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|Can UK Manufacturing Become a Global Leader Again?|
|Friday, 15 April 2016|
The media clamour for grabbing headlines is a dangerous thing. Bad news sells and journalists are challenged to write stories that increase readerships or subscriptions. But, sometimes it would be good to look at things with our glass a little half fuller for a change.
Last week, there were various articles diagnosing the UK manufacturing industry and its production data coming in far below expectations in February, and signalling “worrying times for manufacturing in the country.”
According to the latest figures from the Office of National Statistics, released last Friday, manufacturing production fell by 1.1% in February, the most recent data period. The consensus forecast of economists for February was for a much smaller fall of just 0.2% whilst on a year-on-year basis manufacturing fell by 1.8% against an expected 0.7%. Industrial production was not much better, falling 0.5% year-on-year and 0.3% month-on-month.
Worse still, we’re currently seeing a record trade deficit, with the EU with exports dropping, against rising debt levels which are worrying some in the City. No doubt the referendum, just two months away, could be cited as a reason for the slowdown. But, regardless of how the country votes, Europe will continue to be our largest trading partner for years to come, so any Eurozone weaknesses will be felt here too.
With all the doom and gloom, is there anything positive for UK manufacturers large or small to grab onto?
We think there is. With increased training, giving the next generation of manufacturing employees the right skills – probably the most crucial challenge in the short term – combined with scale ‘able investment that embraces technology and automation, the sector will start to see significant growth.
As an example, a recent report by Barclays looks at manufacturers’ attitudes to automation and robotics investment. It shows that even a ‘moderate’ £1.2bn additional investment in automation has the potential to increase the overall value added to the UK economy by as much as £60.5bn over the next decade. Furthermore, additional automation investment could actually help to safeguard UK manufacturing jobs in the future – a major fear for those currently manning production lines.
To see the UK’s potential, there is no better place than MACH 2016, the UK's top manufacturing technologies event to get a feel for the future and the innovations UK manufacturers have at their fingertips according to CMF Capital’s John Mulheron.
“Whether it’s robotics, automation or ensuring ‘back end’ digital infrastructure is in place, the UK is starting to catch up world leaders such as Germany or Asia. However, this hasn’t been the case. Back in 2012, the UK was 19th in the world for adopting robotics – about mid table in the developed world league – but the projects we have been funding from wide industry cross-sector over the last 12-18months gives us cause for renewed optimism.”
“The skills gap, whilst still needs more investment is also stabilising with over 2 million apprenticeship starts over the last 5-6 years – a welcome outcome for engineering and manufacturing. Successful sector strategies in automotive, aerospace and electronics have helped fuel some export success, whilst the introduction of R&D tax credits and the Patent Box have clearly encouraged innovation investment for companies large and small.” Continued Mulheron.
National infrastructure investment is back on the agenda too, with political commitment to improve roads, rail, ports and communications - all of which are tremendously important to boost economic activity of all types, but clearly don’t happen overnight.
UK SME manufacturers recently came under fire in a report by Exact last November, for poor customer service and skills shortages. However, it also revealed that there has been a shift in the industry away from bulk orders to smaller orders placed more regularly. Could this be a future trend or just a hangover from the last recession and that nagging doubt that global economic foundations have a ‘shovel too much sand’ going into the mixer.
It highlighted that over half (51%) of UK SME manufacturers said customers are increasingly requesting orders in "smaller series”. Small equals fiddly. Fiddly takes time and eats into margins. But by investing in digital technology to streamline processes and take care of ‘fiddly’, it allows your team to focus on productivity.
Interestingly, the report highlighted that most UK manufacturers (64%) believe technology is playing a key role. Many of those that have adopted technology solutions are already feeling the benefits; for example, SME’s who are users of cloud software achieved far higher revenue growth and more than double the profit of those using fewer cloud products.
“There is little doubt the UK manufacturing sector is into a headwind at the moment, but with challenges, come opportunities. To take advantage SMEs need to ensure they are competitive, efficient and provide the very best in customer service. One of the most effective ways of doing that is through technology adoption - whether that's to improve production processes, keep tighter controls over stock or reduce time spent on non-productive administrative tasks."
“It’s all great for the headline writers or industry bodies to champion the need to invest in technology, robotics or automation but for a business turning over £1-2m it’s often a too larger leap of faith. I would also argue businesses need more advice on what they should be investing in first and how that investment should be structured. Those turning £10m + have fewer problems securing funding and can afford to consult or even outsource these step changes. For smaller SME’s your talking about big decisions to get right and that can put some off investing.” Said CMF’s Mulheron.
Such digital capability is scalable, affordable and available across the whole manufacturing spectrum, to the smallest SME, as well as to a large-scale production facility. Using technology advancements, a number of manufacturers are currently benefitting from operational efficiencies, enhanced levels of production flexibility and productivity.
But, the country needs more to follow suit. To make strategic step changes they need support and practical tools to help shape their investment plans. It would also help if the media covered a few of the many success stories in UK manufacturing rather than bashing it all the time.
It will take time and requires action and support from all stakeholders. It can be and is on the move, so a little more of a positive and balanced view from the headline writers might help in-still greater confidence in those needing to make the right investment decisions rather than seeing it as a gamble.
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