In recent years, manufacturing in the UK has faced a variety of challenges, but it has adapted, survived and very often thrived.
Changes in the global economy provide manufacturers with massive opportunities. Companies of all sizes are increasingly global; however there are challenges for UK policy-makers if we are to win the race for international investment.
So, while manufacturers must take the lead in improving their competitiveness and growing their businesses, government also has a vital role to play in creating the right environment to do this and in sending the right signal to ensure our manufacturers invest here rather than elsewhere.
It has become fashionable to talk about the importance of manufacturing, but this has not always been the case and there are some key facts about the UK’s industrial base which are worth repeating, particularly given the current challenge we face in rebalancing the economy towards greater investment and export-led growth.
Manufacturing is globally focused, with almost twice as many UK companies exporting compared with other sectors of the economy
Today, manufacturing is a leader in innovation, accounting for more than 70 per cent of all business expenditure on research and development. Our companies are investing in modern machinery and processes, which in turn is driving continuous improvements in efficiency and productivity.
Manufacturing is also globally focused, with almost twice as many UK companies exporting compared with other sectors of the economy. These strengths ensured that manufacturing went into the recession of 2008-09 in a strong position and allowed it to lead the early recovery.
This success was hard won. The world economy has undergone significant shifts in recent decades and manufacturing has been more exposed to these dynamic trends than any other sector.
We have had to change and adapt to survive, resulting in new business models and strategies. We saw this, for example, through the 1980s and 1990s with the increasing globalisation of companies. The last decade saw a strategic shift in supply chain sourcing as companies took advantage of the emergence of low labour-cost economies.
Today, this evolution is continuing. Some companies are bringing production back to the UK, while others are structuring their operations to maximise growth opportunities across multiple markets, and collaborating more closely with their customers and suppliers. This allows companies to deliver the highest quality products and services, and manage risks through their supply chain.
It is this agility which has put UK manufacturers on the front foot through the recession and subsequent recovery by, for example, reviewing and updating their product offering to customers. Around a quarter of companies, meanwhile, are looking at how they can tap into growing demand for low-carbon goods and services. And when commodity prices rose sharply, many manufacturers looked first to innovate their products and processes to remain competitive and hold down price increases.
It is this agility that will also provide the strong foundations for manufacturing’s future growth and competitiveness, and for a stronger, better-balanced economy. Our research shows that companies across the manufacturing sector have a relentless focus on innovation and on developing new export markets.
Equally they are diversifying into new sectors or bringing new products and services to market. Even against the tough UK economic backdrop, and at a time when credit remains hard to come by, industry is still willing to invest for future growth.
This investment is vital. The pace of technological change is accelerating and the diversity of potential markets will continue to expand as emerging economies mature, and developing countries catch up. This will lead to a wave of new business models, and changes to organisational and supply chain structures, which are difficult to predict. The companies that succeed will be the ones that anticipate change rather than react to it.
Manufacturers, however, have a growing choice about where to invest and we must do more to give companies a compelling reason why this investment should take place in the UK. The government has a critical role to play. Business creates wealth, but government sets the course for the economy and the conditions for growth. We therefore need the Coalition Government to be as relentless on growth as it has been on reducing the fiscal deficit.
Terry Scuoler is chief executive of the manufacturers’ organisation EEF, formerly the Engineering Employers’ Federation, and is on the boards of SEMTA, the sector skills council for manufacturing, and the University of Sheffield Advanced Manufacturing Institute.