We need a super solution for fixing manufacturing talent issues

Posted on 28 Jul 2022 by The Manufacturer

Dale Brimelow, Operations Director at packaging manufacturer and consultancy Duo, believes long-term solutions for attracting, retaining, and developing talent in the manufacturing sector requires a super-deduction style approach.

Talent shortages

The manufacturing sector is struggling to fill 95,000 vacancies. The data, from Make UK, shows this skills shortage is costing the UK £7bn in lost economic output – the equivalent of around £21m per day in lost Gross Domestic Product (GDP). Alarming as these figures are, I fear we’re facing a perfect storm which suggests the situation is only going to get tougher for manufacturers.

Talent shortages aren’t exclusive to the manufacturing sector right now. Growth organisation, TechNation recently reported there were two million vacancies in tech in the last year, more than any other labour area. Other sectors such as hospitality, travel, education, and fashion are all reportedly facing talent shortages. Undoubtedly, there will be some crossover in these vacancies. Fashion and tech jobs existing in manufacturing. However, the concern is that the UK-wide battle for talent is getting increasingly competitive, and manufacturing is already on a backfoot.

For a whole host of different reasons, manufacturing is often a less appealing choice for talent. It doesn’t always seem as attractive as travel or tech, and when other sectors start upping the recruitment ante, it may prove harder than ever for UK manufacturers to fill vacancies. Addressing this challenge will prove expensive, especially in the current climate, and manufacturers would benefit from short-term support.

A short-term, super solution

Tax relief has been provided to manufacturers in the form of a super-deduction. From 1 April 2021 until 31 March 2023, companies investing in new qualifying plant and equipment have been able to claim 130% first-year capital allowance and a 50% first-year allowance for qualifying special rate assets.

The super-deduction has essentially allowed companies to cut their tax bill by up to 25pence for every £1 they invest. It’s a government-led move that’s been designed to drive investment in productivity-enhancing assets. Applying the same short-term approach to addressing talent shortages could prove both a quick fix and a long-term solution for enhancing employability in manufacturing.

Tax relief on recruitment and training expenditure, as well as a special allowance for new salaries, salary increases, and bonus payments, would make it more affordable for manufacturers to invest in growing and developing their workforces.

Such a proposition is likely to sound attractive to employers from other sectors, and they may well question why an employment super-deduction should only be made available to manufacturers? My view is that it’s much more expensive and complex for manufacturers to overcome talent shortages.

Manufacturing recruitment challenges

UK manufacturers are innovative and ambitious. Despite skills shortages, global supply chain uncertainty and rapidly rising raw material and energy costs, they are calling on government to set a 15% GDP target for the sector. Make UK, along with 9 in 10 manufacturers, think government should introduce a national target to encourage growth of manufacturing’s share of GDP – this would represent £142bn for the economy.

This level of ambition is a classic hallmark of a progressive, forward-thinking sector, but this isn’t always more widely understood or appreciated. For decades, manufacturing has been dogged by misconceptions, which have affected the sector’s employability and is one the first reasons I believe the sector would benefit from an employment super-deduction. There are many creative and concerted efforts being made across the industry to increase the appeal of working in manufacturing. They are, unfortunately, still falling short, as more time and resource is required to change age-old, seriously outdated views of manufacturing careers.

Employers remain best placed to show people how enriching and satisfying working in manufacturing can be. They have first-hand experience of overcoming perception problems, and a super-deduction could make it more affordable for manufacturers to invest more in recruitment. It would allow for the expenses of harnessing their greatest asset in this battle – existing employees – and for more face-to-face engagements to effectively change perceptions.

Not a remote chance?

The second reason I believe an employment super-deduction is particularly relevant for manufacturing is the wider shift in ways of working. The impacts of the pandemic have seen a surge in remote working. Recent data from New Street Consulting Group shows there’s been a 28% rise in advertised remote working roles this year, with ten times more of these types of job adverts than two years ago.

Employers across several sectors are adapting job roles, making them hybrid or remote to increase appeal amongst talent pools. Manufacturing cannot compete with this. Many roles throughout the sector need to be completed in production facilities, using fixed machinery and specialist equipment.

There’s significant appetite amongst manufacturers to grow workforces. Data from Make UK shows one-in-five (21%) manufacturers believe employment will grow by over 20% as they expand their businesses. A third (35%) said employment would increase by up to 10%. To realise these targets, manufacturers will need some support to level the playing field in an increasingly employee-led recruitment market. They will have to invest in other incentives such as wellbeing benefits, higher pension contributions and bonus schemes to compete with the appeal of remote working. An employment super-deduction could help make this affordable for manufacturers.

An immediate opportunity

Finally, short term tax relief could assist manufacturers in quickly bringing people into the sector. Recent ONS data (July 2022) shows the UK’s employment rate was estimated at 75.9%. There is a considerable pool of available workers, and manufacturing is perfectly primed to create immediate employment opportunities.

Entry-level and mid-tier roles throughout the sector can be made possible with short, intensive inductions and training, with continuous upskilling put in place to support the ongoing development of employees. An employment super-deduction could help fund training and attractive bonuses to appeal to this pool of available workers, whilst also allowing for adjustments to existing salaries to maintain a harmonious remuneration structure.

Tax relief via an employment super-deduction does not need to be made available in the long-term. A short burst of support would enable manufacturers to rapidly invest in the competitiveness of manufacturing employability and address the biggest challenge of getting new recruits through their doors. In many instances, once this hurdle has been overcome, manufacturers find employees want to stay for the long-term and grow with their businesses.

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About the author

Dale has been an integral member of the Duo team for more than 20 years, working his way up the ranks from his initial role as a conversion operative. From there, Dale spent two years working in the print department and became involved in artwork and origination.

This in-depth foundation of knowledge and first-hand experience of the whole manufacturing operation, along with his natural passion for technical innovation, led Dale to his current position as operations director, following his appointment to the board of directors in 2009 as part of the business’ MBO.

Since then, Dale has been responsible for procuring new machinery, as well as securing funding to support the recent site extension of Duo’s Manchester headquarters. Using the latest machine technology, Dale and his team have designed new processes to enable a greater use of recycled polythene in products. This has resulted in 42% of total material usage being recycled, with virgin polymer usage now at 46% compared to 66% in 2019. This investment in machinery has enabled Duo to increase polythene film output by 25% and overall production output by 10% each year. This is evidenced by Duo’s sales figures – in November 2020 it saw a 22% increase against 2019, recording the largest total monthly sales in the company’s 32-year history.