Annual

Manufacturing
Report 2019
GAUGING THE MOOD OF UK MANUFACTURING

Researched and produced by: Sponsored by:

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 CONTENTS 3

Annual
Manufacturing
Report 2019
GAUGING THE MOOD OF UK MANUFACTURING

04 FOREWORD
05 INTRODUCTION
06 SMART FACTORY
Sponsored by PwC

GOVERNMENT POLICY &

14 INDUSTRIAL STRATEGY
Sponsored by Digital
Manufacturing Week
20 SKILLS & TRAINING
Sponsored by Autodesk 26
GROWTH & EXPORTS
Sponsored by Epicor

32 FINANCING INVESTMENT
Sponsored by Board

PUBLISHER The Manufacturer and Hennik Research cannot accept responsibility for omissions or errors.
Hennik Research
enquiries@hennikgroup.com Some of the photographs used in this report are by the winners of the 2018 Make UK Manufacturing
Photography Competition, sponsored by Liberty House Group.

TERMS AND CONDITIONS

The points of view expressed in articles by contributing writers and in advertisements included in this
report do not necessarily represent those of the publishers. Whilst every effort is made to ensure the
accuracy of the information contained in the report, no legal responsibility will be accepted by the
EDITORIAL DIRECTOR
publishers or contributors for loss arising from use of information published. All rights reserved. No part
Nick Peters
of this publication may be reproduced or stored in a retrieval system or transmitted in any form or by
n.peters@hennikgroup.com
any means without prior written consent of the publishers.

Copyright © Hennik Group 2019

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4  Annual Manufacturing Report 2019  FOREWORD

Foreword
Welcome to the 2019 edition of the Annual
Manufacturing Report, researched and
delivered by The Manufacturer
A very warm welcome to The Manufacturer’s Annual Manufacturing
Report 2019. It would not be a stretch to say that at the time of
writing (January 2019) the desire for a crystal ball has never been
stronger. The lack of certainty in the UK economy is enough to
embarrass a fortune teller. In the absence of any reliable means
of prognostication, we must rely on the instincts of our readers
to gauge how the next 12 months are going to go. We established
this through a survey which was titled Gauging the Mood of UK
Manufacturing, conducted in the last 6 weeks of 2018. I am sure
you will have already guessed that the sector is feeling grim on the
Brexit front thanks to a political class that appears to put national
economic welfare after its own self-interest. (If I did have a reliable
crystal ball I may be able to see that in fact the government is
preparing to pull off a negotiating masterstroke of genius. I am not
holding my breath.)

The dyspeptic mood towards Whitehall flows across the board,

into attitudes towards policy on skills and training, particularly
the Apprentice Levy, and to some extent into industrial strategy.
It’s understandable that those we surveyed would cut the
government little slack on anything currently, but on industrial
strategy we will jump to their defence. We have been following
the challenge that government set industry in February 2017 in its
outline industrial strategy, and watched as business leaders came
together to formulate a strategy designed to better the entirety
of UK manufacturing. Government has shown faith in that, and
we applaud them for it. Our survey respondents are not in such
generous mood, but we are confident that when results start to flow
attitudes will soften.

We could not have produced this report without the extremely

generous support of our sponsors PwC, Autodesk, Epicor and
Board. Like anyone who works with the UK manufacturing sector,
they recognise it, and appreciate it, for being a shining example of
innovation, talent and drive. We are very grateful for the strong
interest in the sector they display by supporting this report. They
are good friends to manufacturers – and to The Manufacturer – so
on their behalf and ours, we hope you enjoy reading it. Whatever
may be coming down the track in 2019, we are going to need all the
friends we can get.

NICK PETERS, EDITORIAL DIRECTOR

n.peters@hennikgroup.com
INTRODUCTION 
5

Introduction
To the Annual Manufacturing Report 2019

This report is based on a survey of manufacturers carried out by positive (left) and negative (right), with the percentages each
The Manufacturer magazine in November and December 2018 attracted. When referring to percentages ‘for’ or ‘against’, we
to determine how UK manufacturers feel about their lot over the aggregate the three either side of the middle line.
coming year. We have been doing this for over 10 years now, as part
of our service to the UK manufacturing sector. Due to rounding, not every graph will add up to 100%.

Methodology Also, you will see we have interviewed some of the respondents to put
We asked survey respondents to choose between diametrically some rhetorical flesh on the statistical bones of their responses. We
opposing points of view and then drew our conclusions from offered them the chance to be quoted anonymously, because otherwise
where they landed on a sliding scale. Therefore, when you look at we would only have been able to run quotes from people senior
the graphs in this report you will see for each issue two questions, enough in their own companies to speak their minds on the record.

E M P LOY E E S CO M PA N Y T U R N OV E R
27%

23% 23%
21%
19%
17%

13% 13%
12% 12%
11%
9%
251-500
1-50

51-100

101-250

501-1000

1001+

£50-£250

£251M+
UNDER £2M

£2-5M

£5-£10M

£10-50M
 6  Annual Manufacturing Report 2019 

Niek Braam
8-axis Voortman V808 robotic thermal cutting
machine, Leach Structural Steelwork, Preston.
www.themanufacturer.com

SMART
FACTORY
 SMART FACTORY 7

Huge potential, but clear

strategy and strong
leadership are required
Smart Factories encapsulate a range of This trend is also reflected in the The UK has a tremendous platform to
transformational digital technologies that recent PwC Digital Operations Survey capitalise on these technologies, but
can help organisations improve efficiency, which demonstrated only 1% of UK adoption needs to be accelerated. It will
reduce cost or, in their widest application, companies were digital champions, require clear leadership and a desire and
create new business models that can drive and UK manufacturers risk losing culture for organisations to be braver in
competitive advantage. competitiveness and growing their digital disrupting their existing business models.
products and services at a lower rate than
By 2025, it’s estimated that the global global competitors. CARA HAFFEY
worth of Internet of Things technology Industrial Manufacturing & Automotive
will reach $6.2 trillion. So it’s perhaps So, aside from the obvious issue of Leader, PwC
no surprise to see an increasing level of investment, what’s holding companies cara.haffey@pwc.com
awareness among manufacturers in the back from digital investment?  The www.pwc.co.uk/manufacturing
Annual Manufacturing Report (AMR), main blockers appear to be a lack of
This publication has been prepared by The
with 74% of respondents accepting they’ll coherent digital strategies and the
Manufacturer, Hennik Group, and as such the
need to adopt digital technologies in inability for organisations to understand views and findings it presents in this document
order to prosper. what practical applications some of are not necessarily those of PwC, unless
these technologies offer within their specifically stated. Those sections which are
The benefits these technologies offer are organisation. Indeed the Made Smarter attributed to PwC have been prepared for
also well understood. In a 2017 report, the Review, 2017, cites an inability to general guidance on matters of interest only,
and do not constitute professional advice.
World Economic Forum identified a $100 understand what ‘good’ looks like as one
You should not act upon the PwC contribution
trillion opportunity for both industry reason for low adoption rates among UK contained in this publication without
and society through the adoption of businesses. obtaining specific professional advice. No
these technologies. The AMR indicates representation or warranty (express or implied)
that the majority of respondents see For many organisations the adoption is given as to the accuracy or completeness
the biggest benefits in improving design of these technologies involves breaking of the PwC contribution contained in this
publication and, to the extent permitted by
and production processes (77%) or in the traditional boundaries between the
law, PricewaterhouseCoopers LLP, its members,
streamlining internal company processes different functions, the recruitment of employees and agents do not accept or
(74%). Our own estimations show that new skills and transforming activities into assume any liability, responsibility or duty of
Predictive Maintenance (one of the eight more flexible, continuous processes. If care for any consequences of you or anyone
key technologies we consider necessary UK firms are to capitalise on the benefits else acting, or refraining to act, in reliance on
for organisations to become true digital of smart factories, a clear strategy and the information contained in this publication or
for any decision based on it.
champions) offers the potential to: strong leadership from top management
increase machine life by 20-40%, reduce is vital.
machine downtime by 30-50% and deliver
4-10% EBITDA margin improvements. But the tide is turning: this year’s AMR
shows a clear and growing understanding
But there’s still a gap between awareness of the opportunities digital technologies
and investment and implementation: offer, from enabling staff to work smarter
the AMR shows one in four respondents and be more engaged through to enabling
currently have no digital plans while 26% businesses to serve customers more
have it on the radar but are unsure how to effectively or open up new markets.
implement it.
8  Annual Manufacturing Report 2019 

Just to be clear about what we mean by ‘Smart Factory’: for the purposes of this report, we include
S M A RT FAC TO RY T E CH N O LO G I E S
what happens inside manufacturing plants, from production line through to office administration
W I L L B E U S E D TO
and HR, and what happens outside them, as in the supply chain and customer service.
77% Improve design and production processes
Critically, we are dealing with the digital technologies that allow manufacturers to gather data 74% Streamline internal company processes
from their operations, interpret it and ultimately predict with confidence events like machine from shop floor to admin
health and output levels. This window into what is happening inside their plants can also be made 42% Communicate better with our supply chain
(selectively) available to other members in their supply chain in order to provide instant tracking 40% Deliver a better customer purchasing
of goods in and out, and generate greater business confidence and resilience. experience
32% Deliver a better customer field service
The official campaign for adoption of these technologies by UK manufacturers is an issue experience for the customer
we examine in another section of this report ‘Government Policy and Industrial Strategy’.
Here we delve into manufacturers’ thinking, positive and negative, around what these digital
manufacturing technologies might mean to their business.

Broadly, it is notable how similar this year’s survey results are compared with those detailed in
the 2018 Annual Manufacturing Report. There is a strong bias towards agreeing with all the
beneficial impacts these technologies offer, operationally and financially. Last year, 69% agreed
with the adoption message, this year we see an encouraging rise to 74%.
“
The UK has a tremendous platform to
capitalise on these technologies, but
adoption needs to be accelerated.
It will require clear leadership and a
desire and culture for organisations to
“
be braver in disrupting their existing
business models.
T H E A D O P T I O N M E SSAG E
CARA HAFFEY
30% Industrial Manufacturing
& Automotive Leader
27% There is a PwC
The message is woeful lack of
loud and clear - we information about
need to get digital why and how
technologies so we 17% companies should
can prosper. We’re adopt digital OUR PLACE ON THE
12% ADOPTION JOURNEY
on it technologies, and
which ones
9% 27% Currently we have no plans. It is not on
5% our radar
26% It is on our radar, but we are unsure about
how to implement it
23% We have adopted smart factory
technologies but only for standalone
projects
STRENGTH OF FEELING 15% Digital technologies are widespread in the
company, with key functions integrated
The positive response is even higher when respondents were asked if the data from connected 2% Our entire factory, from workforce
machines will improve decision-making and reduce costs – it is an incontrovertible 91%. management to production and supply
(See graph on next page) chain, is digitised
7% Other

“
I have attended several different events that either focused on Industry 4.0, or
it was an agenda item. At all of them, I felt the focus was on more developed
companies who would find it easier to adopt the technologies and less so on
smaller companies. I think more could be done to educate a wider range of
businesses, with factual evidence, and let them make an educated decision on
their digital strategy.
“
David Blagg, Head of Operations, Fenmarc www.fenmarc.com
 SMART FACTORY 9

“
T here is a lot of nonsense spoken about digital technologies and the Fourth
Industrial Revolution. Training is probably more important to a business such
as Penny Hydraulics and change is something that happens every day in most
businesses. A major investment was made in automated design that was backed
by a firm business case showing that it would generate many times its £100k up
front cost. These decisions have to be based on facts not from following trends.
“
Robin Penn, MD, Penny Hydraulics www.pennyhydraulics.com

D I G I TA L I S AT I O N R O I

38%
35%

Data from
connected I can’t prove the
machines and ROI on that. The
people will inform 18% FD will surely
decision-making block it
and reduce costs

4% 4%
1%

STRENGTH OF FEELING

And yet as the figures on the centre of this page demonstrate, over 50% of those surveyed either
have no plans to implement them or are not sure why they should. Or are not even sure what we
are talking about.

Some individual responses:

“Not sure what you mean by digital smart factory technologies. We have an ERP system and we have
CNC/robotic machinery.”
“We are too small for it to be cost-effective.”
“It is an area that we discuss with clients in the SME sector and is something that many SMEs have
vaguely on their radar but have no immediate plans to implement.”
“I am not sure what digital smart factory technology is.”

Obviously, there is a gap in understanding if a manufacturer who has an ERP system and
deploys CNC/robotic machinery is not aware they are already deploying digital smart factory
technologies. Perhaps it is the fault of us in the media, of technology vendors and advocates
such as the Catapults and the Made Smarter Commission that we tend to use portfolio language
like ‘Industry 4.0’, ‘4IR’, and ‘digital manufacturing technologies’ without stopping to consider
whether everyone is on the same page as us. That would seem to demand more clarity, more
understanding and more patience in the way we talk about them.

There has been some discussion among SMEs whether the kind of transparency that a connected
supply chain offers between all its members might be of questionable value, if it means larger
companies up the chain have visibility of input pricing and thereby are able to squeeze smaller
companies’ margins. The following graph suggests such fears are overblown. While we did not
specifically test for this, the culture in manufacturing appears to be becoming more collegial and
collaborative as manufacturers of all sizes realise that the zero-sum games of the past can’t work
in the digital age.
10  Annual Manufacturing Report 2019 

S U P P LY CH A I N M A N AG E M E N T

35% I am
concerned that

79%
when they have
improved visibility
New digital of our processes,
technologies will 22% 22% thanks to greater
improve my supply connectivity,
chain relationships those at the top
up and down of the supply of manufacturers
10%
chain will try
to force our prices
believe Smart Factory
9%
down and costs technologies will improve
4% up their supply chain
relationships

STRENGTH OF FEELING

In the old days, supply chains were linear – a company only ever saw its suppliers and its
immediate customer. The digital supply chain is in 3D, allowing visibility and communications
between all parties. It is a place for farmers, not hunters.

CU STO M E R S E RV I CE

26% 26%
24%

We will be Our customers

able to serve want to talk to

84%
our customers real people, not
more effectively be plugged in
using digital via sensors and
technologies internet
9% 9%

6%
believe smart
factory techologies
will accelerate
STRENGTH OF FEELING innovation and design
development

The ability of digitally-connected companies to service their customers better is of significant

importance. Digital technologies driving modern manufacturing machinery allows for mass
customisation, or the ‘customer of one’ as it is also known. Carmakers can claim to have been
in that game for many years, but only in the sense of aggregating customer-unique assemblies
from a set of parts. Modern customisation is of a different order, allowing even small companies
to serve a wide variety of customer demands on the production line.

Given that 76% of respondents agreed that digital technologies improve customer service, it is
slightly surprising that only 53% believe they can open up new markets and find new customers.
 SMART FACTORY 11

B U S I N E SS E N A B L E R

20% 20% 21%

Digital
15% Tech might help,
technologies will
13% but it all boils
enable us to open
down to people
up new markets
11% and great product
and find new
in the end
customers

STRENGTH OF FEELING

This compares with 68% who responded positively last year. We judge this gap to be a case of
some companies either not yet understanding how digital technologies can become a powerful
enabler across the whole range of business - not just in terms of production and the supply chain
- or again, are not clear about how to make it happen.

I N N OVAT I O N D R I V E R S
33%
30%

New digital
technologies
21% Their likely
will accelerate
importance in
innovation
driving innovation
in design
is overstated
development and
processes
9%

5%

2%

STRENGTH OF FEELING

What they do understand is the power of these technologies to accelerate innovation cycles and
improve the efficiency of manufacturing processes.

“
We have seen the benefits of being early adopters, reducing electricity costs, labour
costs per unit and able to take on work competing with much larger companies.
Innovation means we can create new products and secure work, in the UK and for
export, that could not be done without the new technology. As the rate of change
for automation and robotics is now developing rapidly along with digitalisation,
waiting is no longer an option.
“
Richard Hagan, Managing Director, Crystal Doors www.crystaldoors.co.uk
12  Annual Manufacturing Report 2019 

WO R K F O RCE E N GAG E M E N T

48%

91%
They have
New digital
no place in
technologies will
our bespoke
enable staff to
28% operations where
work smarter and
a personal touch
be more engaged
is needed
15% said they will enable
staff to work smarter
4% 4% 1%

STRENGTH OF FEELING

Respondents were also overwhelmingly of the belief – 91% - that the workforce becomes much
more engaged when they can work smarter, working alongside machines rather than operating
them.

I M PACT O N J O BS

37%

They will allow

me to reduce 29% It will cost more
headcount or 23% to hire and
boost production train people to
without taking use new digital
on more staff, technologies than
and thus we could hope to
remain globally recoup
competitive

6%

89%
3%
2%

STRENGTH OF FEELING

From the dawning of the Fourth Industrial Revolution, the ultimate scare story has been said they will enable
that automation means the manufacturing workforce will be slashed. While some parts of them to increase
manufacturing have been able to achieve close to 100% automation in some processes, our
experience is that companies prefer to hang onto the employees displaced by automation and
productivity levels per
retrain them for more value-added tasks. Of our respondents, 89% agreed that while greater headcount
automation means they could cut headcount, digitalisation will actually allow them to do more
with the same number of people. In other words, to become more productive.

The message that digitalisation leads to efficiency improvement across the board, from the
production line through the workforce, supply chain and customer service appears to have been
received loud and clear, but much work remains to be done by vendors and by the Made Smarter
Commission to achieve a breakthrough in communicating to manufacturers how best they can
embark on their digital journeys.
Intelligent
 SMART FACTORY 13

Digital is here
PWC AD

For manufacturing
We balance business understanding and
human insight with technology innovation
to solve our clients’ important problems. #IntelligentDigital

pwc.co.uk/intelligentdigital
pwc.co.uk/manufacturing
 14  Annual Manufacturing Report 2019 

Siobhan Lock
Network of ducts around the outside of the
boiler at Margam Green Energy in Port Talbot
www.themanufacturer.com

GOVERNMENT
POLICY & INDUSTRIAL
STRATEGY
 GOVERNMENT POLICY & INDUSTRIAL STRATEGY 15

Liverpool, 12-15 November

Faith in government policy is

weak but sector resilience solid
What to make of the year ahead? Manufacturers say they are highly
Companies say they are considering sceptical about government’s stated
leaving the UK, others have. Some, like good intentions towards the sector,
Nissan in Sunderland, have cancelled and while we understand why, in light
planned investment, citing adverse of the Brexit crisis, they might say that,
market attitudes to diesels, but making we take a more positive view. Those
clear that Brexit contributed to their with long enough memories will know
decision. As a snapshot of what is that industrial strategy of old was run
happening in the manufacturing sector by ministers and civil servants. The age
as we publish this report, it’s pretty grim, of ‘picking winners’, which inevitably
before one even mentions the tortuous turned into losers, gave it all a bad name.
EU negotiations and the Conservative This industrial strategy is business-led
party’s internal machinations over Brexit. and is not about picking winners but
enabling companies to become winners
All of this means manufacturers are if they wish to take advantage of the
significantly gloomier than they were support, financial and advisory, that the
this time last year, and who can blame Made Smarter Commission will make
them? Inevitably, their blame attaches available. It has only just got underway
to the government for turning the most with the £20m North West Pilot gearing
significant event in post-war UK history up to prove the case for embracing new
into a suspense thriller that even Alfred data-driven technologies. Manufacturers
Hitchcock would have regarded as do accept the case for adopting these
far-fetched. We share that sentiment. technologies, but there is still confusion
History will no doubt help us understand out there. It will be interesting to see
the subtleties of what is going on in how the Commission address that. As the
Whitehall, if subtleties there are, but right previous section notes, some companies
now it looks as if the health of our sector have adopted digital technologies
is under threat. without knowing it, because for them the
conversation is remote and out of touch.
A heavy preponderance of manufacturers
say their strategic planning is being put But perhaps the statistic we should take
at risk, and a significant majority believes most comfort from is the overwhelming
manufacturing will be plunged into chaos belief among manufacturers that we have
by Brexit. Of course we cannot know the drive to succeed as a nation. That
what will happen post-29 March, which self-belief should serve us well in the year
is precisely the problem: no one knows. ahead.
This lack of clarity and certainty, created
by the seemingly circular conversation NICK PETERS
with Brussels, is informing attitudes to Editorial Director
the government’s Industrial Strategy, The Manufacturer
made manifest in the Made Smarter n.peters@hennikgroup.com
Commission and the North West Pilot. www.digital-manufacturing-week.com
16  Annual Manufacturing Report 2019 

Two issues dominate this part of the report: Brexit, and the realisation of the government’s
Industrial Strategy for manufacturing, in the form of the Made Smarter Commission and its first
major initiative, the £20m North West Pilot, which was unveiled at our Digital Manufacturing
Week in Liverpool last November. What we wanted to discover was the extent to which

71%
manufacturers are prepared for Brexit, in whatever form it materialises (this was written in
January 2019), and the extent to which the government is achieving cut-through with its core
message to manufacturers which is, very bluntly, digitalise or decline.

In many respects, the two issues overlap significantly. Adopting digital technologies takes
investment, and as night follows day, pushing the investment button is a tough call when staring
into the abyss of uncertainty that Brexit represents. Playdale Playgrounds have been making
said Brexit
playground equipment in Cumbria for 40 years, for the UK and global market. They have heard uncertainty is
the digitalisation message loud and clear and want to go ahead, but as Paul Mallinson, Playdale’s damaging strategic
Technical & Operations Director told us, “We have reasonably good clarity in terms of what and
how we could do it (digitalise) but uncertainty coming from Brexit is preventing us from fully planning and
pursuing the plan due to funding, and the risk of needing those funds to cope with the impact of business prospects
Brexit.”

BREXIT PLANNING
28%
26%

The uncertainty
Brexit will benefit 17% created by Brexit
us from a legal is making strategic
and regulatory 14% planning difficult
perspective and damaging my
business prospects
9%
7%

STRENGTH OF FEELING

Arguably, the government has played a dangerous game with business. They always refused to
take No Deal off the table in order not to weaken their negotiating hand, but did very little to

64%
prepare the country for it, perhaps because fundamentally they never intended it to actually
happen. Businesses have been left in a quandary - do we spend money preparing for the worst,
or do we trust that a deal will be done? Neither they, nor the government, have factored in that it
could happen by accident. This accounts for the deepening gloom we see reflected in our survey,
conducted at the end of 2018, as it became obvious that time was running low.

said Brexit will

“
cause chaos for
manufacturers
Small businesses like mine who rely on an EU supply chain can’t afford the added
bureaucracy that is currently threatening to crash down on us. Post-Brexit, we
face a triple blow of higher import costs, added paperwork, and a likely recession.
The Conservative Party have given up being the party of business, while the
Opposition show no interest in taking up that baton. With the ERG and Corbyn
consolidating power within their respective parties, and until business owners flood
the membership of either, this isn’t likely to change anytime soon.
“
Oliver Nissen, Director, Cumbric Limited
 GOVERNMENT POLICY & INDUSTRIAL STRATEGY 17

B R E X I T O U T LO O K

26%

21%

Brexit will boost 17% Brexit will cause

UK manufacturing chaos for UK
14%
growth 12% manufacturers

10%

STRENGTH OF FEELING

This time last year, 54% of respondents said Brexit will cause chaos for UK manufacturing. Today,
that figure has shot up to 64%. It is intriguing that 36% therefore believe the counter argument,
that Brexit will boost growth. Manufacturers are voters too and some will inevitably feel the UK
can successfully navigate a future outside the EU.

This picture is reflected in the next graph where respondents were asked to consider what doing
business would be like post-Brexit, particularly when it comes to investment and supply chain
relationships. Sixty-five per cent believe SMEs will suffer disproportionately, with 35% believing
that growth and investment will be on an upswing.

B R E X I T O U TCO M E S

25%

Post-Brexit,
Post-Brexit, the 20% 20% 20% times will be
investment climate tough financially,
in the UK will be especially for SMEs
very positive, as OEMs and Tier
fuelled by growth. 1s squeeze their
Good times ahead! 9% supply chains for
savings
6%

STRENGTH OF FEELING

What does give pause is that the 65% who fear for hard times post-Brexit are responding
specifically to a statement that suggests stronger companies will survive by squeezing the weak.
Arguably that happens all the time, perhaps through unfairly extended payment terms, and that is
why smaller companies display such vulnerability. Countering that is an emerging picture in the
sector of supply chains becoming more collaborative as they become more digitally connected.
Ultimately nobody wins when business is carried on in an atmosphere of winners and losers.
18  Annual Manufacturing Report 2019 

Much more positive is manufacturers’ opinion of their own resilience. Of course, nobody likes to
admit they don’t have the Bulldog Spirit, but it is good to see that even if times do get tougher, a
hefty 77% say there is a strong drive for success in this country, that they can be the architects of
their own success without knocking on government’s door asking for help. That said, at this time
last year, that figure was 83%. We suspect no one will be surprised that this otherwise positive

77%
sentiment has taken a knock over the last year.

THE UK - DRIVEN

30%
said that, whatever
25%
Whatever 22% We have lost the
happens, we have the
happens, we have drive to make it drive to succeed as an
the drive to be
successful in this
as an industrial
nation without
industrial nation
14%
country government help

6%

4% 5%

STRENGTH OF FEELING

On the issue of industrial strategy, manufacturers appear evenly split. Perhaps some of the
sourness over Brexit is making itself felt, but 52% believe the government doesn’t really care that
much about the sector, with 48% believing that the Made Smarter Commission and the North
West Pilot are evidence of solid government intent. Of those, only 5% are fully supportive with
many more hovering close to scepticism.

G OV E R N M E N T I N T E N T

29%

23%

52%
The Made Smarter I don’t believe
Review/North West the government
17%
Pilot is evidence of really cares that
the government’s 14% much about
positive intent 12% manufacturing

said they don’t

5% believe government
cares that much for
manufacturing
STRENGTH OF FEELING

Maybe the picture will change when the Industrial Strategy’s good intentions are backed up by
solid evidence of companies doing better as a result of acting on the advice and assistance they
receive. In our own continuing conversation with UK manufacturers, it is clear there are broadly
two types when it comes to issues like this. There are those who prefer caution over risk, to learn
from other companies’ mistakes. And then there are those early adopters who may make those
mistakes, but also know that they are most likely to gain first-mover advantage.
 GOVERNMENT POLICY & INDUSTRIAL STRATEGY 19

For instance, we asked a more direct question about the Made Smarter strategy of promoting
digitalisation, and again received a very guarded response.

M A D E S M A RT E R

39%

I am excited
that with the
Made Smarter We just don’t know
Commission where to turn for
22%
we have the help - it’s very
framework for confusing
positive business
support 13%
12%
9%

5%

STRENGTH OF FEELING

The fact that the Made Smarter Commission, which will channel significant government funding
and business support for manufacturing, attracts such lukewarm support should not come as too
much of a surprise, disappointing though it might be to all in business and government who have
worked so hard to make it a reality. Government industrial policy over recent decades has been
very patchy, if it has existed at all. Manufacturers have a right to be sceptical of this new iteration
and await the evidence. Plus, we are testing the waters at the start of a process not the end of it.

That said, at The Manufacturer we consider this government’s industrial policy to be a very
significant improvement across the board on what went before. It has taken the best of previous
policies, particularly the Catapults initiative, and then encouraged business to make the
running, via the Made Smarter Review, and now the Made Smarter Commission. The first pilot
project is underway in the North West, helping smaller manufacturers transition into a digital
manufacturing future. We trust that this time next year we will be able to present a more positive
reaction from our audience.

“
No-one can predict the outcome of Brexit, so I would expect the government to
provide businesses with three potential scenarios with their best practice advice
on what businesses should be doing now in order to prepare as best as possible for
each one. The large companies will probably have the resources to plan and man-
age this, but the smaller companies are also vital to the UK economy - the better
we are all prepared, the more we can reduce the impact of Brexit.

If this was a potential war, would the army generals sit back and say let’s wait
and see what happens? Of course not! They would be positioning their troops and
making their plans to be ready to counter any attack, wherever it may come from.
Small businesses are the foot soldiers – absolutely essential to success. We don’t
need to know the high-level thinking – what we need is practical help in getting
us ready for the fight!
Andrew Bennett, Managing Director, Allan + Bertram
“
www.allanandbertram.com
 20  Annual Manufacturing Report 2019 

Steve McLellan
Jacking pipes, Naylor Drainage
www.themanufacturer.com

SKILLS &
TRAINING
 SKILLS & TRAINING 21

Recruiting for the skills we

need today - and the ones
we will need tomorrow
Manufacturing employers are hungry The majority of the current If we are to crack this issue, then two
for engineers with the skills to satisfy apprenticeship frameworks reference things must happen.
current requirements, but often complain out-of-date skills and lack the real-
of university graduates or apprentices world experience that employers seek. Firstly, we ourselves must step outside of
that come to them unable to perform Thankfully, these issues are now being tradition, stop focusing on the problem
certain essential tasks. We recognise addressed by organisations like the and explore new ways of bringing these
the importance of meeting this demand Institute for Apprenticeships & Technical new skills into our businesses. That’s our
more efficiently, but is this yet another Education (IfATE) but any interventions responsibility.
symptom of the industry trying harder to must balance the skills of today against
meet demand as opposed to trying to be the skills of the future, a lot of which are Secondly, huge simplification is needed,
‘smarter’? We’d also question the long- actually unknown, but that should not as referenced by Lord Sainsbury in his
term viability of a workforce trained to stop us moving forwards. ‘Post-16 Skills plan and independent
only solve yesterday’s problems. report on technical education’2. That’s the
A number of universities and apprentice government’s responsibility.
We believe Britain must equip its centres such as Imperial College
workforce with a broader range of skills, London and the Institute for Advanced As the survey results on the next few
earlier, and empower them to identify and Manufacturing and Engineering at pages demonstrate, the issue of skills
add to their skills as their careers develop. Coventry University (IfAME)1 produce and training is front and centre of the
high calibre, industry-ready graduates manufacturing sector’s concerns right
For example: that possess the right blend of skills with now. It is vital that solutions proposed
• Applying ‘design thinking’ and greater real world experience. Such lighthouse by policymakers dovetail not only with
interpersonal skills to traditional models need to be studied and replicated. manufacturers’ needs today, but with
problems For example, a student from Imperial what they will need tomorrow.
• Identifying and using the right digital College London recently supported an
tools to research and collaboratively SME in reducing a traditional process of ASIF MOGHAL
design smart, connected products creating custom foam inserts for bespoke Senior Industry Manager
that can be made using a hybrid of protective cases down from 180 minutes Manufacturing Business
manufacturing techniques to just 15. When placed inside traditional Strategy & Marketing
• The ability to continually research, environments, such individuals act as Autodesk
absorb and apply new skills and “Digital Catalysts” establishing co- asif.moghal@autodesk.com
technologies to the constant mix of mentoring relationships with existing www.autodesk.co.uk
challenges and opportunities that staff, absorbing their experience,
manufacturers face daily challenging tradition and bringing a 1www.coventry.ac.uk/ame
• Leveraging social platforms and coding fresh, digital perspective to the situation.
skills to connect with customers This establishes a natural upskilling 2
www.gov.uk/government/publications/
directly and change the experience of environment at significantly lower levels post-16-skills-plan-and-independent-
buying, owning and operating products of investment than current alternatives. report-on-technical-education
22  Annual Manufacturing Report 2019 

At The Manufacturer there is a standing joke that whenever two or more manufacturers
are gathered together, it takes barely any time at all before they start bemoaning the
skills gap, the recruitment crisis and that ‘nobody understands the sector anymore. They
hardly know we exist.’

51%
Joke or not, the truth is that skills and recruitment represent the most pressing item on
most manufacturers’ agenda. We effectively lost a generation of manufacturers after the
de-industrialisation of the 70s and 80s. Manufacturing retreated into the shadows as
successive governments fixed all their attention on services, particularly finance. Parents
and grandparents, whose only experience of manufacturing was that it was dirty, a ‘second
best career option’, agreed with government that the only way forward for a young person
believe the
was a degree, and steered their offspring away from manufacturing and all the trades that Apprenticeship Levy
make it happen.
is a tax on employment
Today, the government is trying to row back from the damage they caused with the and is inefficient at
Apprenticeship Levy, by which companies with payrolls in excess of £3m annually pay driving apprenticeships
into a fund from which all companies can then draw to fund their training. There was
a precipitous fall-off in apprenticeship uptake in 2018 as companies steered clear of a
clumsy process and then started complaining that the Levy was more of a tax.

A P P R E N T I CE S H I P L E V Y

29%

The Levy is
The Apprenticeship 23% simply a tax on
Levy is working well
employment
and will boost the
and is a very
numbers of young 16% 17%
inefficient way of
people coming into
stimulating skills
manufacturing
11% development

4%

STRENGTH OF FEELING

57%
More support the Levy this year, 49%, than last year, 40%, although only a derisory 4%
are wholeheartedly in favour. Hardly a ringing endorsement of a flagship policy.

That said, manufacturers appear to be encouraged by the revival of apprenticeships over

the last few years, even if 28% believe the system is expensive, confusing and tilted too far
to the benefit of larger companies.
said the education

“
system is a disaster for
T he experience that we’ve had with the apprentice scheme is that, even with industry; it needs a
financial assistance, it costs the business a significant amount to have apprentices total overhaul
on the apprentice system. This is because they spend a lot of time at college and
not on the shop floor, and also because the skills they learn at college are not
directly useful on our shop floor, so we have to effectively train them again to get
the most from them. On top of this, some apprentices want experience at another
workplace when they’ve finished their apprenticeship. Many leave once they are
qualified. As an aside, this used to help us as an SME as we would pick up the
apprentices from the big companies nearby when they were looking to move.
“
Business Development Manager, metalworking company
 SKILLS & TRAINING 23

A P P R E N T I CE S H I PS A DVA N CE

29%

The
Apprenticeships 23% apprenticeship
are coming into 19% system is
their own, not just expensive,
seen as ‘second confusing and
best to uni’ only benefits big
11% 11% companies

6%

STRENGTH OF FEELING

Everything stems from the education system and whether it is doing right by manufacturing.
Given the slowness of the system to adapt – which is inevitable, given its size and how policy
changes can take years to implement – it is perhaps understandable that only 43%, the
same number this year as last, think it is doing a good job.

E D U CAT I O N I N T H E U K

26% 26%

The education
The education system is a
system is at last disaster for
preparing young 16% 15% industry. Nothing
people for a career 13% less than a total
in industry overhaul will
suffice

4%

STRENGTH OF FEELING

It is not just schools, of course, that are involved in apprenticeships. Further Education
colleges provide the classroom learning that is a critical part of the process. Not everyone
finds it a good experience.

“
Our experience of developing our team through our local college has been
enormously disappointing. It would seem that their ability to attract and retain
teachers and lecturers is particularly poor, to the point where they are now trying
to recruit from the apprentice student base. Poaching from the companies that
they are here to support surely cannot be a solution, and by all accounts ours is not
a unique case. Laura McBrown, Managing Director, G&B Electronic Designs
“
www.gandbelectronics.co.uk
24  Annual Manufacturing Report 2019 

Perhaps inevitably, more and more companies are starting their own training centres,
either on their own if they are big enough, or in collaboration with other local companies.
“We prefer to train our own juniors in-house, outside of the official apprentice scheme,”

71%
said the executive from the metalworking company quoted earlier. “We can teach them the
specifics of our shop floor, they are working on our shop floor all the time while learning,
and they seem to come out the other end with more loyalty to the company and its people.”

DIY TRAINING
37% believe
apprenticeships
Manufacturers
are developing into a
28%
have a
It is government’s
proper alternative to
responsibility
to get involved
responsibility to higher education for
21%
in schools and
provide us with
the workforce we
school leavers
training, to shape
need
the workforce of
the future
8%
5%
1%

STRENGTH OF FEELING

We also asked if it was government’s job to provide manufacturers with a trained workforce.
Only 15% said yes, which is surprising in the context of the next question. Perhaps they felt
it should not have been an either/or question, and felt more strongly about manufacturers
stepping in where government appears not to have succeeded.

That would explain why, when given the choice, the majority of companies say the
government is not addressing the skills gap properly.

S K I L L S GA P

26%

The government
66%
said the British
20% is sending people do not
The skills gap
is at last being 19% mixed messages understand the
about dealing
taken seriously by 16%
with the skills importance of
government, with
effective policies in 13% gap, including manufacturing to
cracking down on
place
the immigration the economy. We
7% needed to fill it need a national
campaign of
education.

STRENGTH OF FEELING
 SKILLS & TRAINING 25

“
Investment in training in digital technologies is still being discussed and not acted
upon. Funding for such activities has come via such routes as the European Regional
Development Fund. That is now uncertain – what happens after 29 March?

Industry needs to engage with young people – but the public still do not see
engineering as the rewarding and essential profession that other countries such as
Germany do. Nor do they understand how jobs in manufacturing impact on jobs in
other sectors. A typical aerospace facility generates four jobs in the supply chain
for each job in the main company. These five highly paid individuals support two
more jobs in the community (pubs, restaurants and retail for instance.) Therefore
each job in an aero/auto giant generates five or six more around the facility. For
proof just look at the mining and steel communities and the subsequent effect on
the towns and villages that relied upon them when the pits or foundries closed.
“
Executive, global engineering company

This negative response of 59% compares with 53% in 2018, which should alarm
policymakers. Time is not on our side. With every year, more experienced workers retire,
and there are too few coming behind them to take their place.

It even applies to Brexit, because so many jobs in this country have been filled by workers
from the continental EU. It is more than apparent from the formation of government
policy around Brexit that priority has been given to putting up barriers to immigration
first, then worrying about how to provide manufacturing (and other sectors of the
economy) with the workers they have relied on.

These comments underscore what many companies, individuals and associations have
long said: that there needs to be a campaign to tell people in the UK just how important
manufacturing is to our nation.

CA M PA I G N TO P R O M OT E # U K M F G

28%

This country thinks

financial services
The British public
19% 19% is the only game
understand the 18% in town.
importance of
We need
manufacturing.
a national
It no longer takes
campaign
a back seat to 11%
to show how
financial services
important
manufacturing is
5%

STRENGTH OF FEELING

It is a cry as common as the need for action on skills and training, but those voices who are
trying to spread the good news about manufacturing are failing to achieve cut-through.
Something has to happen soon: the skills gap won’t fill itself.
 26  Annual Manufacturing Report 2019 

Andy Newman
Welding, Griffon Hoverworks
www.themanufacturer.com

GROWTH &
EXPORTS
 GROWTH & EXPORTS 27

Business growth stems from

having the right technology
and the right attitude
A profound digital transformation companies gain advantage and boost its technology precisely to support the
is currently shaping the future of profitability. A must-have investment is manufacturing sector, we are best placed
global manufacturing. As with any real-time visibility. to support your plans and give you the
transformation, the opportunities for confidence to grow.
growth are enormous - but so are the Drive productivity up and costs down
challenges. Whilst a general optimism Reduce the rate of rework and quality
and confidence around the UK sector mistakes, remove a time-wasting step in MARK HUGHES
prevails, we are certainly in unchartered your process, and give people the tools Regional Vice President UK & Ireland
waters. Those manufacturers who will and training they need to achieve “wins”. Epicor
thrive over the coming years are, in our Modern technology not only supports mark.hughes@epicor.com
view, those who prepare themselves to staff today but helps attract much needed www.epicor.com
not only be agile in terms of being able to talent into our sector.
take advantage of opportunities and cope
with the challenges, but those who have Open new opportunities for growth
a robust growth strategy built on solid Add new services and products and
foundations. explore new segments and geographic
areas. Having the right systems in place to
Positioning your business for growth prosper in new markets is of paramount
means looking to the future and adopting importance, so ensure your technology
new methodologies, all of which should provider can support your plans.
be underpinned by new technologies.
Unless you have real-time visibility and Leverage Cloud technology for growth
insight into your business, you can’t Allow for better connectedness with the
make the necessary decisions to drive Cloud. Hardware and software upgrades
that growth trajectory. Increasingly more will become easier, and extensibilities
of the data informing your decisions will allow users to more easily tap into
will come from embedded analytics and modern technologies as they become
connected devices, so it is paramount that mainstream.
manufacturers have a modern enterprise
resource planning (ERP) foundation Connected factories with devices that
to support the innovative technologies gather data, self-monitor, and report
which enable real-time reporting, performance; machines that collect
analytics, automation and the Internet of information that can be analysed and
Things. Forty years of working with UK made actionable autonomously; and
manufacturers have given us key insights factory workers with wearable technology
into the key focus areas for growth. and mobile devices, making them more
productive and efficient - all exist already,
Ensure and increase profitability and are driving competitive edge.
If your business’s data isn’t useful, visible
and accessible 24/7, you’re working blind. Epicor technology is developed
Data analytics and business intelligence specifically for manufacturing.
tools are helping even the smallest As a technology partner that developed
28  Annual Manufacturing Report 2019 

To state the obvious, without growth companies decline. Growth is not a nice-to-have, it is a
must-have. The need for growth in manufacturers’ product ranges, in sales, in productivity,
in market share, in exports is relentless. It is a litany of pressures that keep business owners
and senior executives up at night.

79%
We focus on growth in this section, but in truth every other section of this report features
an aspect of business that affects growth: there is Brexit, of course; access to finance for
investment; skilled staff and how to recruit them; the digital smart factory technologies
that can exponentially increase productivity. They all play a part, so in this section of the
survey we gauged mood and ambition, to see if UK manufacturers still have a tiger in their
tank after a couple of years of profound uncertainty over Brexit and yo-yo exchange rates.
have confidence
A further factor is the drag on growth created by regulation. According to a recent report
by the FSB and the Centre for Economics and Business Research (Cebr), the cost of
they have the capacity
government regulation has hit manufacturers particularly hard. Between 2011 and 2017 for growth
costs attributed to government regulation and policy rose by 19%, on average £60,000,
nearly all that in 2016 and 2017. These are costs associated with statutory wage levels,
pension auto-enrolment, and tax compliance. And they all have to be paid before a penny is
made in profit. It perhaps explains why last year the UK dropped from the 4th best country
in the world to run a business to 9th (World Bank.) (That is still better than all other EU
nations, by the way.)

This April promises more regulatory drag, including Making Tax Digital, a higher living
wage, rising employer auto-enrolment contributions and further business rates hikes.
The FSB says, “This will be a flashpoint for a lot of businesses, one which could threaten
the futures of many.” And then there’s Brexit. So how do our respondents feel about the
immediate future? Given all of the above, they appear fairly resilient.

G ROW T H P ROS P E CTS

37%

29%

I am confident I am not sure

I have all the where I can see
tools to make my growth coming
business grow from

67%
13% 13%

5%
3%
say they are
confident overseas
STRENGTH OF FEELING
trading conditions are
Only 13% say they are super-confident they know how to grow their business, but with the
good for promoting
next two levels of confidence standing at 37% and 29%, we can say with some certainty that business growth
the majority of UK manufacturers are feeling confident. Yes, 21% are on the negative side
of that graph, but not every company feels like a champion, and probably cannot see where
growth is coming from. These are companies who would benefit from an organisation such
as the Manufacturing Advisory Service, part of Business Growth Services, whose demise in
2015 following a government spending cut was much-lamented by manufacturers who had
benefitted from its services. The gap has not been filled by the private sector, despite the
Treasury’s hopes.
 GROWTH & EXPORTS 29

A report in The Manufacturer on a gathering of SME manufacturers to discuss growth

reported: Several of the businesses highlighted positive experiences of working with
the Manufacturing Advisory Service, prior to it being unceremoniously wound up, and
more recently, the Manufacturing Growth Programme delivered by Economic Growth
Solutions, which works via LEPs and receives £10m funding from the European Regional
Development Fund. (Post 29 March, who knows?) One leader noted that the support offered
by the Department for International Trade had been largely stripped back, and “they don’t
have the funds to help reduce the risk or outlay of attending an international trade show.”

ST E A DY AS S H E G O E S. . . ?

33%

28% It would require

I can maintain me to make
or improve significant
profitability, changes to my
without significant business in order
change 16% to maintain
profitability
10%
8%
5%

STRENGTH OF FEELING

When asked if their companies had a growth path baked into their existing processes, the
positive figure is 69%, again with the super-confident quite low at just 8%. At a time (January
2019, Brexit looming) when a pall of doom seems to hang over UK businesses, it is good to
see such resilience. Perhaps it is a coincidence, but virtually the same level of confidence
is demonstrated when asked about exports - 67% positive - the obvious inference being
that companies regard conditions for exporting as good. At a time when we are inevitably
concerned about the future trading relationship with the EU, it is worth remembering
that a great many companies export outside the EU, accounting for 52% of our exports.
(ONS, 2016.) Translate that into the direct question of whether manufacturers are
actively seeking new markets, and that positive figure increases to an encouraging 71%.

E X P O RT G R OW T H

29%
26%
I am confident in
overseas trade
I am unclear how
and market
I can grow my
conditions are 17% exports or build
good for promoting
my trade overseas
a growth in our
exports 12%
11%

5%

STRENGTH OF FEELING
30  Annual Manufacturing Report 2019 

There are two factors to consider when looking at the 33% of respondents on the Export
Growth graph on the previous page who are unsure about how to go about exporting.

W I D E R H O R I ZO NS

71%
26%
24%
21%
With all this
I am looking to uncertainty, I am
grow my business focusing on the say they have
overseas, and I home market, and
have a strategy to
14%
my established an export-based
do so
10% customer growth strategy
channels

6%

STRENGTH OF FEELING

One is the guidance and financial support they need in order to find new markets and the
other is the exchange rate. Key guidance and support is provided by UK Export Finance
(www.great.gov.uk) to de-risk the process, but manufacturers need reminding of its
existence. As the 71% of ambitious exporters in the above graph show, there is a willing
audience.
G OV E R N M E N T S U P P O RT F O R E X P O RTS

29%
26%

The government There is a lot more

is proactively that could be
18%
promoting UK done to support
businesses/ the sector in
products overseas overseas markets
12% 11%

4%

55%
said the government
STRENGTH OF FEELING
should do more to
Over half our respondents (55%) say that government should do more to help exporters, a promote exports
proportion unchanged from last year. Laura McBrown of G&B Electronics suggested that
the government has too little appreciation for the challenges SMEs face when trying to
export, particularly in light of the Brexit red line over the customs union. “I am concerned
that the government does not have sufficient understanding of the effect of globalisation
on the supply chain and the impact that coming out of the customs union and trying to
qualify for trade deals is going have on the UK manufacturing industry,” she said.

With regard to the exchange rate, at the time of writing it is $1.31 to the pound. This time
in 2018 it stood at $1.40, and towards the end of the year it fell as low as $1.26.
 GROWTH & EXPORTS 31

Sixty two per cent of our respondents saw weaker sterling as an opportunity. The other
38% felt the pressure of the inevitable increase in the price of raw materials that the
weaker pound brings about.

W E A K E R ST E R L I N G

39%

Thanks to the lower We’re exporting

exchange rate I’m more, but
getting a big boost import costs are
in export sales significantly up
21%
and my costs are and threatening
not significantly 17% to wipe out the
affected 14% benefits

6%
3%

STRENGTH OF FEELING

How do manufacturers view the opportunity presented by a weaker pound? Do they go

for market share by keeping prices low, or do they go for a quick boost to their bottom
line? A solid 76% say they aim for growth not quick profits, which is encouraging as we
approach what many describe as the most important moment in our national history
since WW2. Manufacturers will need all the positive attitude they can muster and, as they
make abundantly clear, they would appreciate well-targeted, well-funded support from
government.
M A R G I N O R G R OW T H
48%

Lower exchange
rates mean I can Lower exchange
grow market rates give me the
share in overseas chance to boost
markets by 21% my short term
keeping my prices profits
16%
competitive

7% 6%
2%

STRENGTH OF FEELING

Andrew Bennett, managing director of calendar manufacturers Allan & Bertram, says, “If
we end up with tariffs on exports to Europe, I assume there would be similar tariffs applied
to imports from Europe, so I expect the government to allocate this revenue to exporting
businesses to compensate for the export tariffs and allow us to remain competitive. Not
only does the government need to support the business economy in practical terms, it
needs to be seen to be doing so. If the government worked with businesses to get us all
prepared, that could send a very powerful message to the UK and the EU negotiators:
‘We are ready!’”
 32  Annual Manufacturing Report 2019 

Adrian Waine
Structural steel painting
www.themanufacturer.com

FINANCING
INVESTMENT
 FINANCING INVESTMENT 33

Investing in certainty in
an age of doubt
Uncertainty is never the product back offices; Software-as-a-Service (SaaS)
of a single phenomenon. If the UK is commonplace there, but, as this report
manufacturing sector is feeling uncertain indicates, less so when it comes to core
about the future, this may be a knock-on manufacturing systems.
effect of Brexit, but there will be more
to the story than Brexit alone. As this Currently, executives are reluctant to
year’s Annual Manufacturing Report pull the trigger on major equipment
demonstrates, that may include fears over investments, for reasons that the
finding skilled workers, the bewildering following pages will make clear.
speed of technological change, or how
to make investment decisions with But such decisions can be significantly
confidence. Stakes are high and getting de-risked if organisations ensure they
higher. have that single version of the truth
comprehension about their business,
In my experience, the companies that and a 360-degree view of the challenges
succeed in overcoming multi-pronged that may confront them. Once they have
challenges are those that distil them achieved this strategic high ground, the
down to manageable problems that, once decision to make the investments needed
solved, make the next problem(s) easier for growth and productivity becomes
to tackle. A company overwhelmed by significantly less stressful.
a macro issue such as Brexit will only
mitigate its risk, and improve its chances There is a significant opportunity for
of success, if it ensures that every part of manufacturers here, one that can help
its business is aligned. The way to achieve them counter the daunting odds and
this is to have the relevant data to hand navigate their way to a successful future.
that makes effective decision-making
simple and reliable. And that data needs ALAN BAGNALL
to be unambiguous. A manager confused Manufacturing Lead
by conflicting messages is a manager Board International
about to make the wrong decision. abagnall@board.com
www.board.com
This is why, at BOARD, we talk about a
‘single version of the truth’. Data that has
been aggregated from all corners of the
business, from production through to
sales and customer service, and properly
analysed not only gives a unified meaning
to the past and the present, but also offers
a road map to the future.

Investment in data acquisition and

analytics that offer manufacturers a
strategic advantage is made much simpler
by forms of financing already familiar to
34  Annual Manufacturing Report 2019 

There can be no argument that manufacturing is an investment-heavy sector. Companies either

fund investment in machinery and IT themselves, or they borrow from investors or banks.
Funding from their own reserves obviously makes sense and keeps their liabilities lower, but
the process of accumulating that cash can slow down their pace of growth. Borrowing from third
parties used to be par for the course, but ever since the GFC (global financial crisis), the banking

64%
system has been under enormous pressures of its own. Protecting balance sheets has been the
order of the day for them too which often means that the good intentions they display towards
manufacturers in their marketing don’t always translate into comfortable finance arrangements.

This seems paradoxical at a time when interest rates remain at historic lows. All things being
equal, banks and businesses should be making hay. Our first graph shows that is only partly the
case. said they
can self-finance
F I N D I N G F I N A N CE
investment
37%

Low interest rates
The banks say
and availability of
22% they are ready
funding are making
to lend but they
it easy for me to
make borrowing
raise the finance I 15% incredibly hard
need
10%
8% 8%

STRENGTH OF FEELING

Notionally, 67% are more positive on this issue than not (intriguingly, the same proportion
as last year) but yet again it is a very weak vote of confidence. Only 8% of respondents fully
support the proposition. What the question does not take into consideration is confidence. In
other words, would the picture look much different if manufacturers felt sufficiently gung-ho
about the future that they actively sought financing? Banks can’t lend if companies are gun-shy

81%
about asking for money.

It is perhaps inevitable therefore that companies say they prefer to play it safe by storing up
cash for investment. As one manufacturer put it during a roundtable discussion attended by
The Manufacturer, “I want to invest in equipment that offers new capabilities and access to new
markets, but I can’t currently afford the full cost, circa £500,000. I won’t take a loan from the
bank, so I’ll wait two to three years until the price drops to affordable levels.” said they are ready
to invest in new digital

“
technologies to boost
productivity
Consumers now demand instant access to lots of information about a product,
its quality, options and have expectations of a fast delivery. Only by investing in
digital adoption can all the required information for customer sales through multi
channels be seamlessly and instantly gathered, and production planned for on-
time delivery. Crystal Doors manufactures mass customisation, having thousands
of pieces pass through the machines, unique in detail to each customer every
week.
“
Richard Hagan, Managing Director, Crystal Doors www.crystaldoors.co.uk
 FINANCING INVESTMENT 35

CAS H R E S E R V E S
28%

We have strong 19%

We’re going to
cash reserves 17% 17%
hang onto our
on our balance
cash. All this
sheet. We can
uncertainty is
finance investment 11%
making us nervous
ourselves
8%

STRENGTH OF FEELING

It is a weak majority (64% compared with 61% last year) that say they will invest in growth
using their own funds. How much of a knock to confidence would it take to shift those numbers
into negative territory, conserving cash against whatever rainy days might bring? Pessimists
might suggest we’re in for a good many of those in the next 12 months. It all boils down to
manufacturers’ level of desire to take advantage of situations good or bad to get ahead. Some
see a crisis as a threat, and retreat. Others see it as an opportunity to exploit.

Similarly, companies can either take advantage of the low-wage economy that has been
gradually growing over the last 10 years, postponing investment and enjoying short-term
profits through a relatively cheap labour force, or they can pull the trigger and invest in the
digital technologies that they believe will give them a market edge.

I N V E ST M E N T I N D I G I TA L T E CH N O LO G I E S
38%

We have
postponed
We’re ready investment
26%
to invest in decisions because
new, digital low wages
technologies nationally mean
to boost our 17% we can achieve
competitive more through
position 12% staffing - and
save our money
for a rainy day
5%
3%

STRENGTH OF FEELING

Again, there is that mushy centre ground: endorsement of the proposition, but not full-throated.
The goal of the Made Smarter Commission’s North West Pilot is to demonstrate to those in that
38% column, who understand the power of digitalising their manufacturing prospects but are
hanging back for whatever reason, that the process can be smooth, inexpensive and that there
is a network of advice and support out there to see them through it.

And that the results will literally pay dividends.

36  Annual Manufacturing Report 2019

The Made Smarter Commission is the tangible consequence of the government’s Industrial
Strategy, launched in 2017, initiated and led by industry but supported financially by government.
There are other forms of government support routinely available to manufacturers, most
notably tax breaks, which attract 73% support on the positive side of the ledger. R&D tax credits
are very popular, even if, bizarrely, manufacturers tell us that a number of their accountants

73%
do not understand them. These tax credits allow manufacturers to experiment with new
processes at the government’s expense. The existence of agencies who will claim these credits
on companies’ behalf, because their accountants failed to do so, proves their efficacy.

G OV E R N M E N T I N CE N T I V E S

30% said they benefit from

tax incentives such as
Government 24% The tax system R&D tax credits
in this country
incentives such as
19% is flawed and
R&D tax credits
works against
help us move
the interests of
forward. More like
13% manufacturers
this please!
and employers
8%
6%

STRENGTH OF FEELING

Talking of support, manufacturers who want to keep their costs down as they begin the process
of digitalisation should be aware that many vendors are prepared to work with them on a
Software-as-a-Service basis (SaaS). Most of us are used to this, as the Internet has developed
the principle to the point where only rarely would a business buy a piece of admin software,
such as Microsoft Outlook and other products outright. Are manufacturers prepared to do the
same with the manufacturing process software that will propel them into the digital age?

Respondents were not universally supportive of this. What may work in the back-office garners
only 56% support. We recommend manufacturers look very carefully at schemes that will
enable them to take advantage of the technologies that work for them at a price that is spread
comfortably via a SaaS arrangement.

73%
V E N D O R- CE N T R E D F U N D I N G

29%

‘IT/software-as- I prefer to own all

a-service’ (SAAS) my key business said they have some
opens a whole systems - I’m
new opportunity 18% 18% nervous about
form of succession
17%
for us to invest in a vendor having planning in place
key systems as we access to my
grow business
9%
9%

STRENGTH OF FEELING
 FINANCING INVESTMENT 37

The final subject we addressed in this part of the report involved succession planning. It is
a phrase that family businesses will know well, but it also applies to SMEs that have grown
from start-up to maturity, and now the owner(s) want to retire. It has importance beyond the
interests of the individuals involved. In the UK we have a very poor record of growing businesses
beyond the S of SME. We need to become more M! This is very difficult to do unless we develop
a growth mind-set, particularly among lenders, that takes a long and patient view of the future.
Too often we hear stories of great companies looking for buyers when owners want to retire
but the kind of patient capital that would allow for longer term investment and a succession
plan that includes managers and staff is very rare. Companies from overseas often have more
understanding of such opportunities that offer long-term growth value and snap them up.

Looking at this graph, it would seem that a majority of respondents disagree with that
proposition, that they have indeed been working out how to ensure their companies thrive into
the future without them. We quote one below.

S U CCE SS I O N P L A N N I N G

38%

(For business I have no idea

owners) I am 22% how to secure
confident I have succession. We
sufficient resources are very poor
to ensure a positive in the UK at
succession/ 13% nurturing good
transition when I companies long-
13%
retire term

9%
4%

STRENGTH OF FEELING

At The Manufacturer we are keen to stimulate debate on this subject, to look at the variety
of schemes available, including full employee ownership as some companies have done
spectacularly well, and to talk about how we in the UK can nurture smaller companies to grow
into medium-sized companies that will be the engine room of our industrial future. We have
some shining examples, but as our competitors, particularly Germany, demonstrate, only when
there is a broad array of such companies in that middle-sized category will a manufacturing
economy really thrive.

“
We are in a strong position financially, thanks to following a policy of consistent
reinvestment of close to £6m over the last 5 years in machinery, factory infrastructure,
R&D, apprentices and skills training. As a private company we are able to reinvest
profits; we also maximise R&D tax credits and have been successful in securing Regional
Growth Fund grants as our investment in new machinery creates new jobs. Through
Sandwell Council, a partner of the Black Country Growth Hub (BCGH), A&M EDM secured
a grant totalling £375,000, which enabled the business to invest nearly £3m in our new
site. Continuously upgrading our equipment, as well as expanding our premises to
accommodate additional machinery and staff, has enabled us to stay ahead of the
competition, and meet growing demand.
“
Mark Wingfield, Managing Director, A&M EDM www.amedm.co.uk
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