Britain is playing catch-up to the US manufacturing boom One of the key drivers is cheap energy. Thanks to a much more benign attitude than that seen in our paranoid, anti-growth Britain, US shale gas and oil output has grown more than 50pc annually since 2007, creating jobs and driving down costs. In its latest report, McKinsey, the consultancy, calculates that shale could bolster US GDP by $690bn (£450bn) a year and create 1.7m jobs across the economy by 2020, and not just in energy-intensive industries. These are enormous figures; it is a scandal that the Coalition has wasted so much time dithering about this, first halting all shale development work and only now starting to allow the industry to develop. Another important shift is relative wages: US workers have been under pressure for years, whereas Boston Consulting Group estimates that their Chinese counterparts have been enjoying wage and benefit increases of 15pc to 20pc per year, a trend which will have slashed China's labour cost advantage over the lowest cost US states to just 39pc by 2015, when adjusted for the higher productivity of American workers. That kind of gap is too small for China to remain competitive: the lengthy supply chains required to produce such a long way away are rife with risk and uncertainty. It takes ages to ship goods, which mean that lead times need to be uncomfortably long, an increasing problem given the fast-changing nature of modern markets and tastes. The Hackett Group estimates that when all factors are taken into account, the overall cost gap between the United States and China has halved since 2004, and stands at about 16pc today, with rising fuel prices affecting shipping costs. The result of all of this, according to Boston Consulting, is that an extra 2m to 3m manufacturing jobs will be created in the US, together with $100bn in annual output, this decade, with companies such as Apple announcing that they will be moving back some manufacturing work. Liz Ann Sonders, Charles Schwab's chief investment strategist, has compiled a list of 39 major US and international firms that have either moved some business back or are expanding their production in the United States. They include giants such as Boeing, General Motors and Exxon, and the list keeps getting longer. Of course, the fact that China is losing its competitiveness doesn't mean that there are no cheap alternatives - lots remain in other parts of Asia and Latin America and Africa. As long as some countries remain substantially poorer than others, the present international division of production will continue to make sense. But off-shoring for manufactured goods is a trend that has now run its course, and we are about to see at least some facilities move back to the West. Unfortunately, the UK cannot just assume that these forces will automatically help us rejuvenate our own manufacturing industry, even though wages have also been falling here. America is a massive continent, and companies that are starting to produce in the US again are choosing the most efficient states to do business. Europe as a whole may benefit from some re-shoring - but there is a good chance that multinationals decide to base their operations in Poland, or Estonia, where workforces are well-educated, hard-working and cheap, and where products can be transported cheaply to UK stores within hours. This would be near-shoring, rather than on-shoring to the UK itself. There is zero chance of any significant return of lower, value-added manufacturing to southern England, for instance, where costs, including those of land, are prohibitive. The Boston Consulting report distinguished between North America and other parts of the world, arguing that China will remain "an important manufacturing platform for Asia and Europe." But that doesn't mean that we too cannot fight back. UK manufacturers are insufficiently profitable: their net rate of return was just 8.9pc in the first quarter, against 15.1pc for services firms. We need a supply-side revolution to bolster returns to manufacturing, encouraging more firms to invest in the UK. The Coalition needs to pursue a four-prong policy, starting immediately. Britain needs to embrace shale gas and stop obsessing with costly renewable energy that is crippling industry. It must be made easier for firms to expand by liberalising the planning system; this is especially important given the rise of 3D printing, which will allow local small-scale manufacturing. Increasingly, high value-added manufacturing is traded by plane; we need more capacity in London and southern England to allow our manufacturers better access to markets. We must also start looking at the UK as a collection of regions with different comparative advantages. Northern Ireland, with its much lower costs, could be turned into a centre for manufacturing near-shoring, competing with Eastern Europe: corporation and capital gains tax could be abolished entirely, a raft of labour market and planning rules suspended, and National Insurance Contributions slashed. Unless we start to think outside of the box, the UK will miss out on the great re-shoring trend that is about to transform America.