From Global to Local: How Europe’s Manufacturers Are Reconfiguring

A Balancing Act Between Cost, Risk, Resilience and Policy Exposure

Since the early 1990s, the global economy has become increasingly integrated, driven by cost-optimised supply chains, offshoring and trade liberalisation.1 Over the last decade, this trend has weakened due to a combination of shocks and structural forces, including pandemic-related supply chain disruptions, rising geopolitical tensions increasing trade barriers, more interventionalist industrial policies and growing political pressure to protect strategic industries. Together, these forces have raised the cost and risk of hyperglobalised value chains and prompted firms and governments to rethink where and how goods are produced.2,3,5

Based on experience across industrial and manufacturing sectors, there are signs of a potential resurgence in manufacturing driven by shifting economic and geopolitical conditions.

Rather than a wholesale return of manufacturing, the current shift is better understood as a reconfiguration of global manufacturing and supply chain networks. Companies are recalibrating their footprints to balance cost efficiency with resilience, policy exposure and speed to market. In practice, this results in hybrid models that combine offshore scale, nearshore responsiveness and selective onshore capacity for critical or strategic activities.

This reconfiguration creates both significant opportunities and significant risks, with the decisions being made right now will have long-lasting consequences. Investors who misread these trends risk stranded assets, while those who support reindustrialisation can access new growth in sectors such as semiconductors, batteries and industrial automation. While government subsidies may provide short-term support, companies must navigate evolving regulations and increasing competition for incentives. Strategic decisions on factory locations, supplier contracts, and tooling investments will shape competitiveness for the next decade and insufficient localisation may lead to exclusion from government contracts and greater exposure to geopolitical disruptions.

Why is Manufacturing Experiencing a Reconfiguration?

  • Resilience demand: Companies seek shorter, less fragile supply chains following repeated disruptions.
  • Policy incentives: Subsidies, tax breaks, and “onshore-first” procurement policies for critical sectors such as semiconductors, batteries and pharmaceuticals.
  • Automation as an enabler: Advances in robotics, AI and process optimisation expand the range of activities that can be located closer to end markets, particularly in capital-intensive and precision-driven industries.
  • Nearshoring benefits: Proximity to end markets reduces lead times, improves quality control and supports customisation.
  • Energy and sustainability concerns: Lower carbon footprints and regulatory compliance increasingly favour regional production.
  • Strategic capability considerations: Concerns over the loss of industrial know-how and domestic employment in advanced economies.

What is Changing in the Global Industrial and Manufacturing Landscape?

  • Rewriting of trade rules: Increased tariffs, export controls and industrial policy interventions.
  • Diversification of supply bases: Firms adding alternative suppliers and regional production hubs.
  • Capital flows into strategic manufacturing: Governments and private investors funding domestic capacity.
  • Selective adoption of automation: Despite accelerating adoption, high capital requirements and skills constraints limit its impact to specific manufacturing environments.
  • Regionalisation: Industrial clusters and trading blocs increasingly prioritise intra-regional supply chains.

In this shifting environment, businesses and investors must reassess their manufacturing and supply chain strategies to enhance resilience and competitiveness. What are some key practical considerations at play?

Practical Implications: What Businesses and Investors Should Consider

  • Map critical nodes: Identify single-point failures across suppliers, components and logistics.
  • Segment products: Localise high-risk, time-sensitive or strategic items while keeping low-risk, high-volume products cost-optimised.
  • Invest in automation and digital supply-chain visibility: Improving the economics of onshore production.
  • Monitor policy and incentive landscapes: Capture subsidies while stress-testing for policy reversals.
  • Adopt flexible manufacturing footprints: Favour regional hubs or contract manufacturing over large, single-site investments.
  • Track key KPIs: Lead-time volatility, supplier concentration, total landed cost (including risk), inventory days and CAPEX-to-return for localisation initiatives.

The Constraints and Trade Offs of Reconfiguration

While the case for reconfiguring manufacturing footprints is compelling, execution remains complex. Many companies face structural constraints when shifting production closer to end markets.

In Europe, labour shortages and skills gaps in advanced manufacturing, high and volatile energy costs and infrastructure limitations can materially affect operating economics.4 These challenges often result in higher upfront capital requirements and longer payback periods, which may conflict with private equity investment horizons and return expectations.

As a result, reconfiguration decisions increasingly require a rigorous assessment of total economic value rather than headline labour savings alone. For many businesses, the optimal approach is not full reshoring, but targeted localisation of high-risk or high-value activities, combined with continued offshore production for labour-intensive or commoditised components.

Conclusion

Europe’s manufacturing landscape is rebalancing globalisation. Cost optimisation alone won’t accomplish that, but resilience, speed, policy alignment and strategic control are now each equally critical drivers of value.

For manufacturers, competitive advantage will depend on how effectively they design hybrid footprints that combine offshore efficiency with nearshore agility and selective onshore capabilities. For investors, this shift presents both risk and opportunity, while reconfiguration is capital-intensive and complex, well-executed strategies can enhance resilience, reduce volatility and drive long-term value.

Success hinges on linking financial insight with operational reality and ensuring that decisions on footprint, supply chains and capital deployment are both strategically sound and executable.

Footnotes:

1: Brown, C.P., Erbahar, A. and Zanardi, M., “Global value chains and the removal of trade protection,” European Economic Review (November, 2021) 

2: Lamperti, F., Lavoratori, K. and Tredicine, L., “From globalization to reshoring? The role of Industry 4.0 in global value chains across Europe,” Economics of Innovation and New Technology (July 10, 2024) at page 401–423 

3: “OECD Supply Chain Resilience Review: Navigating Risks,” OECD (June 2, 2025) 

4: “OECD Economic Outlook, Volume 2024 Issue 2,” OECD (December 4, 2024)

5: “The resurgence of manufacturing: Reindustrialization strategies in Europe and the US,” Capgemini Research Institute

Published

April 10, 2026

temp Key Contacts

Saskia Hinkenkemper

Senior Managing Director

Allison Beveridge

Senior Director

Alex Haeven

Managing Director

Jauné Bronn

Senior Consultant

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