Prime minister says take-home pay rising but more time needed for economy to recover as he pushes to repatriate offshore jobs
David Cameron has appealed for patience from workers not feeling the benefits of the economic recovery as he launches a drive to repatriate offshore jobs.
In a fresh effort to blunt Labour's attack over stagnant living standards, the prime minister insisted there were positive signs that take-home pay was starting to rise. But he warned that the scale of the banking crisis and recession meant more time was needed.
Cameron made the comments before his speech at the World Economic Forum in Davos, in which he is due to say cheap shale gas energy and a pro-business regulatory climate could encourage firms to move jobs back to the UK.
According to government figures, about 1,500 manufacturing jobs have returned to Britain since 2011. A new service called Reshore UK is being unveiled to help companies that want to follow suit.
Cameron will acknowledge that businesses will keep moving production facilities to countries such as India and China in the years to come. But he will cite research that found one in 10 small- and medium-sized businesses had brought production back to the UK over the last year – twice as many as had moved it abroad.
"For years the west has been written off," Cameron will say. "People say that we are facing some sort of inevitable decline. They say we can't make anything any more.
"Whether it's the shift from manufacturing to services or the transfer from manual jobs to machines, the end point is the same dystopian vision – the east wins while the west loses; and the workers lose while the machines win.
"I don't believe it has to be this way.
"Of course, we cannot be starry eyed about globalisation – it presents huge challenges as our economies and societies try to adapt. But neither should we take this pessimistic view.
"Indeed, if we make the right decisions, we may also see more of what has been a small but discernible trend where some jobs that were once offshored are coming back from east to west."
Along with narrowing wage differentials between east and west, Cameron will stress the importance of "pull factors" such as shorter supply chains and being based nearer to consumer markets. And he will indicate that governments can encourage the trend by acting to ensure supplies of cheap energy.
"There is no doubt that when it comes to re-shoring in the US, one of the most important factors has been the development of shale gas, which is flooring US energy prices with billions of dollars of energy cost savings predicted over the next decade," he will say.
"Taken together, I believe these trends have the ability to be a fresh driver of growth in Europe too. I want Britain to seize these opportunities. I think there is a chance for Britain to become the 're-shore nation'."
In broadcast interviews on Thursday night, Cameron gave an optimistic assessment of the prospects for British business.
An analysis of take-home pay figures circulated by the Treasury has suggested all but the top 10% of earners saw a rise last year. Overall people saw their take-home pay rise by a third more than the CPI rate of inflation, currently 2%.
Cameron told the BBC: "We are seeing some positive signs in terms of take-home pay. But it's going to take time. We need to be patient and work through our economic plan so it's a recovery that lasts and benefits everyone."
Cameron urged people to bear in mind that Britain was "recovering from the longest and deepest recession in living memory".
"I think [the recovery] will be sustainable if we deal with the problems that we had before the recovery came, if we deal with excessive deficits, if we mend the broken banking system, if we make sure that in the case of Britain we rebalance our economy and make sure it's a recovery for all, north and south, to make sure that the poorest people benefit from a recovery," he added.
The director of the Institute for Fiscal Studies thinktank, Paul Johnson, said the government's figures did not take account of benefit reductions and so did not reflect what had happened to household incomes overall.
Johnson said it appeared that pay was now rising faster than inflation for most workers, but predicted that – after inflation was taken into account – incomes would remain "well below" their pre-recession levels by the time of the 2015 general election.
"The government's used a perfectly sensible set of numbers, which are its definition of take-home pay, and the survey that it's looking at clearly showed that from April 2012 to April 2013 gross pay for most people went up faster than CPI inflation," Johnson told BBC Radio 4's Today programme.
But he added: "There are two problems with this, which one needs to take into account. First, we have other sets of data – the Office for National Statistics publishes an average weekly earnings index. That went up quite a lot less quickly than inflation in the most recent months. And of course they are not taking account of reductions in things like benefits which were occurring over the time. So if you are looking at household incomes, that will be different from what's happened to take-home pay."
Asked whether the coalition would be able to claim at the time of the election that households were better off, Johnson said: "We will be able to say definitively – I'm pretty sure – that, come 2015, average household incomes will be lower than they were pre-recession and lower than they were in 2010. Incomes have fallen so much now that there is very little chance that they will have recovered by 2015.
"My guess, on the basis of all the different bits of information that we've got at the moment, is that for most people in work, their incomes have stopped falling relative to inflation and if the recovery takes off and continues as expected, people will start to be seeing their incomes rising by the time we get to 2015, but will still be well below where they were six or seven years ago."