Time for UK manufacturers to seize growth opportunities

Posted on 3 Jan 2019 by The Manufacturer

Britain’s manufacturers are rightly proud of their cutting-edge, market-leading innovation – and now is the time to capitalise on the industry’s strengths. For those able to do so, there is every reason to be confident about the future.

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The UK’s manufacturing industry is the world’s ninth largest.

Delegates to Santander’s recent Manufacturing Industry Day, organised to enable UK manufacturers to share their insights with one another and a range of industry experts, expressed a sense of optimism about the future.

And rightly so – the UK’s manufacturing industry is the world’s ninth largest. It employs more than 2.7 million people spread across the country, and accounts for 69% of the UK’s research and development spending.

The challenge now is to build on this solid base in order to move the UK even further up the global rankings. New research published by EEF reveals that output and order books across manufacturing have proved resilient in 2018, following a year of strong growth in 2017. International demand for UK goods has been particularly strong.

EEF’s chief executive, Stephen Phipson said, “The UK’s manufacturing sector is hugely competitive in the global market and its most successful businesses are modern, hi-tech and innovative.”

Recognising the headwinds

This is not to suggest the path to growth is straightforward, and UK manufacturers are now facing some significant headwinds.

At home, the difficulties include ongoing skills shortages in many areas, the lack of access to finance for some businesses and patchy support from policymakers. And while many manufacturers continue to focus on productivity, the UK’s record here in recent years is disappointing by international comparisons.

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In overseas markets, meanwhile, the challenges for manufacturers include the slowing rate of global growth, which could be exacerbated by further escalation in trade tensions between the US and China. Brexit also remains a frustration for manufacturers, many of which are putting investment decisions on hold until there is greater clarity about the future.

Nevertheless, many UK manufacturers continue to grow quickly, despite these hurdles, and there are now clear opportunities to accelerate.

Embracing the opportunities

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Increasing sales to overseas partners, whether in the EU or beyond represents a golden opportunity.

Now, especially, is the time to focus on increasing international trade. The pressures of Brexit notwithstanding, increasing sales to overseas partners, whether in the EU or beyond represents a golden opportunity.

“The respect abroad for UK-manufactured goods is huge,” said Bernard Molloy, global industrial logistics director for Unipart Logistics. “We can build on that to sell more both into the European Union and beyond: our trade with the rest of the world is already stronger than anything we see coming out of Europe.”

The manufacturing sector already accounts for 45% of UK exports, but there is plenty of room for future growth. The key will be to pursue a twin-track approach.

Existing relationships in the EU will need to be protected, requiring manufacturers to contingency plan for possible Brexit outcomes, but this should not stand in the way of efforts to sell more internationally – both in the EU and beyond. Manufacturing exports to non-EU countries are already increasing faster.

The Fourth Industrial Revolution also offers exciting new opportunities to pursue more rapid growth. Many UK manufacturers are at the vanguard of the next wave of change sweeping the world, spanning technologies that include automation, artificial intelligence and the internet of things.

“We are really on the precipice of this revolution and the UK can lead the world. It’s significant we now have an Industrial Strategy in this country for the first time and we must now seize the opportunity to exploit these technologies,” said John Patsavellas of the Department of Manufacturing at Cranfield University.

Another important step in building a faster-growing manufacturing sector will be to work more closely with ‘scale-up’ businesses in the industry. According to the Scale-Up Institute, there are already more than 2,800 of these fast-growing enterprises in the UK’s manufacturing industry.

Irene Graham, chief executive of the Scale-Up Institute, said, “These are the manufacturers driving productivity and innovation, boosting employment and increasing their exports year after year. These businesses tell us their priorities are strong leadership, recruitment of talent and access to markets.”

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Scale-up businesses have the potential to become the large manufacturers of tomorrow.

Encouraging these firms, and helping to create more of them, must now be a clear priority for policymakers and the broader community of stakeholders that work with the industry. Scale-up businesses have the potential to become the large manufacturers of tomorrow – the standard-bearers for British manufacturing on the global stage.

Making it count

How, then, to embrace these opportunities – even in the face of the headwinds that manufacturers face? A collective effort will be required, with both the industry itself and its partners playing their part. The latter group includes policymakers, advisers and, of course, the banking sector.

One over-riding priority should be a renewed focus on productivity. As UK manufacturers seek to compete both domestically and on the world stage, they will need to focus on increasing the output of their staff.

Part of that challenge is talent, an issue consistently cited by manufacturers as standing in the way of growth. Many manufacturers are now taking proactive steps of their own, investing in their own training and up-skilling programmes to give existing employees the skills the business requires.

At entry level, apprenticeship schemes have a valuable role. Elsewhere in the business, many manufacturing companies report good results from peer networking and other industry groups, which help middle managers and senior executives share knowledge and build out their experience.

The other strand of the productivity strategy is technology. For example, greater automation may now represent a means to improve the productivity of many manufacturers, delivering routine work more efficiently while freeing up the workforce to focus on added-value tasks.

Currently, British manufacturers operate an average of 39 robots for every 10,000 people they employ, while in Germany the figure is 121, excluding automotive. The UK ranks 22nd in the world on this metric – industry can improve significantly here.

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The UK ranks 22nd in the world for robot density per 10,000 people employed.

By combining these technologies with a workforce that is more skilled, manufacturers have a real opportunity to boost their productivity – something that will improve their competitiveness in this country and throughout the world.

Andrea Rodney, a director at Hone-All Precision, neatly summed up that idea for delegates to Santander’s recent event: “We’ve got to be the best we can be,” she said. “We’re investing for the future because that’s what we have to do.”

For further information on how Santander can help your business visit: www.santandercb.co.uk

Paul Brooks, UK Head of Manufacturing, Santander Corporate and Commercial

Halil Bedevi, UK Head of Aerospace, Defence and Advanced Manufacturing, Santander Corporate and Commercial