I’m back in my hometown of Manchester looking into what I thought was frankly crazy talk of re-shoring, re-balancing and re-industrialisation of Manchester’s textile industry. The rag trade returning to its historic home. In theory, this is just what George Osborne ordered for the economy, a move away from offshoring, imbalances, and de-industrialisation. But its lessons are not all good for the chancellor.

At Headen & Quarmby in Middleton, many readers will already be aware that retail guru Mary Portas has commissioned a range of upscale women’s underwear called “Kinky Knickers”. They started hand making them in north Manchester this year, and the results have been incredible. Managing director David Moore tells me that they have increased their staff fivefold, and they could increase by another ten fold again. He wants to turn what was a warehouse for imports into another manufacturing facility. High street retailers are on the phone, they are going to expand their range.

“Lovingly Made in Britain” is the label stitched into each pair of knickers.

So far so good for this, the niche of the upscale manufacturer (with copious amounts of publicity from the Mary Portas documentary). But this is just the start.

The local councils, politicians, businessmen and industrialist Lord David Alliance have got together to form an initiative to test the ground for a much more substantial return of mass manufacturing, or “The Return of Cottonopolis”. Lorna Fitzsimons, the affable former MP, runs it and has commissioned a series of consulting reports on what parts of the textile supply chain could return. Almost all of it. Even, weaving. And even, spinning.

Lorna points me to Asos, a brand called Pacific White, and boohoo.com to show me why.

I went to Boohoo’s offices housed in a former mill right in the centre of Manchester. It is internet-based fast fashion that is changing the economics of offshore clothes manufacturing. Boohoo’s COO Chris Bale told me that just 18 months ago 75 per cent of product came from China. Now over half is made in the UK. He says there isn’t enough textile manufacturing capacity to service the demand. Another Boohoo boss tells me all his mates are starting factories.

In this instance the factories are in Leicester. Other brands have clothes factories in Manchester.

Not all the mills died

Go down the road past Oldham to Delph and you will see that not all the mills died. There the trademark 40 ft chimney is still attached to a working mill, Mallalieu’s. What is amazing, perhaps, is that he is now starting to export cloth to the Chinese. There is a market.

And if that was not enough, then I hear that even spinning could be about to return. It does sound ridiculous, and it seems to break most of the rules of economics. Siemens, the German industrialist, told me that they were “in discussions” and ready to supply new factories designed for mass textile manufacturing.

“If we don’t do it, the Chinese will do it for themselves. There already doing that in Italy,” said one new member of Manchester’s prospective rag trade mafia.05 faisalblog g w The return of Manchesters rag trade, and Osbornes statement

So far so good. But there are consequences for the chancellor.

Firstly the heavy industrialists want and need much more infrastructure. Ports, roads, high speed rail. The new tram lines in Manchester are full up in peak. Infrastructure spending, including the Olympics, has been absurdly skewed to the south-east of England.

In Delph, David Mallalieu says there is an amazing opportunity but the skills aren’t there. Lorna Fitzsimons tell me that there are five training places in the entire country for skilled textile machinists.

Signs of a changing economy

The message from the council is bittersweet. Council leader Sir Richard Leese told me that they anticipate that the “unfair cuts” forced on him already, amounting to 28 per cent, will be increased by a further 12 per cent, affecting his power to boost the economy. On the plus side though, George Osborne will start to respond to Lord Heseltine’s suggestions that the great cities of Britain should control powers and funding for business support, jobs programmes, and even social spending. Whitehall is not happy about this.

In Middleton, David Moore suggests less employment red tape so he can open more factories. This is a difficult area. But it is clear that in an industry that is becoming ever more just-in-time, and ever more flexible, in demand and supply, there is an argument to be had about trading jobs for labour market flexibility.

So these are not green shoots, but signs of a changing economy – and we’ll be looking at this in more depth tonight as we take Channel 4 News to Manchester to cover the chancellor’s autumn statement.

To be clear, the tens of thousands of jobs which the textile industry thinks it can recreate will not be high-paid. As David Moore told me, “not everyone can be PHDs or invent medicines”.

This is another sign of the pressures on British living standards, and the realisation that jobs are being prioritised instead of pay. So that’s the big picture. Five other things to look out for:

1. Tens of billions of extra borrowing added (when you account for the Royal Mail pension) as austerity is extended to 2018.
2. The debt target missed, fudged or changed. Note that strictly speaking it is a “supplementary target”.
3. A counterintuitive claim that the coalition is spending more of our national economy than Labour did, on average on public investment/ infrastructure.
4. Growth projections slashed.
5. A rabbit in the hat. An evil hare, perhaps. Above all, the chancellor feels burnt by the March “omnishambles” budget disaster. He blames it on leaking beforehand. He also will have noticed the positive reaction to the understandably secretive appointment of Mark Carney to the BoE. He’s kept some big cards close to his chest.

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