What UK manufacturing needs to thrive in the digital age

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There’s no doubt we’re in the midst of landmark change in UK manufacturing. As we recently laid out in our Rethink Manufacturing report, the government has promised a greater focus on Industrial Strategy to help ensure UK manufacturing is ready to meet the challenges ahead and remain globally competitive. Additionally, manufacturers are wrestling with how to adapt to the new reality of the Fourth Industrial Revolution (4IR).

 

Gearing up for the future

Recent developments, including both political and macroeconomic events as well as the increasing pace of technology developments, point to disruptive times ahead for manufacturers. As the pace of innovation continues to accelerate, closer collaboration is needed between business, government and academic institutions to ensure the UK remains a globally attractive place to invest.

Establishing the UK as a leader of manufacturing innovation will require greater investment than ever before into R&D, commercialisation of R&D and the adoption of creative solutions. As the government’s Industrial Strategy Green Paper points out, the UK trails other OECD countries in its investment into R&D, and its commercialisation.

The government could help manufacturers by facilitating faster routes to market, increasing incentives to commercialise intellectual property developed in the UK, and through support for innovative start-ups.

Particularly promising is the idea of ‘sand boxes’, referring to controlled environments around specific geographical areas or clusters of businesses, where the traditional barriers of red tape and regulations are relaxed, innovation is encouraged, and any problems can be ironed out before widespread manufacture and entry into the market.

As an example, driverless vehicles are already benefiting from taking the initial first steps towards such an approach. A bolder, more extensive sand box approach, in which ground-breaking technologies could be user-tested in controlled environments, could accelerate the uptake of new technologies.

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Skills

While many view 4IR as primarily about state-of-the-art technology, such as 3D printing or artificial intelligence, at its core 4IR really means smarter products, processes, and people. And it’s this last item that has many manufacturing employers worried.

KPMG has talked with manufacturers from across the UK, including at the EEF National Manufacturing Conference earlier this year, and we’ve found that access to the right talent was one of the biggest concerns they had.

Already there is a skills gap in the industry and the demand for workers with the skills needed for 4IR is growing. From apprenticeships to up-skilling their existing, businesses are looking to strategically meet their current and future needs for new talents and knowledge.

Having a strategic training and development programme will not only help the business grow and evolve, but will help retain talent who benefit from a culture of lifelong learning.

The key will be to have a skills strategy tied to business goals, rather than invented by someone in HR at a head office.

 

Investment

While many of the most innovative 4IR strategies are no or low cost improvements, there are obviously some changes that could require significant investment. To attract this financing, manufacturers need to make sure they ‘have their house in order’.

This means a coherent strategy for the business, from R&D, through innovation and commercialisation. We need positive and collaborate working relationships throughout the organisation, and discipline around the fundamentals of working capital management and cost control.

Manufacturing's priorities:

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Brexit

The changes wrought by Brexit will be significant in the shorter term for UK manufacturers who are dependent on international supply chains and export markets.

To help the industry come to grips with these changes and plan their adaptation strategy, we’ve created a Brexit navigator that looks at all potential variables that will impact businesses, and what actions they need to take between now and 2019. These changes will impact the likes of logistics, lead times, inventory, working capital, pensions and much more.

 

As new sectors and ways of working come to fruition, old business and ways of working will fall away, and there will be winners and losers in this race for the future. Businesses must ensure they have a strategic plan for meeting this change head on, so they aren’t left behind.

The most innovative and forward-thinking engineers and manufacturers will rise to the challenge, and we look forward to working with our clients to anticipate future developments, and ensure the UK manufacturing industry is ready to capitalise on 4IR.

Author

UK Head of Industrial Manufacturing at KPMG

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