Dave Atkinson, head of manufacturing at Lloyds Bank Commercial Banking, talks about what the sector means for the UK economy and what the future holds for the industry.
The UK’s manufacturing sector is a feather in the country’s cap. It directly supports more than 2.6 million jobs, accounts for 10% of GDP and is our single largest exporting sector. Its productivity is consistently above the UK average and its invention, innovation and ingenuity have made it the bedrock of the UK economy.
Challenges and opportunities
But manufacturing hasn’t been impermeable to the current uncertainty, which is in part a result of the UK’s decision to leave the EU and renegotiate its trade agreements. We’ve seen firms face challenging questions about when and how to invest in their businesses but the sector’s resilience has shone through. Many have taken steps to address headwinds while others are looking to seize the opportunities that Brexit will create.
Perhaps the biggest of these opportunities is in international trade. Firms have been taking advantage of the weaker pound, which has made UK exports more attractive to overseas buyers, to trade with new markets. Though sterling has regained some ground in recent months, many exporters have fostered lasting and meaningful relationships with new partners around the world, building on the UK’s reputation for quality manufactured products.
Many firms have taken steps to address headwinds while others are looking to seize the opportunities that Brexit will create
For some, exporting has been an exciting new step into a brave new world. For those new to international trade or thinking about new overseas markets there are tools available that can help you to manage the new processes involved. The Lloyds Bank’s International Trade Portal, for example, helps firms to identify overseas prospects and potential challenges. It also looks at trading requirements and conditions for specific markets as well as enabling companies to search for suppliers and buyers to work with as trading partners.
Managing Working Capital
As well as external headwinds affecting manufacturing there are also challenges from within. Firms are experiencing difficulties with their working capital with things like late payments and growing inventory. This is due in part to the growth many have experienced over the past year and also because manufacturers were stockpiling inventory while costs for purchase remained low.
Managing working capital can be a challenge but through a simple working capital management system we can help companies to unlock between 3 to 5% of their turnover as cash that is tied up in their business which can instead be driven towards investment in to new machinery, R&D and creating new jobs.
Looking at the coming year we anticipate that we’ll see firms of all sizes seize Industry 4.0 with both hands and take meaningful steps to implement more robotics and digital technology in their factories. Our recent Business in Britain survey told us firms are planning to step up their investment this year and around 40% are planning to automate part of their processes too.
And there is support out there available to help them to do this. How we design, make and sell products here in the UK is changing. We can support businesses so they understand the changing landscape. But it isn’t one size fits all. Different manufacturers will need different degrees of support and it is important that any financing is tailored, too – be it long-term lending for growth ambitions or shorter-term asset finance to invest in equipment.
And investment in Industry 4.0 doesn’t have to be all about production. With the introduction of the apprenticeship levy we’re seeing more manufacturers take on new apprentices, which often have the creativity and fresh thinking to help shape processes. Bringing talent in early can help companies shape their skillsets. We’re proud to support apprenticeships and that’s why we’re continuing our commitment to the Lloyds Bank Advanced Manufacturing Centrein Coventry that’ll be helping a further 500 apprentices and trainees into the industry over the next few years.
The manufacturing sector has a brilliant history and a bright future ahead of it. In the coming months we expect to see firms investing to create growth and jobs, making the most of opportunities in new markets and talking productive challenges with gusto. In our role in helping Britain prosper, we’ll be with them every step of the way.
Lloyds Bank is headline sponsor of MACH 2018