Based on a survey of 600 senior manufacturing managers in the three countries, carried out by NOP, the report shows that the ‘select group’ of companies in all three countries that invested strongly in all three areas achieved substantially higher rates of growth in productivity and profitability.
However, the survey also showed that, in the UK, the difference in performance between the ‘select group’ and the rest of the sample was smaller than in the other three countries. This suggests that other factors, including the need to make more effective use of modern working practices such as lean manufacturing and high performance working also need to be addressed if the UK is to succeed in closing the productivity gap with its competitors.
The survey also suggests that medium-sized and larger UK-based firms, and companies in the transport manufacturing sectors, mainly motor vehicles and aerospace, are performing, as well, if not better than their competitors.
Commenting on the report, EEF Chief Economist Stephen Radley said:
“The survey proves that investing across the board in capital equipment, skills and innovation holds the key to success. However, even this may not be enough if companies are not making the best use of modern working practices.
“But there are also some very positive messages for UK manufacturers from this survey. The success of our transport manufacturers and our medium-sized and larger companies shows what can be achieved. The challenge is to get far more companies to match these standards” he added.
The survey also provides a number of pointers as to how improve UK company performance. Larger firms have a key role in encouraging their suppliers to improve their performance. In addition, government programmes such as the Manufacturing Advisery Service have an important role to play in helping companies to identify and remove barriers to improving productivity.
In particular, to raise our performance on innovation, EEF has urged that the increases in government spending on science promised in the forthcoming Spending Review be matched by targeted business support that addresses current weaknesses in collaboration and networking.
Key findings:
Investment
Increases in UK investment lies behind that in France and Germany over the last twelve months. UK firms are less likely to see trends in investment as positive for their productivity levels.
Lack of internal finance remains the major constraint on UK investment with twice as many firms citing it as a barrier than in Germany and a third more than in France
Payback periods are shorter in the UK than in France and Germany.
UK firms are more likely to employ management discretion to block investment projects that would otherwise have gone ahead.
Improving our performance depends on a range of factors including minimising cost burdens, improving profitability through greater use of modern working practices and encouraging related improvements in skills and innovation. However, the government could help by introducing measures such as capital credits that address cashflow constraints on investment.
Innovation
More UK firms undertake innovation in existing/new services to customers, suggesting that they are leading the way in adapting to the demands of modern manufacturing.
UK firms are more likely to undertake a range of innovation activities but struggle to translate this into new revenue streams.
UK firms lag behind German companies in levels and effectiveness of their collaboration with academic institutions.
UK manufacturers also use networking less frequently than German firms to find out information on technological developments, collaboration opportunities and sources of assistance. They tend to find this networking less effective than companies in France and Germany.
Skills
Only UK firms regard the skills available to them as having a negative impact on trends in productivity.
UK companies have recruited the lowest number of apprentices in the last two years, 40%, compared with 70% and 60% in Germany and France respectively.
The effectiveness of the UK apprenticeship system can be increased by improving the quality of careers guidance and by raising the funding for those joining apprenticeships above the age of 18.
ENDS