Editor's comment: Don’t underestimate UK manufacturing...
Author : Mark Gradwell | Editor | EPDT
03 July 2019
Mark Gradwell, Editor, EPDT
The Q2 Manufacturing Outlook, recently published by the trade body for manufacturers, Make UK, in partnership with business advisory firm, BDO, paints a worrying picture for UK manufacturing.
This editorial was originally featured in the July 2019 issue of EPDT magazine [read the digital issue]. Sign up to receive your own copy each month.
It shows domestic and export orders trending downwards, as the boost of artificial stockpiling (ahead of the original March 29th Brexit deadline) winds down, and overseas customers switch their supply chains away from the UK in the face of ongoing Brexit uncertainty. As a result, investment by the sector has been paralysed, and business confidence remains below levels seen ahead of 2016’s EU referendum.
Recent announcements about the British automotive industry, and related manufacturers in the steel and aerospace sectors, remind us of the substantial challenges UK manufacturers are facing today. Beyond Brexit, artificial intelligence, digitalisation, automation, enhanced globalisation of markets and ever greater demand from consumers for quality, precision and pace are all transforming the industry. Against this backdrop, Tom Lawton, Head of Manufacturing at BDO warns of “...the crippling anxieties the sector is facing”, highlighting that manufacturers “...need to prepare for a more digitally-fluent future, both in terms of the technologies they deploy and the people they employ, but right now manufacturers are not confident of a future worth investing in.”
Meanwhile, a new report from the University of Cambridge’s Institute for Manufacturing, carried out for the Department for Business, Energy & Industrial Strategy (BEIS), warns that the economic value of manufacturing to the UK is being underestimated in official statistics. It says the current value placed on manufacturing is based on outdated and inaccurate methods of counting, and that the economic value of manufactured goods increasingly depends on activities officially categorised as belonging to other sectors of the economy.
The manufacturing sector plays a significant role in the UK economy. According to ONS national accounts, it provides over 2.7 million jobs, makes up 49% of UK exports and contributes two thirds of all UK R&D business expenditure. However, manufacturing’s contribution to the UK economy – about 9% of GDP – appears dwarfed by services, which make up 70% of UK GDP.
But according to the report, this is misleading and manufacturing may in fact be significantly higher in economic contribution – and underestimating it could have serious implications for national decision-making. According to Clare Porter, Head of Manufacturing for BEIS: “Official statistics don’t provide the full picture of the role of UK manufacturing in supporting national economic competitiveness and growth. In particular, official manufacturing statistics don’t include the additional value added or jobs generated by services across manufacturing value chains. Many of these services would not thrive, or even exist, without UK-based manufacturing.”
The report explains that the current system of industry classification is out of date, with a range of manufacturing-related services excluded from the manufacturing category. These are mostly technical services requiring deep sector-specific technical know how, including R&D, design and testing.
“This report is a clarion call for politicians of all parties to update their understanding and recognise the central importance of manufacturing not only to local regions, but to the wider UK economy as well,” said Seamus Nevin, Chief Economist at Make UK. “An increasingly outdated understanding of what modern manufacturing actually is means policymakers have neglected the sector in the misguided belief that services, not manufacturing, is where future potential for innovation and productivity growth lies.
“The Government has set out a modern industrial strategy which will be at the centre of the UK economy post-Brexit. It is now essential that there is cross-party support to deliver on this to ensure we meet the new technological challenges of digitisation, as well as the societal challenges which manufacturing, science and engineering will be at the heart of solving.”
EPDT June’s issue contains features on Electromechanical technologies & Aerospace & Defence applications, as well as EPDT's twice-yearly IoT & Industry 4.0 supplement. Read more on what's inside EPDT this month...
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