A successful manufacturing sector needs long-term planning and investment. Following a year of great change, Tom Lawton discusses the vital role of a well-planned government Industrial Strategy.
The year 2016 was one of huge economic change that will impact the UK manufacturing sector for many years to come. Rapid developments in technology and regulation, the growth of populist politics, an uncertain relationship with the EU and opportunities for a whole raft of new trade deals across the globe mean that many of the boundaries that once shaped the way manufacturers do business are changing or disappearing altogether.
These changes pose some interesting questions. For example, how should manufacturers react in such uncertain times, and how can policymakers create the right environment to help them flourish? In simple terms, what should Britain’s post-Brexit economy look like? After all, change brings with it great risk, but also great opportunities for those able to capitalise on them.
BDO’s New Economy report is our contribution to the debate. We believe that a ‘new economy’ is needed, one which makes the most of the UK’s talents, skills and entrepreneurial spirit. It is an economy, which – despite Brexit – is outward looking and helps its home-grown manufacturing businesses expand abroad. And it is an economy which puts the UK’s entrepreneurially spirited, mid-sized manufacturing businesses at the heart of its thinking; businesses which we feel are overlooked and undervalued by policymakers.
To create a truly sustainable and balanced ‘new economy’ we believe policymakers must focus on fuelling the growth of sector powerhouses like manufacturing, and our report suggests some detailed policies with a particular focus on helping the manufacturing sector grow.
At the centre of our policies for building a new economy is the requirement for a long-term Industrial Strategy. Given this, we welcome the government’s comments about developing an Industrial Strategy. However, it is important that any strategy is comprehensive, based on a genuine understanding of the needs of industry and is long term. It is early days, but we note that the initial stages of this new industrial policy have been rather ‘half-hearted’ – so we hope for more impact in the months and years ahead.
Manufacturing is a long-term game and much of the sector relies on significant capital investments, which pay off over years or even decades. The implications of Industry 4.0 on the manufacturing sector will be wide ranging, but will almost certainly require significant investment in technology and skills, and will certainly require constant evolution as a result of new technologies and processes.
Therefore, it is critical that the government builds a strategy over the long term (15 to 20 years) and avoids the disruptions of the political cycle. This should include setting a formal target for manufacturing growth over the next five, 10 and 20 years to provide the background to a sustainable Industrial Strategy.
In my view, if properly supported, Britain’s historic strengths in manufacturing, innovation, design and service, as well as the significant potential that the move to more automated/digitised manufacturing offers can lay the key foundations for a successful and well-balanced UK economy.