Are UK manufacturers taking advantage of the opportunities?

Posted on 27 Oct 2017 by The Manufacturer

Is there still a lack of appetite for capital investments from UK manufacturers? Mike Rigby, head of Manufacturing, Transport and Logistics at Barclays, reports.

UK Manufacturers Stock Manufacturing Image - Courtesy of Barclays.
UK manufacturing is at a crucial turning point, with the months ahead still filled with opportunity – the majority of which are Industry 4.0-related.

Back in January, I described 2017 as being “a year of opportunity” for UK manufacturers.

The previous 12 months had seen the far-reaching disruption impacting every company – regardless of size, sector or location –  coalesce around what’s become widely referred to as ‘Industry 4.0’.

It felt to me like 2016 was the year when transformation within UK manufacturing companies really picked up. The ‘digital economy’ dominated the world and terms such as ‘disruptive’ and ‘transformative’ became ubiquitous boardroom parlance.

In Barclays’ Future-proofing UK manufacturing report, more than half (58%) of British manufacturers said they had invested in industrial automation, and a further 68% saw potential for more automation investment in the future.

Similar sentiments towards digital technology were reflected in the latest Annual Manufacturing Report. Some 71% of executives said that they had spent more on ICT than in the previous year, a record expression of confidence equalled only by the Annual Manufacturing Report 2014.

That same report showed that more than two-thirds of UK industry executives (67%) were familiar with the term ‘Industry 4.0’, with an encouraging 85% either already undertaking a move towards it or planning to do so in 2017.

Against that backdrop, in January I noted that there was an air of anticipation surrounding the months ahead and the opportunity it presents for UK manufacturing.

Further thought-leadership courtesy of Mike Rigby:

Holidays are over, so what now for UK manufacturing? – a timely discussion on why the government’s long-awaited industrial strategy is of such vital importance.

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

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.

I had high hopes that Industry 4.0 would transition from being a buzzword to a pragmatic business tool and become relevant to your archetypical £8m engineering company producing machined components.

So, what has the reality looked like?

Surface indications would appear to be firmly on the positive side. After starting 2017 on a 32-month high, the Purchasing Managers’ Index (PMI) may have fluctuated over the course of 2017 to date, but the score has been on an upward tick for the most part.

Purchasing activity hit a three-year high in April, with order books hitting a level last seen since the 1980s in June. Small and medium-sized manufacturers grew at the fastest pace since 2010, driven by export order books reaching a more than 20-year high and job creation rising for the tenth consecutive month in June.

Dig a little deeper, however, and there is still a missing appetite for capital investments. At a time when we are seeing the fastest pace of innovation in technology there has ever been, it’s frustrating to see individual companies and sectors at large trapped in a period of low growth.

The window of opportunity offered by a weak sterling and an improving global economy may close unless businesses –manufacturing, transport or logistics – invest more to improve efficiency and ramp up capacity.

It would be all too easy to place the blame for this lack of investment at the door of Brexit-fuelled caution and uncertainty. Yet, the UK’s continued poor productivity performance compared to the other six members of the G7 would indicate the issue has been prevalent for far longer.

Unfortunately, it’s a gap which looks likely to widen as our country’s global competitors ramp up their own digital manufacturing initiatives, supported by significant national, regional and business-level investments.

Automation Robot Robotics Digital Smart Factory Smart Factories
China, South Korea, Japan, the United States and Germany represent almost three-quarters (74%) of total robotics sales volumes in 2016.

Take automation, for example. New data from the International Federation of Robotics (IFR) has revealed the world’s largest markets for industrial robots. The top five – China, South Korea, Japan, the United States and Germany – represent almost three-quarters (74%) of the total sales volumes in 2016.

Italy, France, Spain and the Czech Republic all appear alongside Germany in the top 15; the UK is conspicuous by its absence, placed marginally higher than the global average.

That being said, there are signs of positivity. Sales of industrial robots within the UK did increase in 2016 for the first time since 2012, according to IFR figures.

What is clear is that UK manufacturing is at a crucial turning point. The year is still one filled with opportunity, the majority of which are Industry 4.0-related.

I am hopeful that November’s publication of the industry-led government Industrial Digitalisation Review (IDR) will provide the support necessary to bring the UK’s performance up to the same level as the rest of the world – if not greater.

The question remains, are UK businesses hungry enough to take advantage?