The survey of six hundred companies was published today by EEF, the manufacturers’ organisation as part of a comprehensive study on High Value Manufacturing in the UK now, and in the future. It highlighted that manufacturers are now becoming ever more complex and sophisticated businesses with the integration of a number of activities.
In activities such as research, design & development and service provision almost 90% of companies said that the primary location would remain in the UK. The survey also showed that, even in the area of production and assembly, whilst there would be some moves to low cost economies, seven out of 10 companies said that their primary location would still be the UK.
Commenting, EEF Chief Economist, Steve Radley, said:
“This survey confounds the myth that manufacturing is on a fast boat to low cost economies with little physical production left in the UK. While it is inevitable that some production will move to lower cost countries, the UK will still retain a substantial level of high value activity. Companies are shifting into activities such as research design and development and developing service offerings that leave them less exposed to competing on price with low cost countries.”
However, the survey also showed that the association with the UK amongst foreign owned companies was much weaker, especially in the areas of design, development, research and marketing, where only half saw the UK as the main location. This reflects the fact that companies with mainland Western European owners are more likely to locate these activities in mainland Western Europe than in the UK. No significant change is expected in five years’ time. Similarly, companies with their headquarters in Asia were most likely to base primarily their research in the same region.
“This highlights the fact that countries such as India and China are increasing their design and development capabilities. It illustrates the importance of maintaining an internationally competitive environment in the UK if it is to continue attracting these activities” added Mr Radley.
The survey also examined where manufacturers see their competitive strength now and in the future. Currently, production and assembly was the most frequently ranked as the number one source of competitive advantage, ranking highest for 29% of companies, followed by design and development (23%) and service provision (18%)
However, the results showed a clear shift towards innovation driven activity with design and development expected to overtake production in the next five years as the key competitive activity. In addition, the survey backed the increasing evidence that manufacturers are becoming more complex businesses with the provision of services increasing to a close third behind production.
By company size, large companies were more likely to cite design and development as one of their top three strengths, though looking forward all sizes, except mid-sized firms (251-500 employees) thought that design and development would become more important to them.
However, brand and marketing was more closely associated with small and medium size companies, in particular micro companies (<50 employees) reflecting their focus on competing by developing niche products and services.
The survey also backed the growing weight of evidence that export-intensity is associated with a greater degree of innovation and a focus on design and development. Over 80% of companies with a percentage of turnover from exports greater than three quarters cited design and development as one of their key strengths in 5 years time.
The report also showed the turnaround in the performance of manufacturing with high value sectors leading the way with their scope for innovation and product differentiation. The top performing sectors have been chemicals, man- made fibres and electronics, growing by 85% and 73% respectively. However, EEF’s analysis also shows that there has been a turnaround in more traditional sectors such as motorcycles and machine tools which have been able to perform strongly in niche markets and with strong branding.
ENDS