The holidays are over, so what now for UK manufacturing?

Posted on 7 Sep 2017 by The Manufacturer

Mike Rigby, head of Manufacturing, Transport and Logistics at Barclays, offers a timely discussion on why the government’s long-awaited industrial strategy is of such vital importance.

UK Manufacturing - The Evoque being manufactured at Halewood. Photography attributed to JLR.
The Range Rover Evoque being manufactured at Halewood – image courtesy of JLR.

Changeable temperatures across the nation during the summer months would, at least on the surface, appear to have mirrored what was occurring in UK manufacturing businesses up and down the nation.

May saw a Purchasing Mangers’ Index (PMI) score of 57.3, a three-year high reflecting significant expansion in output, total new orders and new export work.

Rising cost pressures and a slow-down in consumer spending resulted in a slight dip in June and July, however a near-record level of new export orders saw UK production increase for the twelfth consecutive month in August.

Our nation’s manufacturers continue to grind out positive results, aided by a recovering global economy and the ongoing weak pound. Healthy order books – both at home and abroad, combined with promising levels of new investment are driving the performance of this vital sector.

However, it’s not all clear skies ahead. Despite some easing on the cost side, inflationary pressures continue to take their toll on factory gate prices and businesses profit margins, political and policy inertia continues to fuel uncertainty surrounding the UK’s future relationship with Europe, and UK productivity remains well below its G7 peers.

Successfully navigating these challenges will depend on maintaining and raising levels of new investment, innovation and employment; exactly the reasons why the Government’s long-awaited Industrial Strategy is of such vital importance.

Each of the 10 Industrial Strategy pillars will directly or indirectly impact UK manufacturing businesses, alongside closely related sectors such as Transport and Logistics:

  1. Investing in science, research and innovation – Supporting the move towards a more innovative economy and doing more to successfully commercialise our world-leading science base to drive growth across all sectors of the UK.
  2. Developing skills – Focusing on technical education to benefit the reported 50% of young people who do not go to university, and boosting national numeracy, STEM and digital skills to ensure people can fulfil the needs of the workplace of the future.
  3. Upgrading infrastructureOverhauling the nation’s digital, energy, transport, utilities and flood defence infrastructure will help ensure future growth isn’t hindered, bottlenecked or unexpectedly interrupted.
  4. Supporting businesses to start and grow – Ensuring that businesses across the UK can access the finance, supply base and management skills they need to grow, and creating the right conditions for companies to invest for the long term.
  5. Improving procurement – Strategic government procurement, particularly for major civil engineering projects, can play a key role in driving innovation and help establish robust UK supply chains.
  6. Encouraging trade and inward investment– Government policy can help lift productivity and growth across the economy, by increasing competition and helping to bring new ways of working to the UK, for example.
  7. Delivering affordable energy and clean growth– UK manufacturing continues to face the ‘energy trilemma’ of price versus reliability versus decarbonisation, a particular challenge for those operating in energy intensive sectors the likes of glass, ceramics, steel and chemical.
  8. Cultivating world-leading sectors– Building on the nation’s existing areas of competitive advantage such as aerospace, automotive and pharmaceutical, while also helping new sectors to flourish i.e. battery technology and autonomous vehicles.
  9. Driving growth across the whole country – Building on the particular strengths of different places and addressing those factors hampering growth – by that investing in key infrastructure projects, increasing local skill levels or backing regional innovation strengths.
  10. Creating the right institutions to being together sectors and places – Assessing the best structures and networks to support people, industries and places, be they local civic or educational institutions, trade associations, financial organisations or a combination.

If you want to hear more from Barclays about the UK economy, you can visit our UK economy hub.

Further thought-leadership courtesy of Mike Rigby:

What role is the UK playing in Connected & Autonomous Vehicles? – lifting the lid on how the UK is driving the future of mobility.

Are UK manufacturers taking advantage of the opportunities? – is there still a lack of appetite for capital investments from UK manufacturers?

Will manufacturing mirror what’s happening in logistics? – Confidence among logistics operators is higher than last year, with a sense of opportunity surrounding the growing impact of digital technology and data.