Helping British manufacturing meet today’s challenges

At the same time, many manufacturers find themselves well placed to exploit recent falls in the value of sterling and explore new export markets, while also taking advantage of renewed government support for international trade.

To help support British manufacturing, Santander has launched a Forum to share experience and offer advice when dealing with these and other important issues facing the sector.

Ensuring businesses get the right support

This summer, against a backdrop of challenge and opportunity, Santander launched the Manufacturing Sector Ambassador Forum, a programme set up to bring together business owners and industry representatives on a regular basis.

The Forum aims to highlight the key issues facing companies in Britain’s manufacturing sector, as well as identify the kind of support such businesses are likely to need in order to grow and prosper in the years ahead.

“The manufacturing sector remains hugely important to the UK economy, but it is fair to say the business climate for manufacturers at the moment is far from ideal,” says Paul Brooks, UK head of manufacturing at Santander Corporate & Commercial Banking.

A wide range of issues

The first Ambassador Forum took place in July at the state-of-the-art Technology Hub of manufacturers’ organisation, EEF, in Aston, Birmingham.

The 125,000 square-foot Hub provides cutting-edge training in leadership and technical skills to managers, workers and apprentices in the UK’s manufacturing sector, collaborating with industry leaders such as Jaguar Land Rover, Ishida and Epson, as well as numerous smaller companies.

During the Forum, the attendees highlighted what they currently consider to be the most important issues confronting manufacturing businesses.

In some cases, these were challenges that apply to a number of sectors – for example, the uncertain trading climate that has resulted from the Brexit decision and the ongoing negotiations regarding the UK’s departure from the EU. But there are also a number of sector-specific issues facing the nation’s manufacturers.

The growing skills gap

The impact of the skills gap on the British manufacturing sector featured prominently in the Forum discussions, as did the general under-representation of women in the industry’s workforce.

The perception gap between the popular image of manufacturing companies as ‘dark, satanic mills’ and the reality of impressive, clean, high-tech workplaces was highlighted.

Far more can and should be done to promote the potential benefits and attractiveness of engineering and manufacturing careers to schoolchildren, and in particular girls, around the more impressionable ages of 13 and 14 – with 15 or 16 viewed as ‘too late’.

Contributors noted that it is vital to appeal not only to pupils, but also parents and teachers, given their influence in young people’s choice of school subjects, Further or Higher Education courses and, ultimately, careers.

A particularly productive course of action could be to allow teachers to spend time in manufacturing companies, in order to get a better understanding of the working conditions and career opportunities they offer.

The importance of embracing technology

Increased adoption of new technology and automation could also help companies overcome a lack of skilled workers. Many in British manufacturing believe that small firms are particularly reluctant to explore the potential benefits of innovations in robotics, with many business owners mistakenly taking the view that such technology was solely the preserve of larger manufacturers.

In addition, there is a role for government or manufacturers’ organisations to educate firms in the potential benefits of automation or robotics, as well as to provide easier access to such technology.

Perhaps surprisingly, cybersecurity issues related to Internet-connected devices, as well as office IT systems, were not seen as a particularly serious threat provided companies take sensible precautions to protect themselves. Clearly, there is a role for education here too.

Brexit and international trade

There was considerable concern about the uncertainty created by last year’s EU referendum outcome and the ongoing Brexit negotiations: the current situation has meant that manufacturers are finding it difficult to make investment or expansion decisions with any degree of confidence.

However, the fact that the government has started to put more effort into consulting industry bodies (including EEF) on its approach to negotiations was particularly welcome.

One related issue of significant concern is that the status of EU nationals currently in the UK – many of whom work in the manufacturing sector – has not yet been resolved.

Energy and input costs

While the fall in the value of sterling has presented an opportunity for businesses looking to export, it has been a double-edged sword for manufacturers. Energy prices – a key consideration in the British manufacturing sector – have become even more expensive; likewise, the cost of equipment and machinery, as well as raw materials and other inputs have also increased.

It is widely felt that the British manufacturing sector is at a serious international disadvantage due to its relatively high energy prices, which are estimated to be around 40% more than in Germany and 60% more than in the US.

The premium UK businesses pay for energy applies to some extent to other input costs, with OEMs in Germany, for example, likely to pay between 10% and 25% less for machinery.

The advantages of a flexible approach

Santander has a comprehensive trade support programme designed to share the benefits of the Santander Group global network with our SME customers. For example, Santander customers can access Santander’s Trade Portal, a database of 194,000 importers and 30,000 suppliers.

Santander customers can also access the Santander Trade Club, where they can find potential trading partners and connect with up to five million business customers across the Santander Group and its selected partner banks.

Brooks adds: “We pride ourselves on working with our customers for the long-run. We know how important it is to have a banking partner which will be reliable, which will stick to its decisions, and which will make every effort to understand the challenges that businesses face in order to best support them.”