Seven years ago, Professor Steve Evans helped to write a major report for Whitehall on the future of British manufacturing and sustainability. In the wake of COVID-19, he looks back on the predictions and what the future looks like today for policy makers and executives.
In 2013, I was part of a team that wrote a report for the UK government on the future of UK manufacturing, making predictions on what a more sustainable future manufacturing sector would look like.
The objective was to look forward to 2050 and inform how the UK could create and capture future value.
The disruptions of the past six months due to COVID-19 have driven more focus on this, even among policy makers who may have been inclined in the past to dismiss manufacturing’s contribution to the economy.
But as much as a specific global pandemic was unexpected, significant disruption was not, and the view from 2013 remains strikingly relevant as governments and firms look to steer manufacturing through the post-pandemic world.
Manufacturing was already changing
At the time of the report, we were fighting a big argument with the government about whether manufacturing was only the narrow act of production or a complex value-creating system.
It seems obvious to those involved in manufacturing, but it was not to those in government. The argument put forward to the politicians was that manufacturing itself was changing.
The biggest change in British employment in manufacturing between 1999 and 2011 was the massive reduction in directly employed operators, from 27% of all manufacturing jobs to 18%. At the same time, British managers numbered 18.4% of all jobs in manufacturing.
So, we had more than one boss for every machine operator; 40% of UK manufacturing jobs in 2011 were at degree level – and this is already seven years ago. Politicians don’t seem to understand how knowledge-intensive manufacturing is.
Our report also zeroed in on four key future characteristics of manufacturing.
By 2050, the report predicted that manufacturing would be:
- Faster, more responsive and closer to customers
- Exposed to new market opportunities
- More sustainable
- Increasingly dependent on highly skilled workers
By 2020, we predicted manufacturing would employ 170,000 fewer people than in 2013, but of the approximately 800,000 jobs that did exist, around 300,000 of those would be graduate-level.
This is far greater than any other sector in employing graduates, and yet we don’t design our skill system to deliver accordingly.
And though there has been some movement in the area of apprenticeships, this is a point that still largely gets lost in high-level discussions of manufacturing’s future.
Three waves of change
This led me to conclude that change would come in three waves.
In the first wave, in 2013, everybody in industry agreed they had to become more sustainable, but it was obvious with all the organisations that we were working with that there was a strong desire to conduct business as usual. People were not being radical or different.
So, within this ‘business as usual’ frame, manufacturers were predicted to focus on energy efficiency and on material efficiency as a contributor to sustainability. This has been true.
The second wave was predicted to be about ‘being ready’ for significant disruption. At the time, the government asked us to examine potential future disruptions, and what we found was that there were so many, it scared us!
In 2013, only three years away from the global financial crisis, they wanted to look at financial crashes, but also food problems, climate change and others. Pandemics were listed but not a major focus.
But what was very clear was disruption was going to come along more regularly and that resilience to disruptions, especially in supply chains but also in factories, was going to become a key measure of performance.
Factories that can carry on working when the competitors are not will, in the end, be more profitable.
The other thing that we predicted for this second wave was experimentation. We foresaw large companies in particular that might have multiple units experimenting with techniques in some markets or in some production facilities.
For too long many believed that big is good. I remember being told by a senior manufacturing person at the time about their own company, that they ‘were big but not strong’.
Basically, if the wind blew in the wrong direction, they would fall over so they were learning how to be resilient and running experiments in different parts of the business.
And, of course, during this time the way technology was changing – and in particular the technology of scale of manufacturing – meant that those experiments could be conducted and future manufacturing systems could be imagined to be much more distributed than they currently are.
The third wave was predicted to be about new structures and governance, something that in 2013 people were uncomfortable with. The way in which we internalise the public good of industry will change.
Policymakers are going to have to compete with each other to create sustainable industry because of the high-quality jobs it generates and the environmental and societal benefits. More manufacturers might become cooperatives.
Whatever happens in wave three, we’re going to see a change in the attitude of policymakers to sustainable industry in particular.
The impetus of disruption
The disruption of COVID-19 has not changed or reversed these waves of change, but it has reshuffled the deck and will soon lead to a number of difficult and messy discussions.
The first difficult discussion has to be around growth. Everybody wants GDP to recover – politicians want the national GDP to be bigger, CEOs want their company to regain scale.
But when the target is growth, what policies and strategies do we often see? We see trade barriers, a focus directed at on-shoring. This does not increase global GDP nor global trade, and hence denudes growth.
Such tactics are a zero-sum game with possible winners who later realise that they have a bigger slice of a smaller pie.
On the other hand, if, as a politician, you target wellbeing, you may accidentally achieve growth because people buy product because they make their lives ‘better’.
Just a thought but as a company CEO, would you prefer to double in size while halving profit, or double in profit while halving in size?
This is going to be at the heart of the strain that will be felt over the next two decades as leaders may well push for scale and not for profit or well-being.
The second difficult discussion is around place. I can see place being a much bigger conversation both with politicians and with the leaders of our large manufacturing set-ups.
Technology is enabling a different distribution of manufacturing – closer to raw materials and also closer to the customer.
Distributing manufacturing becomes a more meaningful and more complex economic-social-environmental decision, for example, to enable local material flows.
Manufacturing is a public good as well as a private good and must learn how to be both.
I believe that on-shoring for political reasons won’t work, but as technology changes and there are more and more things that can be made closer to customers, on-shoring for resilience reasons will grow, and this could lead to more manufacturing in the UK.
But it has to be independent of the political logic.
Resilience and trust
Ultimately, the two words that I think are going to come to the fore in the next decade are resilience and trust.
Resilience grows in importance because there are more disruptions on their way – Coronavirus is just the first.
Based on an analysis last year (before the pandemic), we believe that there is a 50% probability of something approaching the 2009 global financial crisis occurring in the next 10 years. And more disruptions will visit us ever more quickly thereafter.
But even more important may be trust. We are beginning to fail to trust the law as a means of doing business. In the absence of that, contracts quickly come to mean nothing.
What we’re going to see in the next 10 years is people doing business with people they trust whether or not there’s a contract in place. Maybe because that’s the only way in which they can be resilient and safe.
Being a business that your partners, neighbours, staff and customers can trust will be essential.
It’s not all doom and gloom. There is a genuine chance for a truly sustainable world by 2050, one that manufacturing can play an important, constructive and profitable role in.
But to get there, COVID-19 needs to be a wake-up call for politicians – and companies – to start taking these trends even more seriously.
Learn more by watching Steve’s on-demand webinar: Manufacturing sustainability: Back to the future
Professor Steve Evans is Director of Research in Industrial Sustainability at the Institute for Manufacturing, part of the University of Cambridge’s Department of Engineering
*All images courtesy of Shutterstock