UK manufacturing: The engine of the economy is roaring back into life

Whilst 2020 was a tough year for manufacturing – as with many areas of UK business - the sector is already starting to see a significant bounce-back this year as pent-up demand and the vaccine rollout sees the engine of the country’s economy roar back into life. Activity in the sector grew to a seven-year high in March 2021, with the IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index outperformed expectations to hit 58.9 per cent, the highest reading in just over ten years.

So what’s driving this recovery? And what’s in store for the year ahead and beyond?

Covid and vaccine manufacturing

Professor Jason Hallett, an expert on vaccine manufacturing at Imperial College London is in an ideal position to offer insights on how events of the last year will inform future decision making on vaccine manufacture. “We've discovered some overdue lessons,” he explained. “First, we can move a lot faster than we thought, but at the same time, not as fast as we could. It took us about a year and we had the entire world working on it, but we still didn't move nearly fast enough.”

Professor Hallett added that while developing and producing a new vaccine in a matter of months was impressive, once production began, the limitations of the process and associated logistics issues became apparent.

“We're still very centralised in our manufacturing, with vaccines being made in a few discrete locations. If we decentralised, that would avoid a lot of the logistical issues. If we had manufacturing facilities in a lot of different places, we could have mass-produced this vaccine very quickly. All the companies producing vaccines are at one location each and there's no reason that they couldn't be doing it at 10 or 20, or one in each country.”

Reshoring

One of the biggest lessons of the pandemic was the need to rethink supply chains. Reshoring – moving offshore operations, including supply chains, back to the manufacturer’s country of origin – was already a topic of discussion, but the events of 2020 have increased its importance. Reshoring is particularly of interest to the automotive industry, with its complex supply chains. Professor David Bailey of Aston University recently explained how it would benefit many companies in the sector: “You've got less potential exposure to natural disasters, whether they're earthquakes, tsunamis, trade disruption like the Suez Canal getting blocked, customs delays such as extra non-tariff barriers in the UK or the EU, or illness in other countries in the case of pandemics. There's a chance to build more resilient supply chains,” he commented. “Also, when companies shifted production directly overseas, or outsourced then went overseas, there were often quality issues, which then later prompted reshoring to address this.” 

Faster turnaround times are another facet. Bailey continued: “With very extended global supply chains, parts might take five or six weeks to get to the UK. If consumer demand is shifting and you can tailor your product to what the consumer wants more easily, you're probably going to want a more localised supply chain to respond quickly to the consumer.”

Battery power

Alongside sustainable energy generation, energy storage will become a consideration for manufacturers. In particular, batteries are about to become a very important technology. The UK is certainly focusing on this area, with a number of academic projects attempting to improve the performance of lithium-ion batteries.  Potential methods include improving cathodes to get more energy into the battery or exploring the causes of battery degradation and failure in order to try to understand how to extend their life.

Different battery technologies are also the subject of research. Sodium Ion and solid state batteries, both of which could lead to huge shifts in battery technology, are currently being developed by UK universities.

R&D

Ben Morgan, Research Director at the Advanced Manufacturing Research Centre (AMRC) at the University of Sheffield, has over a decade’s experience studying the research and development of the UK’s manufacturing industry. He thinks now is a good time for us to pause and consider where we invest and innovate for the future:

“There are some brilliant companies in the UK doing some fantastic stuff, but on the whole people are, rightly so, relatively risk adverse. The combination of Brexit, the pandemic and climate change, is significantly shifting what we used to know in manufacturing and the opportunities that we have in the future. I think we've got to take a really hard look at ourselves and see if we’re the best place in the world to build these products.

“From an invention and an ingenuity point of view, we quite often are, but in driving that into production, and doing it super-competitively, we're often outgunned. Through innovation and by driving things like digital technologies, we can be globally competitive and win more work. And, ultimately, we can build back greener. We've got an opportunity to apply a lot of these skills that we've traditionally had in new markets, in hydrogen, in small modular reactors in nuclear sector, in hydrogen or electric aviation. We've got some great opportunities, but we've got to innovate and be prepared to change to grasp them.”

Technology advances

Professor Morgan and the AMRC also have extensive first-hand experience of manufacturing technologies. “In terms of technologies, we're doing a lot in digital, working with digital businesses. Big businesses like Microsoft are working with SMEs and startups, and we're developing all different types of connectivity projects. We're rolling out a 5G network with IBM, BAE systems and a number of other businesses in the North. That connectivity – with the ease, speed and volume of data that we can transfer – will be transformative for manufacturing, and particularly for distributed manufacturing, another trend that we're seeing.

Morgan also identified a greater take-up of artificial intelligence in manufacturing, with use cases including predictive maintenance and predicting if and when machines are going to break. However, robotics still has not really made as many inroads into the UK as it has in other countries, such as France. “In terms of industrial robotics, the UK is historically pretty bad at uptake,” Morgan said. “But a lot of the automation and robotics people I'm talking to are incredibly busy, with manufacturers starting to spend a little bit more money. It's nowhere near at the levels that we should be investing in automation robotics, which offer a significant advantage in terms of quality, productivity and competitiveness on the global stage.”

Sustainability

Climate change and concerns over the future of our planet have driven sustainability right to the top of essentially every agenda in the industrialised world. The manufacturing industry therefore must factor this priority into its operations. As the AMRC’s Professor Morgan told us: “The government and the world has woken up to climate change, with a lot of net zero 2050 targets starting to filter through to manufacturing. There's a big focus on renewable energy or nuclear energy.

“Previously in manufacturing, we might've looked at things purely on a cost basis. In the future, we're going to be looking at the embedded emissions, the embedded carbon that products have based in their manufacturing process. We've got to consider what happens in the manufacturing cycle and indeed it's reuse or recycle at the end of its life as well. We've learned a lot over the last 12 months.”

Diversity and inclusion

The impetus behind corporate diversity and inclusion (D&I) policies has increased in recent years, but the prominence of the Black Lives Matter movement in 2020 has brought the topic to the fore.  D&I initiatives are being introduced across a wide range of industries, but are being developed in bespoke ways that best address the needs of individual companies – and their staff, of course. But while individual D&I policies may differ, the one thing that all the corporate bodies have in common is a belief that improving diversity and inclusion is now a core goal for their businesses. 

And it will have to be, in an increasingly challenging labour market, with growing competition for the best talent. At the same time, it has become clear that the manufacturing industry must see building more diverse workforces as a way to continue innovating.

Three key approaches that will help manufacturers raise their D&I game are tackling unconscious bias, ensuring pay equality, and improving staff reskilling and training. By implementing these effectively, companies will have made a good start at challenging societal barriers.

If you are looking to hire top talent in today’s market, please get in touch with one of our specialist recruitment consultants. At Michael Page, we have a wealth of experience in hiring for engineering and manufacturing roles, as well as access to a huge pool of candidates looking for the right next step in their career.