New report looks at the future of UK manufacturing

What will UK manufacturing look like in the future?

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Government report looks at where British manufacturing might stand come the year 2050

New report looks at the future of UK manufacturing

New report looks at the future of UK manufacturing

Most people reading this website would probably agree that manufacturing here is essential if this country is to achieve long term economic growth. However, the rapid changes taking place in the modern manufacturing world could see Britain left behind if it doesn’t keep up with the competition when it comes to new ways of doing business, according to the latest report published by the Government. The position where we stand today, whilst improving on recent years, doesn’t make for great reading – manufacturing currently contributes £139bn a year to UK GDP and yet most firms are small, with 87% employing less than 20 people.  And whereas 9 million people worked in manufacturing in Britain in 1966, there are less than 3 million today, a decline that has been much more rapid here than  in other developed countries, as can be seen in the graph below.

manufacturing share of GDP

Manufacturing share of GDP 1990-2010

However, the Future of UK Manufacturing report, which was published this week, reveals that there are some great opportunities on the horizon, and if Britain acts now we could be in a position to take advantage of some of the trends that are going to effect the way things are made in the future.

With a growing world population and increased demand for materials, water, energy and land, supply chains will become much more volatile and manufacturing closer to home will make the country more resilient to these effects. Reshoring production, where manufacturers who had previously moved their production overseas bring it back to this country, is already a reality, with it now much easier for Britain to compete with lower cost locations on quality, delivery speed and customisation. Firms such as Hornby, John Lewis and Bathrooms.com have all begun reshoring production over the last 12 months, and many more are likely to follow suit in the next decade or so.

It goes without saying that technology will also play a massive part in the manufacture of goods in the future. Mass personalisation of low-cost products by methods such as 3D printing will enable everyone to become their own manufacturer, and increasingly manufacturing will become more urbanised and less based around large factories with many workers. Companies that do well will be those that make use of ‘big data’ to learn more about their customers and use it to their advantage to improve their products and enhance their competitiveness.

But perhaps the most interesting of  trends are those based around sustainability. Remanufacture, where new life is breathed into old products rather than replacements made, is likely to play a big part in the revenue stream of many manufacturers going forward. Already JCB are selling a comprehensive range of remanufactured parts for its machines and more are likely to follow suit as resources and raw materials become more scarce. Shared ownership of products is also likely to become much more widespread, calling for considerably more durable things to be made. Britain has always been thought of as a place to buy quality and so should be in  good position to take advantage of this.

The UK needs to raise its export performance, particularly to emerging economies

The UK needs to raise its export performance, particularly to emerging economies

One of the more shocking facts set out in the report is that more and more British manufacturers are becoming foreign owned, and that by 2020 it is likely that these firms will account for over 50% of UK output. Is this a bad thing if these companies are still creating jobs for the British people that they employ on their production lines? Well, despite a rise in manufacturing capacity, the increased us of technology will mean that there will be less  people working in manufacturing in the future than there is now.

That doesn’t mean that there isn’t a huge need to find people to work in the manufacturing sector – Over the next 7 years there will be around 800,000 UK manufacturing jobs to fill as people retire or leave the industry. Sir Richard Lapthorne, who lead the team behind the report, describes the situation thus:

“The quality and skills of the workforce will be a critical factor in capturing competitive advantage. It is essential that UK policy makers focus on the supply of skilled workers, including apprenticeship schemes, support for researchers, and the supply of skilled managers.”

But finding people for these jobs may be a hard sell, particularly to young people and woman who are apparently the ones with a negative perception of manufacturing. Yet  jobs in the industry can be both highly skilled and well paid – manufacturing remuneration is generally 10% higher than average UK wages, reflecting the high levels of skills required in the roles.

The report concludes that without a doubt action needs to start now if the UK is to take advantage of the rapid changes taking place in the modern manufacturing world. As well as keeping up with technology, sustainability and training skilled workers, we need to ensure that we are exporting the goods we make to the right countries – sales of our home made goods to developing countries are still lagging behind compared to many of our European neighbours.

Without a doubt there will be a huge transformation in manufacturing over the next few decades which present major opportunities to those who take advantage of it – but will Britain be quick enough off the mark? Let’s hope so.

The Future of Manufacturing report can be read here.

7 Responses

  1. At college in the 80s I did a short course called The Economics of Industrial Innovation, or maybe that was the title of one of the books. Anyway, wealth and development are associated with each other. Crudely, a companies HQ and R&D departments are usually in the same country. Companies with some kind of developing product are probably the growing ones. That’s the kind of thing we wrote in essays.

    Does it matter that UK manufacturers are distantly-owned? Yes, because the research and development jobs; the world view, the connection to markets, will be in the same country as the corporate HQ. Likewise, when there is capacity to close, it’s easier to close the furthest one away. In my business for example, there is a vast UK ex-Courtoulds factory making raw microfibre that can be mixed with other yarns, When Courtoulds still existed, it was widely known that they made Tencel microfibre. Now that the factory is owned by Lenzing of Austria, the new products and office staff are all Austrial based. UK children are probably taught at school that fabrics aren’t made here any more, dispite the factory still existing, because teachers don’t see anything to contradict that conventional view on TV.

    I guess the UK is unusual in spending taxpayers’ money promoting overseas ownership. George Osborne has just been off to China to do it, and is very pleased that a nuclear power station can be privately-funded with Chinese money and UK taxpayer price-guarantees. There is an office called UK Trade and Investment which seems to do nothing else but try to sell British assets. Northamptonshire Enterprise Agency tries to prevent factories becoming cheap enough for locals to rent by doing them up with taxpayers’ money until they are in a fit state to let to overseas investors. London Fashion Week promotes overseas-made products. London Development Agency (now closed) used to fly UK designers to China at UK taxpayer’s expense to introduce them to Chinese factories.

    I know that there are alternatives to spending my tax money in trying to sell UK assets around the world.
    Sane countries in Europe subsidise things like technical education, trade directories, and promotion of locally-made goods. I find this kind of thing when I google.

    I know that there are alternative ways of getting capital to fund large projects like airports that need to be privatised or nuclear power stations that need to be built or oil refinaries that need another £billion. EmployeeOwnership.co.uk is a web site about how large organisations can encourage job ownership, so that in the long term they might become employee-owned and able to take pay cuts in bad times or maybe buy-out their rivals or expand in good times. Employee-owned organisations are more likely to train their staff as well. That’s a better way of getting private capital into large projects.

    I know that the money spent on overseas delegations could better be spent on getting the basics right in the UK: basic access to workshop space, basic trade directories, basic technical education. Whatever is done in countries like Portugal, our government should do here. Or, just cancelling the government programs that do more harm than good, like London Fashion Week, would be a good start.

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    PlanB4fashion blog

  2. Michael says:

    The report’s findings need to be tatooed on the forhead of every politician and bureaucrat who clearly are completely ingnorant of what local manufacturing contributes to the nation’s financial and social wellbeing. Mouthing platitudes when elections are on the horizon and falling over themselves to fund overseas screwdiver plants, enriches other nations and does little for long term employment, skill development or the UK taxpayer’s pockets.
    I would argue that it has become ingrained in the ruling elite’s psyche, that making things is a dirty business and beneath their dignity, and they have successfully avoided having anything to do with it since the the second world war, other than to contribute to denuding the whole nation of its industrial base.
    Britain can make things-beautiful and useful things, but they need a visionary ruling elite who understand and are willing to help not impede a resurgence in home grown and owned manufacturing.
    To achieve that goal, the voters will probably have to empty the Parliament completely of the dross that has filled the chambers- government and opposition, and elect those with real talent who understand and will do what needs to be done.

  3. Stuart Wright says:

    For Hi-Tech manufacturing to survive in the UK it must be protected by the government.
    We have to have a level playing field.
    I have worked in the electronics industry all my life and exported British equipment to Asia for manufacturing products such as mobile phones, computers automotive components. Those factories could be in the UK, The labour content is relatively low because the production lines are mostly automatic. The jobs in these facilities are well paid. The production line equipment is often imported (although much less now). The raw materials like copper and oil have a global price.
    Why are these factories not in the UK? Because we don’t have a government that subsidises factory running costs, we don’t have a government that imposes an import duty on goods that we could and should make in Britain and we don’t have a government that bans technology transfer out of the country.
    Three years ago the British company that I worked for was bought by an overseas giant for pennies, they have since transferred all of the designs and technology to Japan and sell all UK made parts to an overseas office at cost thus avoiding paying any corporation tax here.
    The biggest joke is that the sale of the company would have boosted the UK’s export figures and our government would have seen it as tremendous success!

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