Britain pioneered the first industrial revolution, bringing with it significant social and economic change. As we blogged earlier this week, the 4th industrial revolution is upon us – will the UK be a leading player?
As the 9th largest manufacturing country, we certainly have the potential to be, but some hurdles stand in the way.
Manufacturing is central to the UK economy
Manufacturing is central to Britain’s success accounting for almost half of total exports, 69% of total business R&D and employing over 2 million people across all regions of the UK.
The sector also contributes significantly to the Exchequer in tax receipts, pays above average wages and sows the seed of future economic growth through investment in innovation.
Industry 4.0 is happening
Industry 4.0 is expected to be a business reality within the next decade, highlighting the speed at which change will take place. Manufacturers are planning to make investments in new technologies to take advantage of this – so the ambition is there.
The productivity gains that can be expected will flow to those who move first while the economic disruption will see laggards struggling to keep up.
In a globalised world, firms are able to choose their investment location to maximise a return. Our previous surveys have shown that quality of infrastructure is the 4th most important factor for such firms when choosing where to make their next investment.
Looking at digital infrastructure will it enable 4.0 or cause a 404 error?
EEF’s 2015 Digital Connectivity Survey, the results of which we’ve been sharing all week, shows that manufacturers are worried about future digital infrastructure provision.
Our survey showed that over a third of manufacturers are paying over £5000 for internet connections to their business. With almost a quarter of small manufacturers paying this amount.
What can be done?
Decisions taken now on internet connectivity will have a critical bearing in the near future on whether or not Britain is a leading player in Industry 4.0.
To date, most of the focus has been on future household internet access despite the economic returns from better internet connectivity being higher if businesses are prioritised.
Additionally, many of the activities of government and regulators has amounted to a piecemeal approach to the rollout of UK digital infrastructure and tinkering at the edges on competition.
Manufacturers need best in class provision if Britain is to take advantage of the next industrial revolution, companies are paying inflated sums to have proper access and are fearful they will not have competitive access five years’ down the line.
EEF believes there are actions that can be taken now to reverse the drift. Government should:
1. Task the National Infrastructure Commission with assessing the UK's digital infrastructure network and outline an investment path that will see the UK consistently delivering internationally competitive internet access to businesses.
This is exactly the kind of issue we believed an independent infrastructure body should be set up to deal with. Most notably the fragmented decision-making environment for digital infrastructure policy and the limited coherent look ahead at the type of network businesses and households will need.
2. Launch a review of competition for business broadband, with a particularly focus on leased lines, with the aim of getting the cost to businesses falling over this Parliament.
Manufacturers have flagged up to us the poor communication surrounding the rollout of superfast broadband. Additionally, if they upgrade to a leased line to get best in class they are then deprioritised for superfast broadband. Some have suggested market failure, our view is that a review of whether or not a competitive market exists is desperately needed.
3. Ensure Innovate UK has the funding to work with industry to develop cluster networks of early adopters by easing the uptake of digital technologies across industrial supply chains. This should include supporting investment in physical industry 4.0 demonstrators.
The benefits of Industry 4.0 will be felt more strongly where entire supply chains embrace new technologies and ways of working. For some, particularly small manufacturers, the risk of investment will be greatly reduced where realistic outcomes can be recognised through physical demonstrators.
4. Be proactive in pushing for full implementation of the digital single market in goods and services across the EU to deliver benefits for UK businesses.
The strongest response in our survey to future scenarios was on the digital single market.
74% agreed with the statement “The UK should push for the completion of a digital single market to allow businesses to seamlessly access online goods and services across the EU”.
Just 1% disagreed.
The Digital Single Market is a 3 pronged approach which can deliver significant benefits to the UK in the areas of enabling cross-border trade online, improving the security of digital networks and reducing the barriers to digitalisation such as developing interoperable standards and improving digital skills.
Much to do, little time to do it
We have a small window of opportunity to create a business environment that anchors modern manufacturing in the UK.
After that we’ll be in catch-up mode and one thing that can be guaranteed is that playing catch-up will be more costly.