PARIS: A study released on Thursday by a consulting firm Capgemini reveals a significant surge in investment by companies in Europe and the United States aimed at reshoring manufacturing operations following the disruptions caused by the Covid-19 pandemic and the Russian invasion of Ukraine.
Over the next three years, companies across 13 industrial sectors in 11 countries in Europe and the US are expected to invest a total of $3.4 trillion in bringing manufacturing back home or to nearby countries. This marks a notable increase from the $2.4 trillion invested in the past three years.
The report highlights several driving factors behind this trend, including the urgency to enhance supply chain resilience and flexibility, create skilled manufacturing jobs, meet climate targets, ensure national security in strategic sectors, and reclaim the manufacturing expertise once held by Europe and North America.
The Covid-19 pandemic disrupted global supply chains, prompting companies to seek greater control over raw materials and components. The invasion of Ukraine underscored the importance of national security in maintaining control over essential supplies and manufacturing capacity.
Etienne Grass, one of the report’s authors, expressed surprise at the scale of the delocalization trend. The investment represents an average allocation of around 8.7 percent of revenue for the surveyed companies, indicating significant commitment.
The survey, conducted in February and involving 1,300 senior executives of industrial firms with over $1 billion in annual revenue, identified strengthening supply chains as the top reason for reindustrialization, followed by ensuring national security through domestic manufacturing infrastructure. Reducing greenhouse gas emissions and capitalizing on government incentives were also cited as key motivators.
While US companies lead in absolute reinvestment terms with $1.4 trillion, they lag behind other nations in terms of percentage of GDP. For instance, Germany’s reindustrialization effort represents 20 percent of GDP, while France’s stands at 13 percent, compared to five percent for the US, despite generous subsidies under the Inflation Reduction Act.
In addition to reshoring, companies are diversifying away from China by investing in other emerging market nations such as India, Southeast Asia, Africa, and Mexico, distributing critical assets across various geographies to reduce dependence on any single region.
