The Changing Face of Manufacturing

The fourth industrial revolution – Industry 4.0 – is here.  Britain can be at the forefront of it just as it was for the first.

It is easy to be pessimistic, especially in times of change, but what is not so easy is looking at opportunities for growth, development and innovation in a landscape still dominated by talk of rising production costs, reduced access to international markets and the threat of impending tariffs.  That is precisely what UK manufacturers continue to do, however, confounding any fears that Brexit might have caused manufacturing to hit the buffers.

The UK Manufacturing PMI remains comfortably above the 50 mark, the level which would indicate stagnation in manufacturers’ investment intentions; the index’s recent upward trend to 56.7 evidences a clear intention amongst the UK’s manufacturers to invest and expand their operations to take advantage of the increase in demand both at home and abroad. Employment figures are encouraging, as are order books – at the end of 2016 backlogs of work increased for the first time since February 2014. On an annualised basis, manufacturing output is up by over 20% year-on-year.

On the other hand, Brexit and domestic political turmoil continue to present an uncertain future and the impact of President Trump’s administration’s protectionist policies are yet to be felt on this side of the Atlantic. Rising energy costs remain an issue for small and large companies in the UK, as does the skills shortage in STEM subjects. Private enterprise may be able to ride out the storm but it will take Government intervention to properly address the systemic challenges to the sector; the recent Industrial strategy may be the starting gun for just such an intervention.

There has been turbulence this year; the Society of Motor Manufacturers & Traders reported slower investment following several years of strong growth – despite Nissan’s commitment to two new plants in the North East. Some see this development as the bellwether for the sector as a whole as it slowly recognises the reality of a harsher post-Brexit trading environment. Perhaps the glowing growth figures belie an impending downturn of which the SMMT’s announcement is a portent.  In truth, it remains too early to tell.

There are a number of challenges to the status quo for UK plc.  But the changing face of manufacturing is as much, if not more, about what companies are doing to force change in the sector as it is about what companies are doing to react to existential threats.  Industry 4.0 – the trend toward automation and use of data – represents just such a shift and it is one being embraced by companies and government alike.

Investment in R&D is up but it still lags behind other OECD countries. The Government has pledged to invest an extra £4.7 billion in research and innovation in the next four years in an effort to replicate and build on the breakthroughs achieved in recent years by the likes of the High Value Manufacturing Catapult centres.  The capability of these world-class centres of technological and process innovation is an example for how Industry 4.0 should be embraced; the Government’s all-party group on Industry 4.0 would do well to follow the lead of Rotherham’s Advanced Manufacturing Research Centre and others.

But innovation cannot be driven only by Government or academia; it is the input, investment and enthusiasm of private enterprise that funds the vast majority of the UK’s manufacturing R&D either in collaboration with the likes of the Catapult centres or through their own in-house programs. Notably, of Forbes’ list of the world’s most innovative companies, six are UK-based with four of them – SABMiller, Smith & Nephew, Reckitt Benckiser and ARM Group – flying the flag for the UK’s manufacturing sector.  Even away from the PLCs, innovation is no less noteworthy; Islabikes’ Imagine Project is a fantastic vision of the future with its commitment to developing a closed-loop supply chain. Many more are likely to follow suit.

The sector’s future will be shaped more by people than by products or processes.  Many would argue that this is where the sector’s greatest challenge lies, in shaking off its long established reputation as the dirty underbelly of UK plc and presenting it as a beacon of advancement and achievement. Only by attracting the brightest minds to the sector can it continue to thrive in a world where the vast majority of tomorrow’s STEM graduates – by some margin – will emanate from the Far East. The UK will inevitably find itself playing catch-up in an effort to deliver better training and skills but it shouldn’t prove to be too late, especially given a strong domestic skills base.  Perhaps adopting a regular review structure for skills, similar to the start-of-parliament defence and public spending reviews would help focus the Government’s efforts – and investment.

The uncertainty around Brexit and a possible further election should invite reserved judgment – and commentary – for later.  Nothing is known of what form our post-Brexit trading landscape will take and, whilst Brexit will undoubtedly be a key part of what constitutes the changing face of manufacturing, it is only part of the puzzle for the sector.

Automation will have an increasingly significant role in shaping the workforce of the future, and the extent to which automation jeopardises the human role in the manufacturing process will depend not only on the speed of technological development but the attitude of policy-makers. Whilst it might be too early to talk of an I, Robot-like future where bots are masters of their own destiny, the speed at which industry is embracing the opportunities afforded by automation is notable.

With increased productivity, better development of skills and access to international markets, the sector should prosper.  And driving all of that will be the UK’s continued innovation and investment toward a changed face of manufacturing – leading the way on the fourth industrial revolution just as we did on the first.