Despite the often quoted ‘decline in British manufacturing’, the sector remains key to UK economic growth, contributing around 10% of GDP, with industrials alone (including aerospace, defence and petrochemicals) accounting for more than 5% of GDP. In fact, contrary to the forecasts of many commentators, manufacturing has been growing at a very healthy rate. Certainly, strong export from overseas has been buoyed by a devalued pound which has boosted price competitiveness, but let’s not forget that weak sterling has made imported raw materials more expensive. So the strong performance is really due to high-quality products, exciting innovations, improvements in efficiency, and a generally high level of customer experience.
Many of the exciting new technologies that consumers now take for granted were originally developed by industrial innovators, and technologies such as machine learning and smart automation are being successfully deployed across related sectors. These intelligent systems are delivering benefits far beyond simple automation – they are bringing enhanced visibility and greater agility to supply chains, and delivering new levels of efficiency in inventory management. UK industry is enjoying the support of government, as outlined in the Industrial Strategy White Paper, which sets out the clear goal of boosting our competitive position by raising productivity and returning high-value operations back to the UK. And this is a key point, because without the support of a business-friendly government, manufacturing firms are likely to be handicapped when competing against overseas companies that enjoy the backing of policymakers.
Political and regulatory landscape
The issue of Brexit has introduced a whole new set of variables for industrial firms to consider, from potential trade tariffs, to new restrictions on the movement of people, which is likely to inhibit employers’ ability to attract skilled workers from across the EU. Border delays could have a major impact on just-in-time processes, while funding and investment from the EU will also be affected.
However, whilst firms should certainly be making plans to deal with the downsides of Brexit, they should also be awake to the opportunities that are likely to emerge, not least of which would be the opening up of new international markets as tariffs on British exports outside of the EU are lifted.
As Brexit looms, there has been increased recognition that the UK carries a responsibility to train its own people, rather than relying heavily on attracting high-calibre talent from overseas. And this change in attitude is reflected in the growing number of apprenticeships in the manufacturing sector. However, it is questionable whether the supply of skilled people can keep pace with demand, at least in the short term, particularly in highly specialised sub-sectors like robotics and artificial intelligence. The good news is that government recognises the challenges industry faces, and the new National Retraining Scheme includes significant investment in re-skilling and up-skilling people already working in the sector.
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