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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