Annual Manufacturing Report 2020 – What are manufacturers saying about their future?

After three years of unprecedented uncertainty and declining productivity caused largely by Brexit, UK manufacturers remain anxious about the immediate future, even though they embrace the opportunities posed by climate change and new technology to become more sustainable and efficient.  

More than 350 manufacturers across the entire spectrum of UK industry were surveyed for the Annual Manufacturing Report 2020 – the Search for Stability, published today by The Manufacturer. 

“Our survey shows the vast majority of manufacturers are ready for anything,” Nick Peters, editorial director of The Manufacturer said. “But the fact remains they are operating in a semi-hostile environment thanks to politically-driven trade uncertainty, chronically weak education outcomes and a financial sector that is only intermittently geared towards their needs.” 

“It should be noted that this survey took place before the new Conservative government made clear its very hard negotiating stance towards the EU, and before the Coronavirus threatened global supply chains,” Peters added. “With all that in mind, it would be interesting to see how confident and resilient our manufacturing companies might remain in light of those extra pressures.” 

The Annual Manufacturing Report 2020 covers five areas of manufacturing and business operations:

Business Transformation  

Manufacturing companies say they are sufficiently agile and flexible to respond to the rapidly changing global environment for manufacturing and see the drive for carbon-zero by 2050 as an opportunity to adapt products and processes to meet customer demands for more sustainable behaviour from industry. 

84% said climate change and the drive for a carbon neutral future are an opportunity to transform their business. 

Cara Haffey,UK Leader of Industrial Manufacturing & Automotive at PwC, which sponsored the chapter, said, “Against an array of challenges, it’s encouraging to see that many UK manufacturers are looking beyond the promotion of new technology and embracing wider business transformation.

“While transformation can vary widely between companies and sectors, key areas such as supply chain, workforce engagement, productivity and customer experience remain in sharp focus as customers demand more, and manufacturers look to invest in securing growth, improving products and winning in new markets.” 

Smart Factory

The competitive advantages conferred by the digital technologies of the Fourth Industrial Revolution are largely accepted by UK manufacturers. 81% said digital technologies will enable all manufacturers to open up new markets and find new customers, although for many smaller manufacturing companies, which is the vast majority of businesses in the sector, there is still confusion over how to adopt these technologies, and concern over both price and process.  

Chris Lloyd Jones, Global Emerging Technology and Engineering Leader, at digital and cloud services company Avanade, which sponsored the chapter, said, “Industry 4.0 is not the end game for industrial digitalisation. In today’s world of perpetual change, the solution is not another industrial revolution, but a transformation of products and how we make them.

“We call this Industry X.0. Using new technologies like IoT, analytics, AI and digital twin, manufacturers can unlock new revenue and work with customers, employees and partners on a whole new level.” 

Finance and Investment

The concern over how to fund investment in the technologies of the future was reflected in this part of the report. 92% said government needs to incentivise long-term investment in digital technologies, and the supply of patient capital, if the UK is to remain competitive.

The feeling is that UK financial institutions are more interested in short term profits than sustaining long term industrial growth.  

David McKenzie, Manufacturing Lead at Board International, the business intelligence software company which sponsored the chapter, said, “Board International is again delighted to be partnering with The Manufacturer on the Annual Manufacturing Report, for the second year running.

“With 2020 shaping up be a hugely significant year for British manufacturers, I’m delighted to share our thoughts and views about the route forward for success and prosperity in the sector.” 

Cybersecurity 

The growing prevalence of internet-connected devices and systems in manufacturing, and the increasing use of off-premise cloud computing solutions, offers hackers a much wider range of opportunities to launch ransomware attacks on industrial systems.

While 82% of respondents say they have a clearly defined, articulated and enacted cybersecurity strategy, the report suggests manufacturers still have some distance to travel before achieving robust cyber defences. 

Simon Crocker, Systems Engineering Director at global cybersecurity company Palo Alto Networks, which sponsored the chapter, said, “The days of being able to lock a filing cabinet full of company information and regard it as secure are gone. As the manufacturing sector becomes increasingly digital, the threat landscape increases too.

“It’s positive to see from this year’s report that the majority of manufacturers understand this and are taking their approach to cybersecurity seriously. But there are still vulnerabilities when it comes to areas like the supply chain – defending your own systems could mean nothing if your partners don’t also have solid cyber defences in place.” 

People and Skills

Manufacturing faces an acute shortage of skilled engineers and technicians in the coming years. Far from the popular myth that “robots will steal our jobs”, 89% of manufacturers said the replacement of many shop floor jobs by automation means new recruits need to be even more highly skilled to operate our digital future, while pledging to retrain and upskill their existing workforces.

But they remain very sceptical of the education system’s ability to produce skilled young people:  59% said the system is failing and only 39% thought the skills gap is being taken seriously by the government. 

Dan Kirkpatrick of recruitment specialists Hunter, which sponsored the chapter, said, “Too often, the story of UK manufacturing is seen as one of decline, and in post-Brexit Britain, the desire for more clarity into the future of the industry is increasing. The Annual Manufacturing Report plays an important role in gauging the mood of UK manufacturing, celebrating success from the previous 12 months and providing insights into how the industry can grow and improve.  

“Hunter is privileged to be involved with this report, and we are committed to working alongside The Manufacturer to help the UK manufacturing industry continue to drive forwards.”