In November 2020, the EY Election Pulse Strategy Survey revealed that 64% of canvassed US companies with over $1bn in annual revenue were planning on acquiring or building more domestic production in response to anticipated policies incentivising onshoring.
Steep wage increases overseas, coupled with growing trade tensions, have been driving this trend in recent years. The outbreak of Covid-19 has only served to accelerate it.
The pandemic will have a significant impact on onshoring and reshoring strategies, says Mark Williams, president of site location and incentive negotiations firm Strategic Development Group. Williams adds that this is especially true for industries that are averse to supply chain risk or have strategic importance to the US, such as the pharmaceutical and defence sectors.
“Implementation of these strategies and actual movement of businesses will take time and is likely to begin as a shifting of manufacturing capacity back to existing US plants, followed by establishment of new locations,” Williams explains.
A case for reshoring
Florida’s leaders have been at the centre of efforts to encourage reshoring post-Covid-19, which is no surprise given the Sunshine State’s efforts over the past decade to create the optimal environment for attracting business investment.
In July, Congressman Bill Posey introduced his ‘Reshoring American Manufacturing Act’ to assist US companies bringing their manufacturing equipment from overseas to the US.
That same month, another of Florida’s congressmen, Darren Sotto, co-sponsored Elissa Slotkin’s ‘Strengthening America’s National Stockpile Act’ to reduce US dependence on foreign sources of medical supplies needed to fight the pandemic and to boost manufacturing at home.
It helps that Florida is well placed to take advantage of these policies. “Over the past decade, the state has become more effective in marketing Florida as one of the premier economic locations in the US,” says president and CEO of the Florida Ports Council Doug Wheeler. “This was a priority of the Scott administration, and Governor DeSantis has continued these efforts.”
According to the Economic Policy Institute, the US has lost over 91,000 manufacturing plants and nearly five million manufacturing jobs since 1997. Despite little else uniting the presidential candidates during the 2020 election, a commitment to bringing manufacturing back to the US was central to both Donald Trump’s and Joe Biden’s campaign pledges.
The Sunshine State beckons
As the case for reshoring picks up pace in the wake of the pandemic, US enterprises considering bringing manufacturing “back home” are faced with the difficult task of deciding where to put down roots.
With its favourable business tax structure, streamlined regulatory environment, abundant labour supply and wide range of targeted industry incentives, Florida looks like an increasingly attractive option. Already the third-most-populous state in the US, Florida is forecast to attract more than 300,000 new residents annually, taking its total population to over 22 million people by 2022.
“I think Florida will be very successful in attracting relocation of headquarters and office facilities from more traditional locations in the US such as New York, Chicago and LA,” says Williams. “Many businesses are rethinking their office footprints due to Covid-19 with more work occurring at home and a desire to reduce costs.”
In October, the $41bn Elliot Management hedge fund revealed it was moving its headquarters from New York to West Palm Beach, Florida. to make it easier for employees to work from home and take advantage of zero state income tax.
The pandemic has certainly enabled more freedom in terms of where financial services and other white-collar industries set up shop, but what of manufacturing? Between 2015 and 2019, Florida added manufacturing jobs at three times the national rate, and the sector provided over 92% of the state’s exports. Covid-19 has slowed progress, but it is a strong base upon which to build.
Diversifying Florida’s economy
Significant work has been undertaken to create jobs across a variety of highly skilled sectors, from aviation and aerospace to medical and life sciences. At the beginning of 2020, Florida was home to more than 20,000 manufacturing companies, with more than 380,000 high-wage jobs at an average wage of $61,735.
The state’s infrastructure provides a strong backbone for Florida’s economy. Positioned at the crossroads of both east-west and north-south trade lanes of the Panama Canal, Florida has built a reputation as a global hub for trade.
“As the only US state with port locations on two major water routes – the Atlantic and the Gulf – businesses located in Florida or using Florida facilities can reach any point in the US and the world in a matter of days,” says Wheeler.
Florida’s ports support nearly 900,000 jobs across the state and generate nearly $117.6bn in total economic activity. The state’s seaports have already invested billions of dollars to accommodate the larger Panamax ships and capture new logistics business.
In December 2020, despite the pandemic, Florida Ports Council announced plans to invest a further $3bn over the next five years, demonstrating the state’s steadfast commitment to long-term strategic investment.
“We continue to develop and plan for investments that will expand and enhance the growth of cargo and passenger movements at our seaports,” explains Wheeler. “US and international businesses want to locate in an area that will support and enhance their operations. Our seaports provide these businesses with the confidence that they can grow their business operations in Florida.”
Such confidence is getting harder for the investment community to ignore. Relocating businesses requires a leap of faith, but the disruption caused by Covid-19 has opened a space to reconsider whether current operating models are working. As the argument for growing domestic operations picks up pace and manufacturers invest in consolidating supply chains, Florida will be looking to further affirm its position as a destination of choice.
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