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Business Development & Marketing Cash Flow & Forecasting General Turnaround

Directors should plan for innovative UK manufacturing to revive their businesses post-Coronavirus

UK manufacturing innovation UK manufacturing was in dire straits even at the onset of the Coronavirus lockdown, with the CBI (Confederation of British Industry) reporting output dropping at its fastest pace since 1975 in the first quarter of 2020.
As it progressed the pandemic and lockdown revealed many weaknesses in the global supply chain, most notably in the availability of PPE (Personal Protective Equipment) for frontline health and care workers.
However, it is often said that in disaster there are also opportunities and many businesses demonstrated their agility in switching their usual production to manufacturing both PPE and sanitising equipment, for example.
But, as attitudes change, so the opportunities for innovation increase and it is a good time for directors to start planning strategies for not only producing essential supply chain elements within the UK but also for devising new products to fit the new agendas.
The UK Government has announced two initiatives aimed to protect UK business and promote innovation, Project Defend and Project Birch.
Project Defend aims to identify and protect vulnerabilities in business supply chains, with project leader Liz Truss recently describing three aims: reducing the use of suppliers from countries seen as “unreliable partners”; encouraging UK manufacturing; and, stockpiling key items such as medicines and components.
Project Birch is a short term initiative whereby the Government will “temporarily guarantee business-to-business transactions currently supported by Trade Credit Insurance, ensuring the majority of insurance coverage will be maintained across the market” potentially until the end of the year.
Meanwhile support for a recovery plan with projects that support the environment has been given added impetus with a letter to the Government from 200 businesses urging it, among other things, to drive investment in low carbon innovation, infrastructure and those industries that support sectors covering the environment, increase job creation and recovery.
All this should encourage UK manufacturers to think in terms of innovation rather than striving to recover their existing operations.
A report by McKinsey in 2019 in the context of post-Brexit UK business and supply chains identifies several key issues directors should consider when planning their strategy for the future. Their findings are relevant in the current post-Coronavirus recovery context.
The key issues for directors, it says, will be to: redefine their sourcing strategy; revisit their footprint; review inventory build-up; and, crucially adjust their product portfolio to exploit their capabilities and experience.
I know of at least one company, supplying a unique range of insulated, environmentally-friendly products to the construction industry, which is already well-placed to grow post-Coronavirus as the Government seeks to stimulate the economy, jobs and housebuilding. Build Homes Better proposes to use its technologically advanced products to build environmentally and energy efficient housing based on its rapid building system. Check them out at https://buildhomesbetter.co.uk/
The time has never been better for a revival in UK manufacturing with innovative solutions for both new products, developing a greener economy and for strengthening the in-country supply chain.

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Banks, Lenders & Investors Business Development & Marketing General Turnaround

What are the prospects for UK manufacturing?

UK manuafacturing prospectsUK manufacturing output growth held steady in the three months to May, according to the Confederation for British Industry’s (CBI) monthly industrial trends survey.
In July, the CBI reported that in the three months to June UK factory output had turned in its slowest quarterly growth since April 2016.
Furthermore, the CBI reported that ten out of sixteen sub-sectors experienced growth with chemicals, food, drink and tobacco being resilient, while car manufacturing struggled.
Confusingly the CBI also reported that order books deteriorated in the quarter.
By comparison the monthly snapshot from IHS Markit and the Chartered Institute of Procurement and Supply showed that activity levels in the UK manufacturing sector in June had dropped to the lowest level since February 2013.
IHS Markit/Cips found that high stock levels, ongoing Brexit uncertainty, a deteriorating economic backdrop and rising competition contributed to the drop in output. Weak export demand amid a faltering global economy also had an impact.
These figures, while confusing, support the hypothesis that UK manufacturing prepared itself for Brexit in March by building up stock levels and in doing so increased output. However, since then much of this productivity has been ratcheted back.
So where are we?

What is the true state of UK manufacturing?

The publisher, The Manufacturer, takes an up-beat view.
It argues that “Contrary to widespread perceptions, UK manufacturing is thriving, with the UK currently the world’s eighth largest industrial nation. If current growth trends continue, the UK will break into the top five by 2021.”
In their annual manufacturing report for 2019 they argue that there is a “surprisingly resilient mood among manufacturers with 81% saying they are ready to invest in new digital technologies to boost productivity.
But they do not deny there are challenges.
Of course, Brexit and ongoing uncertainty, is having an effect on strategic-planning and business prospects with 51% arguing that the Government should be doing more to promote exports, especially given the currently favourable exchange rates from an export perspective.
Among the challenges the 2019 survey identifies for UK manufacturing is the need for a clear strategy and strong leadership when introducing smart technology into the processes, citing lack of coherent digital strategies and in some cases an inability to understand the practical applications that technology can offer.
Another issue is the lack of skilled engineers. Some respondents argue that the education system and the Government’s approach are both failing. The survey reports that some companies are now establishing their own training schemes and academies because the situation is so bad.
However, I would argue that while the mainstream education system undoubtedly plays a big part, there is actually no reason why businesses should not be doing  so as well. After all, they are in the best position to know precisely what skills they need in a way that schools and colleges perhaps cannot.
On exporting, there were some in the survey that argued that Brexit might be a good thing in stimulating more UK manufacturing rather than being locked into and dependent on complex transnational supply chains.
One manufacturer in Cheshire is reported as saying in a Guardian article in June this year: “We are under the threat of closure all the time.”
But the article goes on to describe how this particular manufacturer is fighting back: “If we didn’t have a drive on productivity we wouldn’t be in business.”
Their solution has been to drive forward with robotic technology and with the support for their proposed changes from their workers. They have involved everyone in the process, mocking up robotic workstations in cardboard to see how they fit in with the workforce, with the result that “while robots have replaced some jobs new ones have come and staff have been trained up along the way”.
All this is without considering the opportunities for completely new businesses that will arise from the growing drive to clean up the environment and make activity more sustainable which will no doubt create opportunities among the more innovative producers for new processes and ways of doing things.
Perhaps we should not write the obituary for UK manufacturing quite yet.
 

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Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Creative thinking and innovation are crucial to manufacturing growth

Addressing the challenges facing UK manufacturing requires creative thinking, innovation and fundamentally investment if it is grow in the medium and longer term. Especially where real growth can only be achieved by exporting those products and services we provide.
Unfortunately, too many of the analyses published in the media focus only on the short term and are often also simplistic.
Where one commentator suggests that manufacturing is benefiting from the reduction in oil and raw materials prices, another focuses on the difficulties that the high value of sterling causes for exports. Where one analyst sees a continuing downward trend from the first two quarters of 2015, another focuses on the expansion in trade shown by an increase in trade and orders in October.
All this suggests that it is foolish to draw conclusions for the whole sector and that what may be helpful to one manufacturer can be a problem for another.
For example a manufacturer of specialist equipment for the oil industry is likely to see a contraction in orders due to the contraction in the oil industry whereas a manufacturer that relies on fossil fuels for energy may actually benefit from energy cost reductions.
However, these are relatively short term fluctuations and in the longer term all UK manufacturers need to play to their strengths, which are their reputation for high-quality, precision and speed of supply.
UK manufacturing cannot hope to compete in the mass market with competitors from places like Asia where wages are lower.
It may be that their most sustainable route to success and growth is to focus on using doing things differently and using innovative technology such as robotics, on supplying high-quality short run products, and on offering support and maintenance services that all rely on their valuing skilled engineers and technicians.
All this means investing much more in R & D, technology, plant & machinery and employee skills.
Essentially we need to invest in manufacturing if it is to grow and in particular if we want to grow exports.