While the competitive challenges posed by low cost regions have not diminished, fewer UK manufacturers are reporting a significant impact from price competition in key markets, compared with 2004. Furthermore, whilst many low cost competitors, such as China, have been striving to become more innovative, only two fifths of companies saw higher value added goods from these competitors as posing a threat and only three per cent a significant threat, down from half and 12 per cent, respectively in 2004.
The challenge from low cost economies is firmly on companies’ radar and they are adopting a range of strategies including entering niche markets, increasing innovation and improving service delivery. This means that manufacturers are competing less on price and more on quality and customer service as a result.
Alan Hall, Director at EEF Northern, based in Washington, said: This survey paints a positive picture of how manufacturing companies have adapted to the challenge of the global environment. Instead of competing on price alone they are adopting a range of strategies to take advantage of emerging markets. While there are many other challenges on the horizon, manufacturers look well-placed to rise to them.”
Neill Rayland, partner and head of manufacturing at BDO Stoy Hayward, based in Bridgewater Place, Leeds commented: “The competition from emerging markets is likely to increase as these new economies move further up the value chain. We see an increasing challenge from China and India as they develop the low cost models that we have seen to date and begin to add innovation, research and increasing quality to the mix.
“However, the threat from established economies such as Germany and the US must not be overlooked. Like the UK, they are associated with quality and have access to sizeable home markets with the ability to tap into overseas markets. What’s more, manufacturers in these countries can also outsource to lower cost economies to shrink their cost base and boost their competitiveness.”
As part of their strategy, the survey shows that manufacturers will continue to look overseas to reduce costs. Seventy per cent of companies who already have overseas operations expect this proportion to increase within the next five years and one third of companies with no production currently outside the UK expect this to change by 2012.
However, the survey also shows this will not lead to an exodus of manufacturing, with the UK remaining the centre for high value innovative activity. Three quarters of companies expect the UK to be the primary location of research and development in five years’ time with only three per cent of companies locating production outside the UK to access new technologies. This compares with two thirds of companies using overseas production to reduce labour costs.
Neill Rayland added: ”The UK is still the home of innovation for manufacturers, with three fifths locating R&D activity here. Moreover, there is still a strong demand for the low volume local niche products that are required on a just in time basis by UK customers. This has helped maintain a number of smaller UK manufacturing companies despite the turmoil of the global challenge.“
The survey shows the changing nature of competitive threats, but also the significant increase in companies identifying emerging markets as opportunities.
Whilst China and Eastern Europe remain perceived as major threats (25 per cent and 20 per cent in 2002 compared to approximately 80 per cent for both in 2007) there has been a marked increase in the number of companies looking to take advantage of the rapid growth in Eastern Europe (68 per cent), China (58 per cent) and the Middle East, where a quarter of firms are already exploiting opportunities and a further firth expect to do so within five years.
India and Russia are also viewed more as an opportunity than a threat with over a fifth of companies seeing potential in both regions and a further third seeking opportunities within five years.
Notes for editors
For more information, please contact:
Terry Gilligan/Sandrine Powell/Diane Roskell,
Ptarmigan Consultants,
Tel: 0113 242 1155
E-Mail: terry@ptarmiganpr.co.uk/sandrine@ptarmiganpr.co.uk/diane@ptarmiganpr.co.uk
Notes to editors:
EEF Northern has more than 500 member companies in the North of England and provides the most cost effective legal, employment law, employee relations and HS&E advice and training in the UK.
EEF Northern employs teams of HR and employment specialists and has access to more than 60 lawyers and barristers to help its members understand the issues associated with the ever increasing introduction of legislation and regulation.
Membership of EEF Northern gives immediate unlimited access to the team of specialists - including the largest specialist employment law team in the UK, which provides professional no-nonsense advice and guidance either by telephone or in person.
In addition, EEF represents the interests of its members at UK Government, European and international level, and can provide advice and support on issues and legislation that can affect almost every aspect of business.
Visit www.eef.org.uk/northern for further information.
BDO Stoy Hayward LLP operates across the UK with over 3,000 partners and staff. BDO Stoy Hayward LLP is a UK limited liability partnership and the UK Member Firm of BDO International. BDO International is a world-wide network of public accounting firms, called BDO Member Firms, serving international clients. Each BDO Member Firm is an independent legal entity in its own country. The Belfast Firm is operated by a separate Partnership.
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BDO Stoy Hayward is an award winning firm. Recent achievements include:
1. '100 Best Companies to Work For' - The Sunday Times 2008
2. 'Best Workplace UK' - Financial Times 2007
3. 'Top 50 Where Women Want to Work' - The Times 2007
4. 'Employer of the Year' - Accountancy Age Awards 2007
5. 'Global Firm of the Year' - Accountancy Age Awards 2006