Tim Figures, director of technology, sustainability and innovation at Make UK, discusses the future of UK manufacturing in a rapidly changing world
The way we trade around the world is changing. The assumptions that have underpinned our goods trade for nearly half a century, in particular those that flowed from the UK’s membership of the European Union, no longer hold true. And as Britain reorientates its trade and regulatory policies, our long-term destination remains unclear. Simultaneously, our sector is undergoing a massive digital transformation – requiring investment in new technologies and ways of working – as well as the transition to a net-zero carbon economy by 2050. So what does all this uncertainty mean for manufacturers, and what should we do about it?
At the time of writing* the negotiations between the UK and the EU about our future trading relationship were about to enter their second round. Wherever they end up, a very significant change to the business landscape will happen at the start of next year. Customs processes, border checks, new regulatory requirements and, potentially, tariffs will be imposed on trade between the UK and the EU, and vice versa. New migration policies will come into force, which will make it harder and much more expensive to hire EU nationals in the UK, and also make it more difficult for UK citizens to travel to the EU for work – whether permanently or temporarily. Trade with a range of non-EU countries may also become harder, depending on what terms the UK Government is able to negotiate separately with them.
These changes are made even more challenging by the very tight timescale. We might not know the precise details of the trade agreement with the EU until the autumn, leaving just weeks to make the necessary arrangements to implement it. There is a possibility that the UK and EU fail to strike a deal at all, in which case our trade with the EU will revert to the most basic WTO terms. So manufacturers need to prepare now for a range of outcomes. If we wait for 100% certainty about what is going to happen before doing anything, it will be too late.
Last year, Make UK, in association with Squire Patton Boggs, published a report setting out the range of issues that manufacturers need to be thinking about. While we did that in the context of a possible disorderly exit from the EU – which will not now happen – the points in that document still remain valid. It’s available to download free from makeuk.org and is a good starting point for business preparedness. And we will be ramping up our support for Make UK members and affiliates as the year progresses.
But beyond worrying about customs forms and work permits, I think there are some more fundamental questions manufacturers should be asking themselves. Is my supply chain model viable in a deglobalising world, where transporting things across borders will become more difficult and more costly? What impact will the move to a net-zero carbon economy have on my business model and customer expectations? And, perhaps most fundamentally, how do I respond to a tightening labour market, increased wage costs and skill shortages?
The UK manufacturer of the future will need to have a different, higher skilled and digitally savvy workforce, more reliant on data analysis, working collaboratively with technology in order to remain competitive. The adoption of digital manufacturing techniques – in other words the smart use of tech and data – has the potential to transform manufacturing productivity in this country, allowing us to capture more value and to produce goods far more efficiently. But take up has been too slow, particularly by SMEs, who are concerned about the cost, confused about the technology, and don’t always feel confident about implementing change.
As well as all of this, the UK manufacturer of the future will need to embrace sustainable production in all its forms. The Government’s legally binding target of a net zero carbon economy by 2050 will impact us all, but irrespective of regulatory changes, customers will increasingly demand low-carbon and sustainable goods. This will require significant changes to the way we make things – but it also unlocks huge demand for the new and innovative products our economy will need to decarbonise. Smart manufacturers will think about how best to capitalise on this and benefit from what is often termed ‘green growth’.
I don’t believe that small-scale, incremental change will be enough to adapt to these three huge and simultaneous challenges. I hope, as our sector prepares for the new trading relationships that will commence in 2021, our leaders take the time to consider these more fundamental questions. If we can create a sector that is truly digital, global and green, then we will have secured its future for generations to come.
* This article was written for The Engineer in early March, ahead of the current Coronavirus outbreak