Cranfield School of Management said Britain’s biggest manufacturers need to become better “stewards” of local supply chains if they are to switch to using more small domestic suppliers as costs rise in emerging markets.
Prof Alan Braithwaite, of the Supply Chain Research Centre at Cranfield, said: “We are not arguing that uncompetitive suppliers should be propped up, rather they should be actively encouraged to improve.”
The report also found that the rise of low-cost economies and productivity improvements among British manufacturers over the past decade have come at the cost of almost 1m jobs and the closure of around 30,000 businesses.
The UK manufacturing supply base can no longer “respond to rapid changes in demand,” the report found.
Prof Braithwaite added: “The strategy of large UK manufacturing enterprises to seek low-cost suppliers around the globe is at direct odds with the approach taken in developed countries such as Japan and Germany.
"In these countries, indigenous supply is encouraged by large manufacturing enterprises and is acknowledged as leading to competitive advantage due to reduced risks and increased responsiveness.”
Foreign ownership of UK manufacturers, investment in production facilities and the adoption of so- called “lean” efficiency improvements have resulted in a focus on improvement of existing products and processes but not growth and innovation, Cranfield said.
The report calls for the Government to provide incentives for giant manufacturers to help their suppliers improve and for clearer signposting to financial and training support for small companies.