Despite the decline since the 1970s, when manufacturing contributed 25% of UK GDP, the UK is currently the eighth largest manufacturing nation in the world.
Overall, the UK’s industrial sector has increased by 1.4% a year since 1948, according to a recent report from the Office for National Statistics (ONS).
The ONS attributes the sustained growth to a better quality; more skilled workforce; a shift in production from low to high productivity goods; improvements in automation and technology; increased investment in R&D, and a more integrated global economy.
According to EEF, UK manufacturing currently:
- employs 2.6 million people
- contributes 11% of GVA
- accounts for 44% of total exports
- represents 70% of business research and development (R&D)
- provides 13% of business investment
Upcoming UK events from The Manufacturer:
- Manufacturing Leaders’ Summit: Your digital manufacturing toolkit – 14-15 November, Liverpool
- Smart Factory Expo: The UK’s biggest showcase of digital manufacturing – 14-15 November, Liverpool
- The Manufacturer Top 100 2018: Report launch – 14 November, Liverpool
- The Manufacturer MX Awards 2018: Gala Dinner and Awards Ceremony – 15 November, Liverpool
Although the contribution of manufacturing to GDP has declined on paper, many of the services provided to manufacturers which would have once been considered part of manufacturing – such as catering; cleaning; building services, security and so on – are now allocated into different areas of the economy.
However, those contributions are directly reliant on manufacturing for continued business and could actually be considered as a part of manufacturing’s GDP input. As such, many are calling for the true value of manufacturing to be recognised, a move which would see the widely cited figure of 10% of GVA almost doubling to 19%.
UK Balance of Trade:
Key findings from the Annual Manufacturing Report 2018:
The Annual Manufacturing Report 2018 reflects a surprisingly resilient mood among UK manufacturers; surprising that is to those who haven’t been paying attention.
The survey demonstrates conclusively that the argument for new digital technologies has been won: manufacturers accept that the future of (successful) manufacturing lies in the adoption of advanced – largely digital – technologies.
The core benefit of digital technology is the ability it offers manufacturers to monitor, and act upon, data flowing from connected machines, people and processes. Sensors pour data into locally and increasingly cloud-based computers where the data is crunched almost instantly to provide a moving, real-time picture of production.
This allows decision-makers, either humans or machines, to see weaknesses in the system before they become problems, or tweak systems to achieve greater efficiency. A clear 91% of respondents get this.
Furthermore, 80% of manufacturers believe Smart Factory technologies will improve their supply chain relationships, and 89% believe Smart Factory technologies will enable employees to work smarter.
FINANCE & INVESTMENT
Although, respondents split 67% – 33% in favour of the notion that they can access finance with some ease, it is a very weak majority and could quite easily have broken the other way. Fewer than 10% say they find access to finance ‘easy’, for example.
There appears to be a distinct lack of confidence in the future, suggesting that even if manufacturers do have the cash for investment, they remain reluctant to spend it on technologies and plant that will improve profitability and productivity.
Sentiment in business is everything, and the prevailing sentiment here is very clearly one of uncertainty.
And that brings us to Brexit, the uninvited guest who muscles in on every discussion about business these days.
More than 50% of our respondents believe that the post-Brexit landscape will be a tough on for SMEs, and that the opposing argument that the investment climate will be very positive attracted only soft support – which should give policymakers pause.
No amount of stirring words form politicians will alter perceptions of what Brexit has in store. Policy that demonstrates government has a plan is needed.
SKILLS & TRAINING
When two or more manufacturers get together, it is a better-than-evens bet that within 30 minutes the conversation will turn to the lack of skilled recruits. For many companies, this is becoming an existential issue.
We can revel in the opportunities that advanced digital technology offers, but if the education system is not producing young people who can staff this digital future, it is little wonder why this is such a pressing issue.
More encouragingly, respondents – by a margin of 3-1 – believe that apprenticeships are finally gaining respect as an alternative to university. Their resurgence goes some way to reversing the downward trend of the past 30 years, but the overwhelmingly positive view manufacturers have of them is countered by the fact that many companies, particularly smaller ones, are finding it extremely difficult to make the system work for them.
The majority (55%) believe that the government is sending mixed messages about this issue, nowhere more so than the Apprenticeship Levy. Only 5% have total confidence in the Levy achieving its stated goals, with some offering lukewarm support, and most downright criticism.
It is tempting to view the survey results on this issue as encouraging, and in line with all the messages that have been broadcast over the past few years about the need for manufacturers to embrace industrial digitalisation. And yet, there is clearly a degree of reserve in the answers.
There does not exist, as far as we can tell, a totally ringing endorsement for digital technologies. Perhaps suggesting that while the case for adoption is known, there is still a lag in pulling the trigger on investing in them.
There is arguably more to cheer in the view that digitalisation opens the door to new business opportunities under the heading of ‘servitization’. Just as software companies saw the benefits presented by software-as-a-service (SaaS) some time ago, manufacturers are increasingly aware of how technology can unlock some of the long-term value embedded in their products through service offerings, performance monitoring and upgrades.
GOVERNMENT POLICY & INDUSTRIAL STRATEGY
There is a tendency to assume that anyone at risk of being affected by a political development the size of Brexit will be automatically doom-laden about surviving it. In fact, in our conversations with manufacturers over the past 18 months, we have found them to be generally sanguine about it.
Of course, manufacturers – like most business people – dislike anything that creates uncertainty, but almost all have said ‘Brexit is happening, let’s get on with it and deal with whatever comes our way’. And that is reflected in our survey.
We were as even-handed as possible, asking whether respondents believed Brexit would boost UK manufacturer or cause chaos. They split 46-54, a surprisingly balanced response that is not hugely dissimilar from the Brexit vote itself.
However, manufacturers believe the road to Brexit will be politically difficult and will likely push the Industrial Strategy either down the agenda or off it completely.
GROWTH & EXPORTS
Manufacturers who want to succeed in the coming years – years made all the more uncertain by Brexit and its consequences – need to have growth strategies that involve getting more efficiency out of their processes and finding more customers to sell to, thereby increasing their output.
By all accounts, this is easier said than done. Our survey found that more than 60% of manufacturers are on course to maintain or improve profitability without significant change, but close to 40% are beginning to wonder where profits will come from. That is a disconcerting figure and goes some way to explaining some of the sluggishness in growth the UK is experiencing.
Similarly, more than 70% believe that conditions are right for improving exports, which is hardly surprising given the rise in global economic activity in 2017. But again, the fact that close to 30% of manufacturers appear to have no idea how to get involved in exporting or building their trade outside the UK gives cause for concern.
Dive deeper into each section’s findings and our analysis of them by downloading the full report.
Statistics by sector:
British Aerospace at a glance
- 128,000+ direct jobs // 140,000 indirect jobs
- £31bn annual turnover
- 30% productivity growth in the past five years
- 39% growth since 2010
- 18% global market share – largest in Europe and second globally to the US
- 90% of turnover to export markets – worth £26bn
- Almost a decade’s worth of work in hand, with an order book of more than 13,000 aircraft worth up to £195bn to the UK
(Information courtesy of www.adsgroup.org.uk)
British Automotive at a glance
- 169,000+ direct jobs // 78,000 employed across UK supply chain
- 25,000 new jobs to be created to cover the production of connected and autonomous vehicles
- 2,000+ automotive suppliers in the UK – including 18 of world’s top 20
- £71.6bn annual turnover
- 80% of a vehicle can be manufactured in the UK
- Annually adds £12.4+bn to the UK economy
- Annually producing £34.3bn of exports – accounting for 12% of the UK’s total export goods
(Information courtesy of www.smmt.co.uk)
British Chemical & Pharmaceutical at a glance
- 105,000 (Chemical) and 53,000 (Pharmaceutical) direct jobs // 500,000 indirect jobs
- 30,000 employed in related R&D (7,000 – Chemical, and 23,000 – Pharmaceutical)
- Annually adds £15.2bn to the UK economy
- Adds £60m to the UK balance of trade every day
- UK’s largest manufacturing export sector (£24.7bn – Chemical and £20.7bn – Pharmaceutical)
- CIA members have a combined turnover of £50bn
(Information courtesy of www.cia.org.uk)
British Construction at a glance
- 1m direct jobs // annually provides upwards of 80,000 new job opportunities
- Employs just under 200,000 women in the sector
- Annually adds £92bn+ to the UK economy – represents 6,4% of the total economic output
- 35+% of construction employees run their own companies
- More than a quarter of employers have recruited a school leaver in the past 2-3 years
- Almost 50% of employers in the building services engineering industry take part in the modern apprenticeship scheme
(Information courtesy of www.cic.org.uk)
British Defence at a glance
- 142,000 direct employees // Almost the same number in indirect jobs
- Employs 4,300+ apprentices and trainees
- £24bn annual turnover
- 18% growth since 2010
- The UK is the world’s second biggest defence exporter behind the US, generating an average of £7,7bn for the UK every year
- 34% export growth between 2009 – 2013
- 9,000+ defence companies including SMEs exist in the UK
- BAE Systems – the UK’s largest defence company – currently employs 40,000 domestically
(Information courtesy of www.adsgroup.org.uk)
- 800,000+ direct jobs
- £78bn annual turnover
- 95%+ of the sectors 6,000 businesses are SMEs
- UK Electronics is the world’s fifth largest in terms of production
- 14 of the world’s top 20 semiconductor companies have established design and/or manufacturing sites in the UK
- In semiconductors, almost 80% of the activity comes from foreign direct investment
(Information courtesy of www.techuk.org)
British Energy at a glance
- 137,000 direct jobs // 500,000 indirect jobs
- Annually adds £5.5bn to the UK economy
- The energy sector reduced its carbon emissions by 13% in 2015
- Generation output from renewable sources increased by 30% from 2014 to 2015
- Invested £18bn in infrastructure, generation, distribution, metering and customer service during 2015
(Information courtesy of www.energy-uk.org.uk)
British Food & Drink at a glance
- 400,000 direct jobs – predicted to need almost 110,000 new recruits by 2022
- Annually adds £21.9bn to the UK economy
- Accounts for 16% of total UK manufacturing turnover – making it the largest sector
- Productivity has increased by 11% over the past five years
- 96% of the sector’s 6,360 businesses are micro to medium-sized
- Exports worth £12.8bn a year – 77% of which go to the EU
(Information courtesy of www.fdf.org.uk)
- 63,000+ direct jobs // 80,000+ indirect jobs
- Companies in the UK nuclear industry have the capability to provide 80+% of the work involved in new nuclear power station projects
- 16 reactors on nine sites currently supplies 19% of the UK’s electricity
- Over the next two decades, it is forecast that globally there will be £930bn investment in constructing new reactors and £250bn in decommissioning those coming off-line
- There are currently 15 operational reactors across the UK
(Information courtesy of www.niauk.org)
- 170,000+ direct jobs
- £23.5bn annual turnover
- 6,200 companies in the sector
- 35% of manufactured plastics products exported – valued at £6.7bn
- 1.7m tonnes of plastics materials produced annually – 3.3m tonnes of plastics materials recylced
(Information courtesy of www.bpf.co.uk)
British Security at a glance
- 76,0,00 direct jobs
- £9bn annual turnover
- 65% growth since 2010
- The UK is the world’s sixth largest exporter of security equipment
- Average exports worth £2.9bn to the UK
- Benefits include national infrastructure; cyber security; policing and counter-terrorism; border security, and major event security.
(Information courtesy of www.adsgroup.org.uk)
British Steel at a glance
- 30,000 direct jobs
- 54% of UK Steel workers work in Yorkshire and the Humber, or Wales
- Annually adds £9.5bn to the UK economy
- Exports worth £4.9bn in 2013
- 1m tonnes of output in 2014
- The value of the industry has declined by almost a quarter (24%) since 1990
- More waste steel is recovered in the UK and recycled than all other materials combined
- Each tonne of scrap recycled by the industry saves 1.9 tonnes of iron ore and 0.6 tonnes of coal
(Information courtesy of www.eef.org.uk/uksteel)
British Space at a glance
- 34,000+ direct jobs // 72,000+ indirect jobs
- £11bn annual turnover
- Growing at more than 8% a year
- Exports worth ££4bn to the UK
- Achieved 27% growth since 2010
- Largest application is broadcasting, followed by telecommunications
- Services support disaster relief; telemedicine; navigation, and broadcasting
(Information courtesy of www.adsgroup.org.uk)
British Textile at a glance
- 340,000+ direct jobs across 79,000+ companies
- Annually adds £11.5bn+ to the UK economy
- Gross value added (GVA) per head measured at an average of £34,220
- Third-largest fashion employer in the EU – behind Italy and Germany
- British consumers spend annually almost £55bn on the high street
(Information courtesy of www.fashionunited.co.uk)