chains translate directly to lower transport emissions, while UK environmental regulations often demand higher standards, helping manufacturers align with customer expectations on ESG criteria.

Importantly, Nigel stresses that nearshoring isn't replacing offshoring, but complementing it: "The complex global supply networks of geographic specialism and scale that have been built over past decades cannot be replaced or even simplified without pulling the rug from under the entire global economy."

Many UK firms are instead adopting a hybrid model that balances offshore cost-efficiency with the resilience and responsiveness of nearshore operations. As Nigel puts it, that mix is proving to be "a practical way to stay flexible in the face of things like shifting demand and global uncertainty". 

The digital infrastructure imperative

As the working-age population in developed economies shrinks, labour shortages—particularly in skilled and engineering roles—are becoming increasingly acute.

For UK manufacturers, this demographic reality is pushing automation, AI and digital infrastructure to the forefront of strategic planning.

Nigel observes that many businesses with legacy systems are finding themselves "leapfrogged by newer supply chains that are built in integration with advanced digital visibility and control tools". The solution requires substantial investment in capital-intensive technologies designed to boost productivity.

Nigel adds: "Many companies will need to invest heavily in capital intensive technologies to boost productivity – from vast data clean-up and plumbing exercises through to end-to-end supply chain visibility enhancements."

Looking ahead, Nigel predicts that the "hype of AI" will also give way to leading supply chains characterised as data-enabled, AI-controlled and human-conducted". This evolution will see automation and AI helping to fill the gap left by a declining workforce whilst addressing the complexity of modern supply chains.

Future-proofing through adaptability

Clearly, the transformation of global supply chains is being driven by political uncertainty, climate disruption and rising costs. Many businesses are rethinking long, complex supply routes that leave them exposed to significant risks.

Nigel emphasises that nearshoring offers a practical solution to bring operations closer to home, improve reliability and maintain flexibility when circumstances change rapidly.

However, this doesn't signal the end of globalisation: "The future of supply chains will be more balanced, with manufacturers keeping some operations regional for speed and control and looking globally when it adds value. Many are now combining nearshoring, offshoring and reshoring to manage risk and stay competitive."

"What comes next will be shaped by how well businesses can adapt. Those with more agile, better-connected supply chains will be better placed to navigate whatever the next few years bring."

For supply chain professionals, the message is clear: the future belongs to those who can master the art of strategic flexibility, combining the best of global networks with the agility of local operations. The transformation is already under way—the question is not whether to adapt, but how quickly and effectively organisations can embrace this new reality.