Brian Holliday, managing director of Siemens UK & Ireland, discusses what UK manufacturing needs to sustain growth.
The Coalition over the past five years has made great progress in supporting UK manufacturing:
- More than 2 million apprenticeships have been created
- High Value Manufacturing Catapults – homes to R&D nestled between universities and business – are thriving and sharpening our innovative edge
- Industrial strategies are in place helping the automotive and aerospace sectors boom in exports
- R&D tax credits are increasingly helpful
- Investment in the domestic supply chain is boosting smaller firms
This direction of travel and the foundations created has given Siemens the confidence to build a Hull-based facility to make wind turbines, creating up to 1,000 jobs. But what more do we need?
To enable a revolution in digitalisation, productivity and automation we call on the next government, whatever colour (or rainbow of colours) to focus with laser like precision on three areas – innovation, investment and skills.
These are the foundations to build a UK at the cutting-edge of manufacturing – to be at the heart of what many have called a “fourth technological revolution” (or Industry 4.0).
The next government needs to invest for the long term. It should continue to steer applied research toward automation and digitalisation because the resultant long-term opportunities for the manufacturing sector are significant.
Advanced manufacturing, and the high levels of investment spearheaded by the automotive and aerospace industries, will take root in sectors that have often under invested.
The benefits will be significant and enable more of our manufacturing base to address increasingly individualised production without an escalation in cost. This is known as mass customisation and it’s fuelled by the growth of a global, demanding middle class.
We must ensure the ongoing funding of the High Value Manufacturing Catapults using the current industry, university and government matched funding model. The science budget should be ring fenced so we can help UK industry innovate domestically, and help create new treatments in healthcare too.
R&D spending roughly amounts to 1.72% of GDP, lower than the 2.06% equivalent for the EU, and some way short of the previous government’s target to increase UK R&D investment to 2.5% of GDP by 2015. We think a new 2.5% target by 2020 would be a step in the right direction.
We urgently need more investment in manufacturing to address obsolescence and improve productivity in an increasingly global growth market for manufactured goods.
We need to bolster UK infrastructure. An export economy needs high quality transport infrastructure including airports, ports and roads. A long-term plan for rail and roads, underpinned with world beating broadband and digital infrastructure, is now required and the announcement of the Northern Transport strategy looks promising.
The tax system needs to work better for manufacturers too. We’d suggest an urgent freeze on all new valuations for plant and machinery upgrades. The next government needs to remove plant and machinery from the business rates valuation to bolster business investment, helping achieve large efficiency savings for the UK tax payer.
For the process industries, the majority of the rate bill is made up of plant and machinery, so an equivalent valuation methodology should apply. There is a full debate ongoing about the Annual Investment Allowance (AIA), currently edged at £500,000 but due to fall back to £25,000 in December. We suggest freezing the AIA for 10 years at £1 million.
We also believe enhanced capital allowances should be extended to cover automation technology in the same way they have been applied to energy efficient technology to stimulate investment and improve productivity for small and large scale manufacturers alike.
We need continued focus. Employers have a role to play in equipping the next generation with leading edge technology knowledge and vocational training at all levels.
Industrial digital skills will be needed in particular to embrace Industry 4.0. Triple the number of women in engineering. Establish a single mechanism within each LEP area to promote engineering careers to students, linking closely with a national careers advice service.
Creating a single industry-led body through each LEP area would help SMEs identify the most appropriate providers to meet their specific needs.
The UK must invest in digital and smart factories, not least because the concept of Industry 4.0 plays to our strengths and tackles many of the complex production and consumption challenges we face today.
By investing in these technologies, UK manufacturing stands to achieve up to 30% improvement in productivity, which could in turn aid accelerated economic rebalancing.
As a global corporation that is also a large-scale British manufacturer, we’re keen to ensure the sector has a great manifesto derived from broad consultation that gifts direction and insight to our new government to continue what’s been started.