Manufacturers are showing optimism and will look to invest as the economy starts to recover, but it's not just investment that has to increase. There needs to be a change in perspective to secure the future of the industry, says Marc Sobbohi.
UK manufacturing is moving forward with growing interest in the production industry. Recent reports claim manufacturers are ready to invest more, whether that investment is aimed towards exports or not.
Whilst research and development (R&D) investment is improving and British manufacturers are embracing the role of innovation, a transition to focusing on commercial benefit could really boost the economy. Something many countries in the Far East realised a long time ago.
Andrew Johnson, senior economist at EEF, believes a heavy reliance on the services industry means the UK’s relative R&D spend will have less chance of growing.
“In terms of business expenditure in R&D as a proportion of the overall economy, we are still quite a bit below the OECD average.
“One of the reasons for that being the case relative to some of the major OECD economies is that the UK is particularly service intensive and they don’t tend to spend as much as the manufacturing sector. So the chances are if you have a smaller manufacturing sector, you’re going to have a smaller relative R&D spend.
“The way the economy has grown in the last 10 or 15 years, consumers have been able to fund their spending on the back of rising house prices or rising asset prices. That isn’t going to work going forward and we need a more sustainable model of growth. One of the key elements of that has got to be investment in innovation and R&D.”
“The way the economy has grown in the last 10 or 15 years, consumers have been able to fund their spending on the back of rising house prices or rising asset prices. That isn’t going to work going forward and we need a more sustainable model of growth.” – Andrew Johnson, senior economist at EEF
A lot of funding will have to come from company’s own pockets. It makes sense for them to invest in improving products and drive growth now that markets look more optimistic.
Incentives are there with an increasing number of SMEs taking advantage of tax claims. SME R&D tax claims have risen 49% since 2009.
A number of surveys came out last week offering mixed messages on the type of investment manufacturers were looking to spend.
A recent survey from NatWest and the EEF found 71% of producers are planning to spend on R&D in order to export to new markets in the next three years.
Differing results from Barclays found 54% of manufacturers will increase investment spend over the next 12 months, however investment in new export markets appears less attractive.
The Manufacturing Advisory Service (MAS) reported 50% of the 682 SMEs they surveyed were expecting to spend on new machinery and premises in the next six months.
The Manufacturer’s Will Stirling sheds some light on the issue. In his investigation Felicity Burch, economist at EEF, explains their survey with NatWest was deliberately focused on intangible forms of investment, such as process, service and product innovation.
This raises the question of how you define innovation. It could take days to formulate an answer to this and still have seven different sides to the debate.
The MAS survey offers a more tangible definition whilst EEF’s and NatWest’s survey covers a broader range of innovation investment.
Whatever the boundaries, increased optimism across manufacturing companies means they are willing to evolve and do something different to increase production.
Added to this, all the vendor companies questioned in the article post positive outlooks on order levels, revealing a positive mood amongst manufacturers.
Figures from the Confederation of British Industry (CBI) on output growth, recorded total orders at their highest since August 2011.
Burch said the investment will “help companies compete in the global race”. However, she warned: “The UK still has a long way to go, as levels of R&D expenditure lag well behind those of our competitors.”
There may be a wave of positive signals coming from within, but the industry has to ask how those outside the sector see manufacturing.
Facing the future
Perspectives need to change. We must question whether companies are investing enough in R&D. We all also have to ask what a perceived lack of consideration or importance does to future generations of manufacturers.
The Bloodhound SSC project is excellent at involving and inspiring young people to look at a career in engineering. The Government is also aiming to improve the number of skilled technicians as well as supporting projects like Bloodhound’s education initiative.
Despite this there have to be major concerns over the future of manufacturing. A recent poll from food manufacturer Mondelez reads poorly for the future of manufacturing.
Negative perceptions of manufacturing:
- 39% think the job would be physically demanding
- 73% think that a desk job would be more likely to impress their parents
- 76% think that a desk job would be better paid
- 84% think that a desk job is more glamorous
- 25% think they have the skills to enter the industry but not the guidance from schools
Only 8% of the 1,600 16-18 year olds polled would even consider a job in manufacturing
Desk jobs are clearly more fashionable and young people believe those careers are expected of them by their parents.
It lacks any sort of balance to have a generation, or several, that think this way. The burning question is what needs to change?
What to change?
Genuine change takes time and there’s no easy answer, but there needs to be an imminent change in perspective to get the ball rolling.
There’s an ambitious target of manufacturing making up 20% of UK GDP by 2020, from 10% currently. That will never be realised if only 8% of 16-18 year olds consider a career in the sector.
“There’s an ambitious target of manufacturing making up 20% of UK GDP by 2020, from 10% currently. That will never be realised if only 8% of 16-18 year olds consider a career in the sector.”
There’s no point skirting the issue. With universities saturated, as well as expensive, and service industries packed full of people there needs to be a release. The only way to do that is offer incentive for another option.
Apprenticeships are key, as is awareness of them. It also requires further awareness of industry. The media and the Government have turned attentions and that helps, but is it fleeting support or will it last?
Manufacturers should be doing all they can to promote the industry if they truly believe in it. Getting others involved is key to progression as positive signs of growth and investment keep coming.
Calling UK manufacturing ‘The Silent Heartbeat’ of the country is a fair analogy, vital and constant. Now the pulse is starting to pick up and the sounds need to get louder, otherwise the industry faces a future full of heartbreak.