EEF National Manufacturing Conference 2017: reflections

With the past 12 months described as “unimaginable” by chief executive, Terry Scuoler, EEF’s flagship National Manufacturing Conference brought together more than 800 influential industry and political leaders to discuss what the future holds for the UK’s industrial sector.

In his opening remarks to this year’s National Manufacturing Conference, Terry Scuoler predicted that the negotiations surrounding the UK leaving the European Union would be nothing short of “brutal”, both publicly and behind closed doors.

Terry Scuoler, CEO, EEF
Terry Scuoler, CEO, EEF.

Though EEF very publicly campaigned for remaining, the die has been cast and while politicians have spent the intervening months pontificating, industry has kept its nose to the grindstone and achieved significant gains.     

Like with any challenge – Brexit, Fourth Industrial Revolution (4IR) disruption, exporting – there are opportunities. For manufacturers, overcoming these challenges could lie in participating in the government’s Industrial Strategy consultation currently underway.

Government has long been accused of turning a deaf ear to the needs of small and medium-sized manufacturers, the green paper is an opportunity to readdress that balance. It may well be under the stewardships of the Department for Business, Energy and Industrial Strategy, but it belongs to UK manufacturing, and businesses must contribute to it.

Productivity

According to Ian Isaac, managing director of asset finance specialist Lombard, the 10 pillars of the Industrial Strategy green paper clearly define the challenges facing UK manufacturing.

Inherent inertia towards investment, particularly in plant and machinery, is a leading factor in the nation’s continuing productivity puzzle, Isaac continued; and though recent EEF research found that 50% of manufacturing businesses are looking to invest in the near future, the other 50% are seemingly not.

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“The future has a habit of catching up with us all”, he warned, urging manufacturers to “tool up” now in order to capitalise on the Fourth Industrial Revolution (4IR), something which could multiply the UK’s strength and help “find the missing piece to the puzzle”.

Martin Wolf CBE, Financial Times’ chief economics commentator, succinctly summed it up by noting, that as a nation “we spend too much and invest too little”.

State of the nation

“The next two years are going to involve intense negotiations and a national conversation about the type of society we want to live in; regardless of whether the vote was for leave or remain, it was a vote for change,” explained Shadow Chancellor of the Exchequer, John McDonnell MP.

Astutely, Wolf voiced the concern that the focus of any post-Brexit deal would likely be on the “divorce process” itself, rather than the long term ramifications and objectives.

McDonnell stressed how manufacturing needed to have a central place in our society, creating well-paid, reliable jobs not in isolated hotspots, but spread across the UK. However, industry is battling against 30 years of neglect, with the profits largely going to the few and the pains of austerity felt by the many. Arguably, he added, many of the SME community never experienced the benefits even during the “good times.”

It is essential industry, and society more widely, fights for the best possible Brexit, one which protects jobs and living standards. Additionally, almost of a quarter (23%) of export value currently depends on imports required to produce them, far higher than the 15% of either the US or Japan. As such, McDonnell noted, EU supply chains are vital and must be maintained. A goal not likely to be achieved by government’s “phony tough posturing” and “call my bluff tactics”, creating an atmosphere of mutual distrust.

4IR

UK Manufacturing Pound Coin Currency Graph Money Brexit Finance - Stock
To capitalise on 4IR the country needs long term, stable, fair and evenly distributed investment, rather than the stop-start practices of yesteryear.

To capitalise on 4IR the country needs long term, stable, fair and evenly distributed investment, rather than the stop-start practices of yesteryear. If that could be achieved, then UK manufacturing could be the lever to lift all parts of the economy.

McDonnell noted that 4IR represented a “manufacturing renaissance” for all, not just those already performing well. The growing proliferation of advanced technologies and processes would also help blur the distinction between blue and white collar jobs, but requires investment in skills and infrastructure.

Skills is of paramount importance, as advanced industry needs advanced skills, yet there exists an obvious disparity between the government’s apparent focus on skills, training and apprenticeships and the level of education cuts being pushed through, with the current scale last seen 50 years ago.

Wolf offered a stark warning regarding technological investment, highlighting the fact that doing nothing is simply no longer an option – a sentiment I’ve heard at several such conferences over the past 18 months. “If you are not at the frontier, really at the frontier, then your business is seriously at risk. Trade negotiations could take up to 10 years, and if you choose to do nothing during those 10 years then your business will cease to exist,” he cautioned.

Where next for UK industry?

Centre of Economics & Business Research (CEBR) board member, Vicky Pryce described how strong consumer spending had sustained the UK economy in the face of manufacturing and construction contraction. However, the very real compression of wages and living standards would effectively scupper this equation; a primary factor in low forecast expectations for 2017/18.

A firm starting point is defining an effective innovation and technology strategy.
Those companies which are succeeding are those connecting their ecosystem.

Those companies which are succeeding are those connecting their ecosystem – fostering strong relationships and connections with universities, their own research and development activities, their supply chain and investment partners.

Collaboration is currently a non-competitive sport, and is how thriving businesses dealt with issues pre-Brexit, and no doubt any arising post-Brexit, said Alison Rose, CEO commercial and private banking for NatWest. Indeed, the value and importance of collaboration was highlighted by several of the days’ speakers and panel members.

The issues revolving around infrastructure, skills, productivity and investment are long-standing and if the UK is to truly overcome them it will only do so through a deep understanding of the contributing factors and a long term view. Yet, that is in direct opposition to the predominantly short-termism and headline baiting actions of government.

Secretary of State for Business, Energy and Industrial Strategy, Greg Clark MP worked hard to convince attendees the government had adopted a longer term perspective, though was arguably a little thin on detail.

Why manufacture in Britain?

Offering a global perspective, Juergen Maier, CEO of its UK operation, explained why Britain was so important to Siemens, a company which operates in more than 200 countries. According to Maier, every site knows it is competing against every one of the others, with the Congleton (Cheshire) plant unquestionably one of the best [Siemens] factory in the world. He outlined three reasons why: skills; backbone of R&D, i.e. the High Value Manufacturing Catapults; and a supporting policy framework.

Yet, Congleton – an astoundingly productive site fitted out with the very latest advanced technology and processes – is the exception, rather than the UK norm. Why aren’t other manufacturers investing in digital technologies, automation and advanced skills? If investment in automation were to rise to, say, that of Japan, the UK’s productivity could grow by as much as 20%. 4IR, therefore, offers the opportunity to leapfrog global competition and see Britain reclaim its position at the centre stage of global industry.