Manufacturing remains fundamental to our economic wellbeing. In Europe there are 33 million people in manufacturing accounting for 30% of total global manufacturing output.
It still represents one sixth of UK GDP, accounts for two thirds of our exports, employs 3 million highly skilled people and almost 80% of UK spend on research & development. Even in London, where services are king, there are still almost a quarter of a million manufacturing jobs.
When manufacturing first emerged it did so on the back of a massive emphasis on design and innovation in both products and processes. It was shaped by the huge social and cultural shock of the move from agriculture into industry and, it took advantage of a huge growth in world markets provided by our empire.
Design and innovation
Now, the same thing is happening again. Firstly, we have an increasing emphasis on design and innovation. Secondly we have transformed our processes with the full integration of IT and, thirdly, migration, the internet and 24/7 society are providing a similar social and cultural shock to that experienced in the 19th century.
UK companies are also taking advantage of the same growth in world markets, except this time it is provided by emerging markets rather than empire. Nonetheless change is constant in our sector and the pace of it is increasing. So what strategies are companies adopting to achieve success?
Firstly a substantial increase in investment and innovation. In a recent EEF survey of 500 companies, 85% described themselves as ‘innovators’. Most positively, almost three quarters had increased their spend on innovation in the past three years. On investment, the pattern was similar with over 80% of companies having increased their overall levels of investment in the last year.
The pattern of investment is also changing, away from traditional capital investment and towards intangibles such as design, research and development and marketing.
Secondly is the extent to which companies are becoming increasingly nimble on their feet to take advantage of emerging markets.
Use of services
Manufacturers are also changing how and where they add value, earning less from purely the product itself but gaining more from activities linked to these products. Whilst the manufactured product will still be at the core of their business, nowadays there are many more people working on design, service support, supply chain management or marketing.
Looking to the future, there are big opportunities for manufacturing companies to present themselves as the solution to, and not the cause of, our environmental problems and take advantage of the massive business opportunities available.
For example, the UK's "environment industry" currently employs around 400,000 people and this is forecast to triple by 2050. BERR has estimated the market in ‘environmental goods and services’ could be worth £46bn pa to UK by 2015 and this will present massive opportunities.
The global challenge
Companies are reengineering themselves to face global challenges, knowing that they can no longer just cut the price of the product they make to survive. The successful companies of the future will be highly flexible and innovative.
They will invest more and more in intangibles and be increasingly highly skilled. They will be agile in a range of overseas markets and will have a strategic approach to outsourcing rather than have a short term dash for low cost. Most importantly they will all embrace change.
The rise of countries such as China and India present us with great challenges but, with the right strategies in place, manufacturing industry and our economy will continue to thrive.