Can Poland become the beating heart of European manufacturing?

Poland is Europe’s top nearshoring destination, but why is it so attractive and what does the future hold for this increasingly prominent and influential economy?

In our recent white paper into global near-sourcing, nearshoring and reshoring, which is free to download here, we found that Poland was the most attractive destination globally for European firms looking to change sourcing partners.

Increasingly, European companies are looking eastwards to secure production capacity in an unstable world, but what makes Poland such a uniquely attractive location?

Why Poland?

Poland’s attractiveness as a destination for inward investment into the manufacturing sector rests on three key pillars: its workforce, its geographic position, and its underpinning infrastructure.

These have already helped to propel Poland to become a critical manufacturing nexus within the European Union and created 30 years of expanding Gross Domestic Product (GDP), with the brief exception of 2020, when the pandemic was at its height.

This is a record-breaking period of continued growth, which led all Eastern Bloc members of the EU between 2004-2019 and is unsurpassed for global continuity.

<p>Description automatically generated


Workforce productivity, skillset and labour cost

Poland’s most critical resource in becoming, and sustaining, itself as a manufacturing powerhouse is its labour force. This offers an advantage for companies looking to manufacture goods as it combines highly competitive wage rates, a longstanding knowledge base in industrial production and decent productivity levels that have consistently risen over the last 30 years. 

Chart, bar chart</p>
<p>Description automatically generated

Only six other countries in the EU28 are cheaper than Poland when it comes to total hourly labour cost. While the price per hour for Polish labour would be around 40-50% more expensive than contracting outsourced labour in China, it is only 40% of the EU average wage and nearly 70% cheaper per hour than for a German worker.

Furthermore, as Poland sits in a central location in Europe and within the common market, the total landed cost for goods manufactured in Poland will often be cost competitive with a location like China once all additional transportation, administration and customs and excise costs are included.

Adding to this is Poland’s longstanding industrial base, particularly in heavy industries and chemicals. That background gives it a worker knowledge and skillset base conducive to setting up manufacturing capacity in the country.

That workforce has also been able to steadily increase productivity in the long term, trebling productivity in manufacturing since the early 2000s according to Eurostat.

This has made Poland highly competitive in manufacturing and is why it is ranked 24th in UNIDO’s Competitive Industrial Performance Index.

It also outperforms its overall economic and population size when it comes to the value generated from manufacturing. Poland ranks 15th in the world for manufacturing value added in dollar terms, sitting just behind the Netherlands and Spain, despite it having the 38th largest population and 23rd largest nominal GDP.

Geographic position

Poland is blessed by proximity to some of the world’s largest and most productive manufacturing hubs, most notably Germany.

That geographic position, combined with membership to the world’s single largest market area in the EU, acts as a major boost to growth and productivity.

While obvious, this does need to be stated, and it is clear from our research that proximity and market access are critical considerations when looking at near-sourcing and reshoring. European respondents in the white paper said that shortening supply chains and reducing risk were their two greatest drivers of shifting sourcing strategy.

Chart, bar chart</p>
<p>Description automatically generated


Poland sits within 2,000 km and in a common market area with 11 of the top 20 most competitive manufacturing economies in the world according to the UNIDO index. 

This puts Poland, which is seen as a generally stable country, in a great position to capitalise and participate in a nexus of manufacturing excellence, often providing components to countries that sit higher up the value chain or conducting final assembly. 

Infrastructure and the role of the EU

That geographic position means nothing if it is not well connected. In this regard, Poland outperforms on road, rail and industrial space metrics, but falls behind in maritime and air infrastructure.

Poland ranks 12th for goods transported by railways in million ton-km, and is the fourth-ranked country for goods moved by truck anywhere in the EU, coming ahead of countries like Italy and the Netherlands, underlining the importance of the country as a manufacturing and logistics hub, as well its strong foundations for efficient haulage.

Chart, bar chart</p>
<p>Description automatically generated

Poland also sits on the rail transport corridor to the Far East, which although currently disrupted, presents potential long term.

In terms of maritime and air transportation, Poland fares noticeably worse. In the 2021 Global Ports Index, Gdansk ranks 203rd and Gdynia 255th. Poland does not have a top 50 air hub for air freight either, despite being such a large manufacturing centre.

Overall, Poland is ranked 28th in the World Bank’s Logistics Performance Index, which is respectable (falling two places behind China), but not spectacular.

Another core component to infrastructure and manufacturing destination attractiveness is industrial space. Here Poland has seen massive expansion, which reflects overall demand, but also a strong supportive construction industry and planning system for new industrial space.

JLL reports that industrial stock increased nearly 150% from 2016 to Q3 2022 alone, going from 11.2 million m² to 27.8 million m². This means that there is considerable stock of modern warehousing and factory space in the country that can continue to expand.

Polish growth industries now and in the future


Automotive is the crown jewel in Poland’s industrial crown and looks set to continue in this vein. The sector is Poland’s single largest export field, creating the best part of $30 billion in export value for the Polish economy annually when including associated parts and components.

Given Poland’s price point competitiveness, proximity to Europe’s largest automotive hub in Germany, and the extreme disruption felt by most car manufacturers post-pandemic outbreak, further investment into Poland will continue.

Similarly, Poland already has a head start in terms of electric car supply chains, as it is home to Europe’s largest existing battery production facility, which is being expanded, and is a leader in terms of lithium-ion battery output not just in Europe, but also globally.

Mercedes Benz also has a battery and electric engine production facility in Jawor and announced that it will construct a €1.3 billion electric van factory on this site, underlining that global car manufacturers are willing to continue to buy into Poland as a core piece of their global supply chains.


Already Poland has an established electronics sector, producing batteries, computers and electronic consumer goods. This has high potential to grow as the electronics sector was one of the most disrupted by recent events and most likely to note that it is changing sourcing strategy.

Chart, bar chart</p>
<p>Description automatically generated

However, Poland will have to be highly competitive to make ground. Both Hungary and the Czech Republic also have well established electronics industries, so Poland doesn’t have this market space cornered, and investment into digital capabilities will be required.

Nonetheless, Poland’s wage profile and strong base in ICT services should make it an attractive proposition for those looking to move closer to final market.

Aerospace and defence

Aerospace and defence remains a relatively small aspect of the Polish economy so far, but Poland has announced ambitious intentions to expand its defence industrial base, recently partnering with South Korea over a series of licensed platforms.

The aerospace sector should benefit from Poland’s build up in this area, especially as the aerospace sector is globally capacity constrained and is seeking additional suppliers.

The Polish workforce has aligned skills and so this has potential to be a high growth area, albeit from a relatively small base.

Energy transition systems and components

If Poland transitions successfully into the new wave of automotive production processes based around electric drivetrains, as it looks like it will, then it will already have a substantial knowledge, skill and capital base in green technologies. This will give it an important position as a manufacturing centre for the energy transition.

Poland’s workforce make-up and current base has the potential to transition well into green technologies as it is highly cost competitive, the industrial space is available, aligned skills exist, and the investment into battery production facilities shows there is already confidence in Poland’s ability to deliver green technologies at scale.

Furthermore, should Poland align with the EU and unlock the complete funding allocated to it for post-COVID investment, a huge portion of that is earmarked for green technologies, which could supercharge the sector.


Poland is a minor player in the pharmaceutical sector, but many European countries have realised the vulnerability of having so much Active Pharmaceutical Ingredients (APIs) production centralised in India and China. Multiple countries have been hit by shortfalls in drug availability very recently, including Greece, Ireland and the Netherlands, leading to the European Commission to register shortages and order stockpiling.

In our survey, the healthcare, life sciences and pharmaceutical sector had the third highest rate of production disrupts due to delayed raw materials and the second highest of delays in finished goods.

This is not acceptable strategically to European countries, nor is it beneficial to pharmaceutical companies, which are losing out on sales at points of peak demand.

Chart, bar chart</p>
<p>Description automatically generated

It was the most likely sector to report that it is shifting sourcing to shorten supply chains and to improve control and oversight.

Therefore, a strategic shift is ongoing and Poland could be a core beneficiary.

Already Poland has an extremely well established chemicals sector and a pharmaceutical industry skilled at making generic drugs. These are likely to see a significant shift, given that 80% of APIs are made in India and China currently.

Poland’s government has stated an aim to expand the sector and can tap into EU funds.

Ratings agency Fitch noted that Poland is improving its position and has potential. 

Poland’s potential and investment priorities

Poland is already seen as an attractive destination to site manufacturing and that perception is strengthening as a result of companies re-evaluating their supply chains and looking to move closer to final markets.

Its cost competitiveness and connectivity to Europe, in particular its proximity to Germany, another manufacturing powerhouse, provides the foundation for this strength.

Poland cannot sit still in order for this trajectory to continue, however. There is a need to embrace high-skill, high tech manufacturing and to increase productivity per worker.

Overall, if the right environment and supporting investment are made, this moment presents another great opportunity for Poland, similar to when it joined the Europe Union nearly two decades ago.

comments powered by Disqus