Annual

Manufacturing
Report 2020
THE SEARCH FOR STABILITY

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2 Annual Manufacturing Report 2019 

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 CONTENTS 3

Annual
Manufacturing
Report 2020
THE SEARCH FOR STABILITY

04 FOREWORD
05 INTRODUCTION
06 SMART FACTORY
Sponsored by Avanade

CYBERSECURITY

14
BUSINESS
Sponsored by
Palo Alto Networks 22 TRANSFORMATION
Sponsored by PwC
30 FINANCING INVESTMENT
Sponsored by Board

38 PEOPLE & SKILLS

Sponsored by Hunter

PUBLISHER The Manufacturer and Hennik Research cannot accept responsibility for omissions or errors.
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EDITORIAL DIRECTOR
Nick Peters
Copyright © Hennik Group 2020
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4 Annual Manufacturing Report 2020  FOREWORD

Foreword
Welcome to the 2020 edition of the Annual
Manufacturing Report, researched and
produced by The Manufacturer
A very warm welcome to The Manufacturer’s Annual
Manufacturing Report 2020. When I wrote the foreword to
last year’s Report, I did not anticipate that 12 months’ later I
would still be talking about the uncertainty blighting business
and investment. And yet, here we are, with another year of
negotiations (and no doubt political posturing), heading in the
direction of a Brexit that seems to be harder than anything even
the hardest Brexiters originally asked for. History is going to have
much to say about how we got here, but right now, it is how we get
through it that matters.

And the cheering news on that front is that businesses will cope.
They may not like the adjustments being forced on their processes
by the political dislocation caused by Brexit but this report
demonstrates that manufacturers are, in the main, confident of
making their way in this troubled world, confident in their search
for stability. Inevitably, there is barely concealed scorn for some
of the political decision making that has brought us to this pass,
and a real sense of urgency in the continuing need for some real
leadership on the issue of skills and training. This report talks a lot
about technology, but people are our future. Talking of technology,
we decided to find out which of the newest technologies being
discussed in the sector are actually being adopted. It makes
interesting reading.

We could not have produced this report without the extremely

generous support of our sponsors PwC, Avanade, Palo Alto
Networks, Board, and Hunter. Like anyone who works with the
UK manufacturing sector, they recognise 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.

So, enjoy this Annual Manufacturing Report 2020. We believe it

throws a positive light on a manufacturing sector that is buzzing
with ideas, confident about what is in their control, still nervous
about what is not. Stability is something one never really notices
until it’s gone. Let us hope that as the year progresses everyone’s
search for stability is a fruitful one.

NICK PETERS, EDITORIAL DIRECTOR

n.peters@hennikgroup.com
 INTRODUCTION 5

Introduction
To the Annual Manufacturing Report 2020

This report is based on a survey of manufacturers conducted by positive (left) and negative (right), and judge from the percentages
The Manufacturer magazine in December and January 2019/20 the relative strength of opinion. When referring to percentages ‘for’
to determine how UK manufacturers feel about their lot over the or ‘against’, we aggregate the three either side of the centre 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 We interviewed some of the respondents to add qualitative content to

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

N U M B E R O F E M P LOY E E S T U R N OV E R O F PA RT I CI PAT I N G CO M PA N I E S

22% 23%
30%

18%
23%
14%
13%
15% 16%
10%

8% 8%
1-50

101-250

251-500

Under £2m

£5-10m

£10-50m
51-100

501-1000

1000+

£2-5m

£50-£250m

250m+
 6 Annual Manufacturing Report 2020
www.themanufacturer.com

SMART
FACTORY
 SMART FACTORY 7

Successful manufacturers
are looking beyond industry
trends to become future ready
Standing still isn’t an option for as a top three priority, with 84% agreeing key areas: efficiencies, experiences
manufacturers. Neither is simply moving with the ERP and CRM unfit for purpose and innovation. But it’s crucial those
forward with a “business as usual” situation. Embracing new technology and dimensions are complemented by
mindset. Because today’s manufacturers achieving greater innovation are the two intelligence – including analytics, AI,
face a perfect storm of challenges. main transformation drivers for IEM and machine learning and broader disciplines
consumer goods business leaders. such as data science.
Products need to get to market faster and
more cost effectively than ever before. Yet 43% of businesses are encountering so Manufacturers seeking to respond and
Meanwhile, personalisation demands many roadblocks, they’re now reporting adapt to the market trends of Industry
are increasing in complexity, emerging digital transformation fatigue. 4.0 can improve their chance of success
technology is changing the way business by following this transformation path.
processes are executed, and the widening Finding the route to a future-ready state By capitalising on this future-ready
employee skills gap needs urgent Researchers at the MIT Sloan Center model, manufacturers can adapt quickly
attention. for Information Systems Research (MIT to changing economics, regulations
CISR) have identified two crucial drivers and competition. In fact, they can do
For many manufacturing organisations, for successful digital transformation and more than adapt. They can lead, forcing
keeping pace is enough of a headache, let getting on a route to becoming future competitors to adapt to them.
alone achieving a digitally transformed ready: an organisation’s customer and
future-ready state. employee experience maturity, and its Here’s what that all means when it
operational efficiency. comes to your bottom line: companies
Digital transformation fatigue that become future ready tend to enjoy
Avanade – a provider of digital and cloud Companies that are able to master these margins 16% higher than the industry
services – recently conducted research to see big business benefits – including average, according to MIT CISR.
understand the struggles organisations cost efficiency and improved innovation
face as they seek to address these potential. Chris Lloyd-Jones
challenges. Global Emerging Technology
They’re able to use disruptive and Engineering Leader,
The findings are stark. Whether it’s technologies like the internet of Avanade
legacy systems, siloed departments or an things (IoT) to create new experiences
array of misaligned technology systems, for their employees and customers. www.avanade.com/futurereadynow
companies that fail to tackle digital They’re capable of harnessing emerging
transformation are seeing profits erode by technologies to connect workers. And Formed in 2000 by Accenture and
as much as 5.1%, compared with industry they’re willing to embrace artificial Microsoft, Avanade works with
peers. intelligence (AI) and automation to manufacturers across the globe to create
augment and free up workers to perform cultures that embrace transformation, to
We also found that 94% of industrial higher-value tasks. shape strategies and to execute consistently
equipment manufacturing (IEM) leaders on their plans with a measurable return on
agree their marketing, ERP and CRM Ultimately, they’re future ready. investment. We focus on helping businesses
systems are no longer fit for purpose. to become future ready now by ensuring
Expanding on evolutionary thinking they can build operational efficiencies,
That’s probably why we also found Building on the MIT CISR approach, invest in customer and employee
that over 90% of consumer goods we’ve broadened the digital experiences, and unleash continual
manufacturers see digital transformation transformation model to embrace three innovation.
8 Annual Manufacturing Report 2020 

It is the defining feature of modern manufacturing: the drive to adopt smart factory, or digital
manufacturing, technologies. Every year, we see a change in manufacturers’ attitudes, from those

87%
days four to five years ago when there was a combination of resistance and incomprehension,
mostly among SMEs, to the point now where close to 90% agree with the need for UK
manufacturers to ‘get on it’. The figure last year was 76%.

D I G I TA L M A N U FACT U R I N G T E CH N O LO G I E S -
IS T H E M E SSAG E G E T T I N G T H R O U G H ? say we need to
adopt digital
37%
technologies so we
can prosper.
The message is There is too much
loud and clear 26% emphasis on
24%
- we need to this. We have no
adopt digital need to change
technologies so we - customers are
can prosper. happy and we are
We’re on it 8% profitable

3%
1%

We would caution against anyone suggesting that this obvious support for the adoption of

“
digital manufacturing technologies means the game is won. As the chart on page 20 (adoption
of advanced technologies) demonstrates, there is still a long way to go. This at a time when our
industrial competitors appear more ready to invest in modernising their businesses, and when
other strains such as political uncertainty make investment decisions hard. Industry 4.0 is not the end game for
industrial digitalisation. In today’s world
In terms of what digitalisation will do for their businesses, a similarly large number understand of perpetual change, the solution
the enormous benefits that can be derived from having greater visibility of their supply chain up is not another industrial revolution,
and down. This goes quite a way to counter the fear that used to be widely expressed, that greater but a transformation of products
third party visibility of processes poses a risk in terms of IP and pricing. and how we make them. We call this
Industry X.0. Using new technologies
like IoT, analytics, AI and digital twin,
D I G I TA L T E CH A N D T H E S U P P LY CH A I N manufacturers can unlock new revenue
and work with customers, employees
and partners on a whole new level.
37%
CHRIS LLOYD JONES
Global Emerging Technology
28%
and Engineering Leader,
Avanade
“
New digital 24% I am concerned
technologies will about the greater
improve my supply 3rd party visibility
chain relationships of our processes
up and down and prices
that greater
8% connectivity
delivers
3%
1%

That said, there are still some who feel that hierarchy inevitably rules in the supply chain.
 SMART FACTORY 9

“
Customers want open book (but without opening theirs). Trust in product and
process has never been more important. There is also a need to protect IP within
SMEs through non-formal methods (as opposed to formal protections via patents.)

Tony Dumbreck, Managing Director, Innovate Foods Ltd

And there is concern that pressing these new systems, which involve whole new technologies
such as cloud computing, on companies that don’t have the skills to understand them, nor the
money to hire them in, will be problematic.
You will note elsewhere in this report (People and Skills on page 38) that manufacturers believe
that digital manufacturing technologies will drive the upskilling of the workforce.

WO R K S M A RT E R , M A K E S M A RT E R

40%
37%

New digital They have no place

technologies will in our bespoke
enable staff to operations where
work smarter and 14% a personal touch is
be more engaged needed

5%
3%
1%

What we see here is that there is a dividend in terms of retention, because making smarter
definitely allows staff to work smarter, and therefore be more engaged with outcomes.

The productivity dividend from digitalisation is equally accepted. We gave respondents the
opportunity to reduce headcount and produce the same amount or keep the headcount and
produce more.

PRODUCTIVITY DIVIDEND

39%

They will allow

me to reduce It’s all too
27% expensive. I shall
headcount 25%
and/or boost continue to look for
production without low-cost labour,
taking on more even if Brexit
staff, and thus means that gets
remain globally harder to find
competitive 5%
3%
1%
10 Annual Manufacturing Report 2020

Both of the options we presented, to be fair, constitute an improvement in productivity, they

are just two different ways of achieving it. It is satisfying to see such an overwhelming majority
supporting the notion of retaining staff and going for growth. But progress comes at a cost.

“
We have a business model that wraps technology around the heart of people
both team and clients. I however need to finance the digital requirements to
deliver on this. As a small business that has carved out a niche offering in textile
development, my labour costs are my highest component, as all on living wage. This
89%
of manufacturers
is crucial. I can offer a more productive, effective and global service if supported believe Smart Factory
to transition to digital, which in effect would lead to creating more jobs, not less. technologies will improve
Christina Mackay, Managing Director, BeYonder Ltd
their supply chain
relationships
D I G I TA L T E CH I M PACT O N I N N OVAT I O N

33% 34%

New digital Their likely

20%
technologies importance in
will accelerate driving innovation
innovation is overstated
in design
development and 8%
processes
5%

0%

It is almost a no-brainer that digital manufacturing technologies will accelerate innovation in

87%
design development and processes. The extent to which digital twins and additive manufacturing
are becoming commonplace, and the tremendous strides being made in CAD systems, means that
it is no longer a question of whether a manufacturer should adopt them, but how quickly.

It follows that if our respondents agree overwhelmingly that digital technologies will improve
their supply chain relationships, workforce engagement and innovation/product development
that they will also understand the benefits that flow into decision making and customer service. believe smart
DATA D R I V E N D E CIS I O N M A K I N G factory techologies
39% will accelerate
34%
innovation and design
development

Data from I can’t prove the

connected ROI on that. The
machines and 16% FD will surely
people will inform block it
decision-making
and reduce costs
6%
4%
1%
 SMART FACTORY 11

It is perhaps one of the most compelling arguments for digitalisation, that the ready availability
of information about the business, available in real time and not hidden on spreadsheets, will
improve efficiency.

As we argue at the end of this chapter, however, policymakers and perhaps even larger companies
in the supply chain, need to understand that simply demanding SMEs in the supply chain
‘go digital’, as some large companies do, is not enough. More imaginative ways of offering
digitalisation support to SMEs must be considered.

And of course, everything ends with the customer, whose satisfaction or otherwise with
manufacturers’ products will decide their fate. The ability for manufacturers to improve their
customers’ experiences by gaining digital insights into the customer relationship, and by
improving it through value-added services, is well recognised.

DATA I M P R OV E S CU STO M E R S E R V I CE ?

31% 31%

We will be 20% Our customers

able to serve want to talk to
our customers real people, not
more effectively be plugged in
using digital via sensors and
9%
technologies 7% internet

3%

In the end, the UK’s success as a manufacturing nation will be decided by how the various
players in the digitalisation debate – government, solutions providers, advisory services and
manufacturers themselves – iron out the many difficulties and challenges adoption poses.

Only 20% of the respondents tend to believe the digital dice are loaded against SMEs. It’s a
positive sentiment echoed in all of the responses in this chapter of the Annual Manufacturing
Report.

D I G I TA L T E CH WO R KS F O R A L L CO M PA N I E S?

31%
26%
Digital 24%
The dice are
technologies loaded against
will enable all SMEs who cannot
manufacturers 13% hope to compete
to open up new against larger
markets and find manufacturers
5%
new customers
2%

We believe it is important, however, to report there were voices of caution among our respondents
who rightly say that it is one thing to declare digitalisation a universal good, quite another to
make it happen.
12 Annual Manufacturing Report 2020

For us, this is one of the reasons why, in hindsight, the start of the Made Smarter North West Pilot
last year, while in itself an admirable project, was unfortunate, as trialling it in just one region
suggests that everyone else in the country can put their plans on hold and wait to see how the
North West gets on. That could be quite a while.

81%
We therefore agree with the comment below that the entire country needs to get its digital act
together quickly.

“
SMEs need support to adopt. Made Smarter rolled out nationally would help.

Andrew Hodgson, Strategic Lead – Digitalisation, Siemens UK

said digital
technologies will
enable all
A final question about the adoption of digital technologies by UK manufacturers. Just how
advanced is it?
manufacturers to
open up new
In his address to the Manufacturing Leaders’ Summit in Liverpool, November 2019, Henrik
von Scheel, the technology strategist who first used the term “Industry 4.0”, offered a list of markets and find
technologies manufacturers need to be considering now, and in the coming years. Some of these
technologies are now quite standard, some extremely rarefied, but they will all be part of the new customers
manufacturing landscape in time.

We asked our respondents: which of them have you adopted, or are you actively considering? It is
interesting that only three of the technologies commonly thought of as beng Industry 4.0 cross the
50% threshold.

T H E A D O P T I O N O F A DVA N CE D T E CH N O LO G I E S BY U K M A N U FAC T U R E R S

Neurotechnology 2%
Bioinformatics 2%
Quantum technology 3%
Nanotechnology 7%

Blockchain 8%

91%
5G Communications 15%

Autonomous Systems 25%

Smart Energy Systems, local generation 26%

Augmented Reality 29%

Artificial Intelligence 30% said they will enable

Advanced materials 31% them to increase
Smart Automation 33% productivity levels
Additive Manufacturing 46% per headcount
Cybersecurity 48%

Advanced Data Analytics 49%

Automation/robotics 63%

Cloud Computing 66%

Internet of Things - data from devices 71%

Factories of the
 SMART FACTORY 13

Future: Innovative.
Intelligent. Effective.
Become Future Ready. Now.

Manufacturers seeking to respond

and adapt to the market trend
of Industry 4.0 can improve their
chance of success by becoming
future ready.

Avanade is the leading

provider of innovative
digital and cloud services
on the Microsoft platform.

To find out more visit

www.avanade.com/futurereadynow
 14 Annual Manufacturing Report 2020 
www.themanufacturer.com

CYBERSECURITY
 CYBERSECURITY 15

The enemy at the gate

Since the Industrial Revolution began some the entire supply chain (e.g., are third parties
270 years ago, manufacturing has not just as secure as your business?)
come of age, it has learnt to adapt and evolve
with multiple waves of technological change; • How to secure new routes to
but never has so much change come to bear market and customer engagement
so quickly as the sector is facing in the early
years of the 21st century. Palo Alto Networks continues to drive the
need for a cohesive approach to embed
The Fourth Industrial Revolution is cybersecurity in all aspects of your IT
bringing digital transformation through landscape, from the programmable logic
the deployment of up to 17 different controllers on the factory floor to the use of
technologies. All these technologies are cloud-based machine-learning to drive faster
competing for your time, money and effort, remediation and lay the foundations for
cybersecurity being just one component. smart factories.

Our early research with The Manufacturer Whilst many manufacturers recognise some
suggests cybersecurity is understood as a of this, they certainly haven’t extended this
critical pillar of Industry 4.0, with 85% of thinking into securing their increasingly
respondents identifying it as part of their global supply chains or even the chairman’s
digital transformation, though perhaps only personal mobile phone on the weekend.
at a basic level.
Cybercriminals are everywhere; the risks
Palo Alto Networks further explored are not just for banks and governments.
how cybersecurity is understood in Everyone and everything that is connected
manufacturing; for example, principles such could be a target. In our evermore connected
as Zero Trust in the IT environment have world, it becomes harder to stay ‘safe’.
been widely explored, but what about how to
build a consistent security posture across IT Industrial businesses routinely tell
and OT environments? The Manufacturer that cybersecurity
isn’t a priority: ‘who cares about a widget
We identified five primary ways to address manufacturer?’
and deliver effective cybersecurity in a
manufacturing environment. Don’t underestimate the cost of being
hacked.
Ensure you consider:
From downtime to loss of production,
• Secure unification of the IT and OT damaged equipment, loss of reputation or
environments even ransom demands, it can be immense –
and it can happen to anyone.
• How to uphold the availability
of manufacturing operations Greg Day
VP & Chief Security Officer, EMEA
• Protection of your intellectual Palo Alto Networks
property
www.paloaltonetworks.com
• Confidentiality, availability and integrity of
16 Annual Manufacturing Report 2020

The threat to manufacturers from an attack on IT systems has grown exponentially in

recent years thanks to the greater level of connectedness between companies and the
outside world, and by the growing adoption of sensors and other devices connected via
the Industrial Internet of Things (IIoT). All this is the inevitable consequence of Industry

51%
84%
4.0, one of whose fundamental features is the gathering of data from industrial processes

85%
and their transmission via IP (Internet Protocol). That can be transmission within the
factory, to partners via the supply chain, or to third party data processors and analysts in
the cloud.

Whichever way one looks at it, the days of being able to lock a filing cabinet full of
company information and regard it as secure are gone. As recently as 2016, an executive
believe
said the
cybersecurity
from a niche car manufacturer told The Manufacturer his company rejected the said cybersecurity
Apprenticeship is
Levy
notion of connectedness to the outside world by saying all product data, specifically is the responsibility
IP, was held on one computer that was not hooked up to the internet. That may still be
is aembedded
tax on employment
in their
of everyone
and istransformation
inefficient at
desirable in some instances, but any manufacturer keen on embracing a digital future digital
will have to understand that the threat from cyber criminals is a necessary part of digital in the business
driving apprenticeships
transformation. That is not the same as doing nothing about it. Modern cyber defences
are sophisticated and effective.

In this section of the Report, therefore, we sought to discover manufacturers’ attitudes

to cybersecurity, the internal cultures they believe necessary to enforce it and how they
might have confidence that all parts of their value chain are secure.

D O YO U H AV E A CY B E RS E CU R I T Y P O L I CY I N P L ACE ?

31%

27%
24%
We have a
clearly defined, We do not have
articulated a clearly defined
and enacted strategy, either
cybersecurity at board or
10%
strategy from the departmental level
board down 6%
2%

We found the very positive response to this question quite puzzling, because in the
past manufacturers have suggested to us they don’t see cybersecurity as a priority. It is
therefore surprising and gratifying that a clear majority of respondents say they have
a clearly defined cybersecurity strategy, rather bucking that impression. It is of course
entirely possible that the people who said they didn’t see cybersecurity as a priority
57%
82%
82%
said the education
have
haveaaclearly
clearly
defined,
defined,
were not the people responsible for it. Perhaps it just wasn’t on their personal radar. Or system is aand
articulated
articulated disaster
and for
enacted
enacted
perhaps it is yet another demand on limited resources for some companies.
industry; it needs
cybersecurity
cybersecurity a
strategy
strategy
total overhaul

“
We want this to be a priority, however affordability is an issue.

Christina Mackay, Managing Director, BeYonder Ltd

 CYBERSECURITY 17

CY B E R S E CU R I T Y A N D D I G I TA L T R A N S F O R M AT I O N

36%

Cybersecurity 28%
is embedded We don’t see
in our digital 21% cybersecurity as a
transformation, major threat to the
enabling us to business, we have
securely use data other priorities
for decision making 10% as we move to a
and to develop the digital world
business
3% 2%

As mentioned earlier, the advent of digital manufacturing technologies that rely on IP

connectedness means that protection against cyber attack is of critical importance. It
follows that a similarly large majority of 85% say cybersecurity is embedded in their digital
transformation, which enables them to share data securely inside their plants and with
supply chain partners.

But what if there is a breach? As the case of aluminium smelters Norsk Hydro in March
2019 demonstrated, a ransomware cyberattack can be seriously damaging, as damaging
as any other external event such as fire, flood and acts of God, against which companies
routinely insure themselves. (The attackers encrypted company files and demanded a
ransom to unlock them.)

B U S I N E SS CO N T I N U I T Y P L A N N I N G

39%

In the event
our business,
26% We are not aware
production line
that cybersecurity
or supply chain 22%
should be placed
was threatened
in the same
by a cyber attack,
category of risk as
cybersecurity is
fire, flood or loss of
a key part of our
8% key personnel
business continuity
planning 4%
2%

The response shows that awareness of the threat to business continuity is very high. We
did not extrapolate from that question to see whether manufacturers had bought specialist
cyber insurance, because it is unlikely the majority of our respondents would know of
their companies’ insurance coverage. It is important to note that most standard business
continuity insurance policies will not cover cyber attack up to the full extent of loss. As well
as ensuring systems are protected, it is necessary to ensure the business is properly insured
too.

The next issue to consider is the point at which increasing connectedness in the supply chain
with customers and suppliers might be perceived as a threat rather than an opportunity.
18 Annual Manufacturing Report 2020 

CY B E RS E CU R I T Y A N D O U R S U P P LY CH A I N

71%
24%

53%
53%
When negotiating
with suppliers, we
19%
insist on evidence 18%
they have proper
cybersecurity 15%
14%
defences in place, We don’t enforce
our cybersecurity
believe
or we won’t 11%
policies on our
insist
insist
ononevidence
evidence
apprenticeships
engage - we
could too easily connected supply supply
supply
are chain
chainpartners
developing partners
into a
lose Intellectual chain
Property or other proper
have alternative
havecybersecurity
cybersecurity to
valuable business higher education
defences
defences ininplacefor
place
intelligence
school leavers

It is clear manufacturers are far more confident about cybersecurity in their own systems
than they are in those of their supply chain partners. Only a small majority have cybersecurity
on their radar when working with supply chain suppliers. Just as cybersecurity is becoming
a feature of business continuity, it won’t be long before solid cyber defence becomes as
important a part of supply chain contracts as quality and payment terms. Our survey
suggests it is an area that is evolving, but not yet the done deal.

When it comes down to safeguarding your systems, where do you lay your defences? This is
critical, because as software and data capture are increasingly embedded in manufacturing
operational technology (OT), IT and OT increasingly work together. Indeed, in future there
may be no distinction between the two. Is this already happening?

I T / OT CO N V E RG E N CE

66%
34%

73%
73%
We are bringing 26% Operational
OT and IT together technology (OT)
to digitise our has always been
business. They will 17% separate from IT said the British
share responsibility and will remain people do not
for protecting us 11% thus to protect expect
expect cybersecurity
cybersecurity
understand the
against cyber 8% our production
attack. environments inin
the
thecloud
cloud
importance of
4%
manufacturing
totobebeconsistent
consistent
to
the
witheconomy.
with their We
theirown
own
need
internala national
internal policies
policies
That is not an entirely positive response, suggesting that internal cultures are not evolving as
rapidly as digital technologies are being adopted. We suspect this is an area of vulnerability, campaign of
if the disciplines that have normally been the most aware of security threats – IT – are not education.
effectively overlapping with OT, where the new vulnerabilities exist every bit as much as
they do in areas previously regarded as exclusively IT.
 CYBERSECURITY 19

“
Our Business Systems department is very keen on cybersecurity, but the rest of the
business is mostly unaware of the threats and dangers.

Tom Greenwood, Process Engineering Manager, JRI Orthopaedics

CY B E R S E CU R I T Y I N T H E CLO U D

27%
26%

The use of cloud

20%
technologies is
Our Industry 4.0
critical to our smart
plans don’t include
manufacturing
cloud technologies.
plans, and
11% We prefer to keep
we expect 10%
our data and
cybersecurity in
intelligence on
the cloud to be 6% premise.
consistent with our
internal policies

Cloud computing is an integral part of digital transformation. Many software systems

recommend that data that is of immediate real-time use, such as information from
sensors attached to a machine, should be processed on-premise (otherwise known as Edge
computing).

Data that is non-time critical can be handled more cost-effectively in the cloud, and it is
therefore inevitable that manufacturers must have confidence that cloud tech is robust and
safe from hacking.

The responses suggest that, largely, they are, indicating faith in the security deployed by the
main cloud platforms, and why not? Giants like Google, Microsoft and Amazon will be in
a much better position than most to keep your data safe. Where manufacturers should be
concerned is when they are connected to multiple platforms that have different interfaces.

That creates the potential for confusion.

“
People are generally the weak link in cybersecurity breaches. It is important to
understand when cloud connectivity is necessary, and when Edge deployment is
a better option. A good digital solution will be a hybrid of connectivity options.

Iain Crosley, Managing Director, Hosokawa Micron

20 Annual Manufacturing Report 2020 

That last respondent’s reference to people generally being the weak link returns us to the
issue of internal culture and its importance in getting as close to total defence as possible.

71%
84%
W H O I N YO U R B U S I N E SS IS R E S P O NS I B L E F O R CY B E R S E CU R I T Y?

38%

believe
27% said cybersecurity
apprenticeships
Cybersecurity is areisdeveloping
the responsibility
into a
the responsibility
of everyone in the
19%
Cybersecurity? properofalternative
everyone to
business; this is
That’s taken care
of by the people
higher education
in the businessfor
part of the ethos of
the company 8%
in IT. school leavers
5%
3%

When it comes to whose job it is to guard against external cyber intruders, there’s an
element of defiance in the response, “We all take responsibility…”

While not wishing to second guess our respondents, I wonder if that’s more an aspiration
than a reality. And again it returns us to the way some companies have evolved from the
days when cybersecurity was the preserve of the IT team, siloed in solitary splendour in
a remote corner of the building, to today when awareness of IT and its potential – and
dangers - runs throughout the factory.

Or should.

Young people entering manufacturing expect connectedness and transparency of

66%
71%
communications in a way that even ten years ago would have seemed extraordinary. Not
only do manufacturers have to be on the same digital page as their Millennial workforce,
they must harness their awareness and understanding as part of a 100% defensive attitude
to cybersecurity.

said the
said British
they are
people do not
bringing
understand OT and
the IT
together to digitise
importance of
manufacturing
their business. They
to
the economy. We

“
will share responsibility
forneed a national
protection against
Cybersecurity and vigilance against scams and fraudsters is the responsibility campaign of
of everyone in this business - we educate them on what to be aware of. cyber attack.
education.
Wayne Hine, Managing Director, Inductotherm Heating & Welding Ltd
Secure Manufacturing
for Industry 4.0
Industry 4.0 builds on the Third Industrial Revolution's continuing adoption
of computers and automation by adding smart, autonomous systems driven
by data and machine learning.

Read this new e-book to learn the five primary ways to address demand for
effective cybersecurity in manufacturing.
 22 Annual Manufacturing Report 2020
www.themanufacturer.com

BUSINESS
TRANSFORMATION
 BUSINESS TRANSFORMATION 23

The catalyst of uncertainty

What a difference two years can make. decade because of technological change.
In 2018, PwC’s 23rd Annual Global CEO One of the most pressing problems that
Survey revealed a record level of optimism society has is the growing mismatch
regarding worldwide economic growth between the skills people have and the
but, as UK CEOs look ahead to 2020, shortage of qualified talent for the new
economic growth is now their top concern digital economy.
with more than half expecting global GDP
to decline. We’re helping organisations anticipate
the skills they will need in the future and
Uncertainty is fuelling this shift work together to find the comprehensive
- something I am sure those in solution. It’s a wide discussion we need
manufacturing can relate to. Change is all to have across society, government and
around us and how we prepare, transform business. We all have our part to play.
and pivot is key.
You could have the ultimate smart
According to our CEO survey, many factory with all the right talent but if
UK businesses are responding to this you don’t have the product and business
uncertainty by focusing on practical model that your customers desire, then
measures to improve efficiencies while failure may still come. Companies in
targeting new products, services and the manufacturing industry are shifting
markets. towards a more service-orientated
business model.
Manufacturers are going beyond
the promotion of new technology This Annual Manufacturing Report
and embracing the whole journey of survey shows that this is really being
business transformation: learning new embraced and that UK manufacturers
habits, acquiring the right talent and that offer aftermarket and service support
implementing organisational changes. are growing. This is so encouraging –
adding value to customers and aiding
They’re carefully thinking through how collaboration and closer relationships.
to best use technology to increase their
efficiency, effectiveness and, ultimately, Cara Haffey
productivity. And they are focused on UK Leader of Industrial Manufacturing
using technology for the capability it gives & Automotive,
and ultimately the value it can create. PwC
cara.haffey@pwc.com
It is not straightforward, however, and the www.pwc.co.uk/manufacturing
holistic approach to how this is applied in
practice is the truly transformative part Note: Conducted in September and October
and directly links to success. of 2019, PwC’s 23rd Annual Global CEO
Survey, which involved 1,581 chief executives
People and skills are vital to the in 83 territories, explores the sources and
application of new technology. PwC’s manifestations of uncertainty and how
New World, New Skills analysis shows CEOs are taking action to address it.
that one in three jobs is likely to be
disrupted or to disappear in the next
24 Annual Manufacturing Report 2020

According to PwC, who sponsor this section of the Report, “Business Transformation is
a major shift in an organisation’s capabilities and identity so that it can deliver valuable
results, relevant to its purpose, that it couldn’t master before.” Inevitably it involves change

94%
at every level of a business, from organisational culture, to technology, product range and
delivery. (For clarity, the topic of Digital Transformation, which is often used to describe a

79%
business adopting digital manufacturing technologies, is dealt with separately in the Smart
Factory section of this report, although as noted, technology does form part of the wider
Business Transformation issue.)

Business transformation is too large a topic to address through a short series of survey of manufacturers
questions. But we can get a picture of how ready UK manufacturers are to embrace it
by gauging their agility in responding to some of the many and varied challenges and haveare alive to
confidence
opportunities that exist in today’s unpredictable world. Essentially, we wanted to discover
if they are continually scanning the horizon for those challenges and opportunities or are
they have
newthe
ways
capacity
of
hunkered down, content with business as usual. for growth
adjusting their business
Our first question was quite simply designed to gauge the transformation mindset among to achieve growth
manufacturers.

T R A NS F O R M AT I O N AWA R E ?

44%

35%

We have been
We are constantly
doing very nicely
alive to new ways
as we are and
of adjusting our
are reluctant to
business to achieve 15% invest in any further
growth
transformation

4% 2%
1%

57%
67%
That is a seriously positive response, with only a small handful of respondents demonstrating
any significant caution.

say their attitude

sayto
they are is

“
growth
confident overseas
unaffected by political
The “Age of Transformation” should not be viewed as moving from one set-up to trading conditions are
another. It is more a continuously evolving status that we will always have to stay good and economic
for promoting
ahead of.
uncertainty
business growth
Roy Haworth, Engineering Manager, Airbus

However, it is one thing to say you are constantly looking for ways to improve and grow,
quite another to follow through on that when faced with significant external challenges.
 BUSINESS TRANSFORMATION 25

To what extent do manufacturers have the internal systems – and the mindset - in place to react
to challenges with agility?

R E S P O NS I V E N E SS TO M A R K E T CO N D I T I O N S

47%

We are conscious
29%
of the changes
We’re making
and challenges in
money and
the marketplace,
growing, so no
and adapt our 15% change is required
business model
accordingly
6%
3%
0%

That is a convincing response. Into the challenges category we would most definitely place
Brexit and the accompanying political cliffhanging drama of deadlines that came and went, a
General Election, and then, on 31 January, Brexit itself. What flows from that is yet another
chapter of political uncertainty as horse-trading over a new relationship with the EU begins
and a newly ‘independent’ UK seeks new trading relationships around the world.

Clearly there is a significant degree of frustration and ambivalence about the way political
uncertainty, in the main driven by Brexit, has impacted our sector.

AT T I T U D E TO G R OW T H

27%

Our attitude 18% We are incredibly

16% 17%
to growth is 14% frustrated. We
unaffected want to plan for
by political growth but times
and economic are too uncertain
8%
uncertainty and unstable

“
The transformation of a business starts with the transformation of a strategy and the
people are centric to its delivery. We recognise external political, economic factors
but build relationships that come from trust, reliability, technology, and ultimately the
delivery of solutions that meet our customers’ needs.

Wayne Hine, Managing Director, Inductotherm Heating & Welding Ltd

26 Annual Manufacturing Report 2020 

The growth that really counts comes from exports, and the government understands that, with
its drive to counter the loss of access of the EU single market with a campaign to encourage

68%
more manufacturers to export across the globe. Are manufacturers up for the challenge?

71%
E X P O RT CO N F I D E N CE

26% say they are

24%
confident in overseas
say they
trade have
and conditions
I am confident in 18%
overseas trade, an export-based
I am unclear how are good for
and market 14%
I can grow my growth strategy
conditions are
good for
12% exports or build my growth into
trade overseas
promoting growth
6% new markets
in our exports

That last sentence may appear a bit cyn

sector when it comes to financing business
and institutions appear to want a one-way
companies that are already winners.

“
We are a UK manufacturer who exports to China. Our UK sales have fallen by 80% over
the past three years owing to the EU debacle and an incompetent government. Our
exports have increased to 80% of our turnover which, despite the UK turndown, has
improved our profits.

Graham Naisbitt, Chairman & CEO, GEN3 Systems

That is surprisingly positive. But are manufacturers equally positive about the support on offer

65%
from government – support that could make all the difference to the government’s post-Brexit
trading policy? The answer is a resounding no. That is stark. Manufacturers are clearly very

H OW G O O D IS G OV E R N M E N T AT T R A D E P RO M OT I O N ?

27%
55% say the
saidgovernment should
the government
22% should do more
do more to
to support
20%
18%
promote exports
the sector in
The government There is a lot more overseas markets
is proactively that could be done
promoting UK to support the
businesses/ 10% sector in
products overseas overseas markets

3%
  BUSINESS TRANSFORMATION 27

unhappy with the level of government support. They say A LOT more could and should be done
to support UK manufacturing in overseas markets, which is clearly critical as we are now out of
the EU and apparently on the way to a golden future of international trade.

“
There are too many changes happening at the moment with digital, political, market,
social - it is difficult to keep up. Regulation needs to ease up and businesses supported
by government rather than bashed.

Rizvan Khalid, Managing Director, Euro Quality Lambs

nical, but it reinforces a sentiment in the

“
Domestic political polarisation, global economic slowdown, geopolitical conflicts,
cybersecurity and environmental concerns are currently combining to present a
s in the UK; a suspicion perhaps that banks climate of unprecedented challenge and uncertainty for business.
y bet, and are only really ready to invest in
Richard Ennis, Chairman, Creative Composites Limited

As noted in the comment above, another challenge facing our sector is climate change, and how
manufacturers should regard the inevitable changes to processes and materials that this will
demand of their businesses. In terms of business transformation, this could easily become a
long-term issue whose importance will ultimately have significantly more impact than Brexit
or fractured politics. Our own research at The Manufacturer already suggests that consumer
demands for products that reflect their deepening concerns around climate change might well
have profound implications in the coming years and decades.

Considering this, do manufacturers regard climate change as simply another burden to endure
or an opportunity to be grasped?

CL I M AT E CH A N G E = G R OW T H O P P O RT U N I T Y

31% 30%

Climate change
and the drive for 23%
a carbon neutral
We see no
future are an
need to disrupt
opportunity for
ourselves to satisfy
me to transform
what feels like a
my business
9% media/political
by embracing
bandwagon
sustainable 6%
manufacturing
processes 1%
28 Annual Manufacturing Report 2020 

So climate change and the drive for carbon neutrality is seen as a really strong driver of

84%
growth. Manufacturers relish the opportunities presented by the need to develop more
sustainable manufacturing processes. Knowing UK manufacturers as we do, we expected
nothing less.

The final topic on which we quizzed respondents in this section is servitization. There is
some controversy around this. One respondent described servitization as “a rubbish, made
up buzzword, (the product of ) trendy management theory.” However you regard the word, say climate change
though, the fact is the process of manufacturing-as-a-service does offer manufacturers a new
dimension to growth and customer service. Of course, it is not new, with Gillette, Xerox and and the drive
Rolls-Royce plc outstanding early examples of the genre.
for a carbon
Generally, however, most manufacturing has over the decades been ‘fire and forget’, with neutral future
little visibility of where products ended up once they’d left the factory. The advent of digital
technologies that offer transparency throughout the supply chain, and therefore greatly are an opportunity
enhanced customer communication and service opportunities now means that the servitization
model is open to many more companies. And it can bring great benefits to manufacturers who to transform
might struggle to compete on price with products from countries enjoying cheaper costs, but
can now win and keep customers with superior service-based products.
their business

P RO D U CTS AS A S E RV I CE

30%

25%
We are 23%
developing (or
have developed) We prefer to sell
a servitized our product in the
business model established way,
that adds value 11% through distributors
to our customer and retailers
relationships and 6%
aids retention 4%

It is more than clear that servitization is growing apace among UK manufacturers, with 78%
saying they are developing business models that add value to customer relationships, aiding
customer retention in the process. 78% say they are
developing (or have

“
Changing from a traditional business to a servitized business model is a challenge to a
lot of people as it requires a complete change of philosophy, thinking value rather than
developed) a
servitized business
thinking price. With 75% of our business being overseas, and the unclear future of British
overseas trade, new opportunities are essential if businesses are to survive and grow.
model that adds
value to
Iain Crosley, Managing Director, Hosokawa Micron
customer relationships
With the caveat that government must work very much harder to earn the respect of
manufacturers, the UK sector as reflected in these findings is displaying a refreshing degree of
resilience and vigour in the face of significant challenges.

Or perhaps we should describe them, as these results would seem to indicate, as opportunities.
Transforming
manufacturing
businesses
We combine our business expertise
with technology innovation to solve
our clients’ important problems.

#TransformingManufacturing

pwc.co.uk/manufacturing

@ 2020 PricewaterhouseCoopers LLP. All rights reserved.

 30 Annual Manufacturing Report 2020 
www.themanufacturer.com

FINANCING
INVESTMENT
 FINANCING INVESTMENT 31

Empowering British
manufacturing through
data confidence
Brexit has happened. But the uncertainty must predict and improve decision-
that came with it is by no means over. making for their organisation to succeed.

The Brexit process was particularly At Board, we have over 20 years’

tough on British manufacturing, an experience in improving decision-
industry also trying to come to grips with making and helping companies succeed.
globalisation and an increasingly volatile Globally, we have worked with leading
supply chain. Not all manufacturers manufacturers like Ricoh, ZF, Honda
survived this period, even if they believed and Mitsubishi Electric to help them
they were in a strong - and safe - position. understand their businesses better.

The problem that these companies faced We help organisations transform all
was simple. They did not truly understand parts of their business from day-to-day
their business. How can business leaders operations to global sales, to strategic
set strategy and plans when they only planning and analysis. At Mitsubishi, we
have visibility over a fraction of their helped ‘give the business back control and
business and how it’s performing? help drive the business forward’. And at
ZF we were able to provide their business
But this is how many manufacturers are leaders with ‘a single point of the truth
still operating today: on hunches and from which to guide their company’.
guesswork. And if businesses continue in
this way, it’s hard to see how the British It’s only with this control of your
manufacturing industry won’t continue to business through complete visibility and
struggle on the global stage. confidence in the data in front of you
can manufacturers truly thrive in this
However, as The Manufacturer’s report challenging time. Businesses without this
shows, there is a clear shift in confidence might be able to survive, but a long-term
in the industry, and the confidence to approach to your corporate planning is
invest back into the business - something the only way to ensure long-term success.
that it has been in desperate need of for
several years now. And with reports that Ask yourself: do you trust your data?
Manufacturing Purchasing Manager’s
Index rose to 50 in January 2020, a If not, get in touch to see how we can help
mindset change has clearly occurred. you and your organisation succeed in
challenging times.
And this is wider than just manufacturing.
Deloitte research shows that 63% of CFOs David McKenzie
believe their role will shift to focus on Manufacturing Lead,
analysis, prediction and decision support. Board International
Forward-looking businesses have realised dmckenzie@board.com
that it’s no longer enough to react. They www.board.com
32 Annual Manufacturing Report 2020

Manufacturing in the UK has been suffering from low investment and declining confidence
in recent years. There are no prizes for guessing what some of the core components of
that are.

75%
73%
But it is also fair to suggest that the way we structure business in the UK, from start-up
through to plc, is perversely geared away from making life easy for companies. There
is little political capital to be had in supporting business and little general appetite for
growing businesses, even were conditions more amenable. We have a cash-out culture
in this country, with bright young businesses eagerly snapped up by foreign investors, and
very few homegrown investors interested in keeping them British. have strong cash
find it quite
Also, we are familiar with the “Valley of Death”, where manufacturers find it near-
reserves on their
simple to raise
impossible to commercialise innovative technologies so, again, they either fail or take their balance sheet
work abroad. It is hardly surprising therefore that banks routinely come in for criticism in money through
this report, and this year is no exception. Support for the notion that they are properly and can finance
engaged with and knowledgeable about the manufacturing sector, and therefore a mainstream UK banks
reliable or useful financing partner, is tepid at best.
investment themselves

H OW G O O D A R E B A N KS AT S U P P O RT I N G M A N U FAC T U R E R S?

39%

The banks say they

I find it quite
are ready to lend
simple to raise 22%
but they actually
money
don’t have the
through 15% expertise to
mainstream UK 12% understand our
banks
7% plans
5%

With banks considered to be less than reliable finance partners, and with insufficient
support coming through from the alternative finance sector, it follows that in order for

86%
manufacturers to be able to invest with confidence, they have to store cash on their

86%
balance sheets. And they are proving ready to invest, even though across the board
business investment is down.

R E A D I N E SS TO S E L F - F I N A N CE I N V E ST M E N T
say they are
readyready
to invest in new,
to invest
29%
digitalintechnologies
new, digital to
24%
22% boost technologies
our competitive
topositio
We have strong
cash reserves
We’re going to boost their
hang onto our
on our balance
sheet. We can
13% cash. All this competitive position
uncertainty is
finance investment
making us nervous
ourselves
6%
5%
 FINANCING INVESTMENT 33

Self-investment only works if one’s business has the ability to generate enough reserves,
and that is not a luxury afforded many companies. Add to this the growing, and highly
cynical, readiness of large companies to make small companies wait longer than a
reasonable 30 days for payment, and there is the inevitable perception that the deck
is stacked in favour of large businesses who have the power to lobby government, while
being able to brush off the - so far weak - efforts by government to encourage a “Pay in
30 Days” culture in the UK.

“
We are a micro-SME as are 93% of the electronics industry in the UK; 93% of around
47,000 “Electronic Systems Community” businesses have less than 19 employees, yet
this sector yields around 7% to UK GDP.

It’s this sector that needs support, not the larger companies.

Graham Naisbitt, Chairman & CEO, GEN3 Systems

An oft-cited reason for low UK productivity is that businesses have chosen to postpone
investment because they have access to low-cost labour. Our respondents say this is not
the case in manufacturing, where, as we know, there is a skills gap.

I M PAC T O F LOW WAG E S O N I N V E ST M E N T D E CI S I O N S

33% 33%

We have
postponed
We’re ready 20% investment
to invest in decisions because
new, digital low wages
technologies nationally mean
to boost our we can achieve
competitive 8% more through
position staffing - and save
3% our money for a
3%
rainy day

This is made evident by the fact that average pay in manufacturing is significantly higher
than in the service or public sectors. So, there is the evidence that manufacturers are
ready to invest in digital technology, rather than relying on labour for profits.

The extent to which that holds true will, however, depend on which part of the
manufacturing sector one is discussing. It is fair to suggest that some companies in food
and drink, for instance, have routinely relied on low-wage, unskilled labour for years.

relationships
34 Annual Manufacturing Report 2020

I M PACT O F B R E X I T O N F I N A N CE S

39%

I have built a Brexit

war chest that
will allow me to
weather the need
19% 19%
My cash flow,
and plans for
investment, have
been hit by having
67%
have have built
for challenges such to finance Brexit a Brexit war chest
as stockpiling 9% readiness
8%
6%
to weather
the need for challenges
such as stockpiling
For many manufacturers, the tortuous stop-go Brexit process has put them under
unforeseen financial pressure and is likely to be the gift that keeps on taking.

Many manufacturers were stung in 2019 by the coming, then passing, of deadlines for the
UK to leave the EU. 31 March and 31 October were false starts that cost many manufacturers
significant cash in stockpiling and close downs. With Brexit now a reality this is of less
importance, but clearly there are large numbers of manufacturers keeping a nervous eye on
further financial impacts from the uncertain year that lies ahead of us, as the government
seeks a new future trading relationship with the EU, the US and everyone else.

This will have an impact on financial planning across the board, particularly for those
manufacturers trying to plan for the long term, looking for the kind of long-term patient
funding that manufacturers in particular need, when ROI on some capital investments
takes years to manifest.

LO N G -T E R M F I N A N CI N G

39%

We are in the
market for long-
term, patient
19% 18%
UK financial
institutions are
chronically short-
92%say government
funding. There is
term lenders. needs to incentivise
plenty out there 9% 10%

5%
long-term investment
in digital technologies,
and the supply of patient
capital, if the UK is to
That must qualify as a weak response, and demonstrates that the City is not geared to
offering the kind of finance manufacturing needs. remain competitive
This is particularly important when we consider the oft-stated need for the UK to develop
many more medium-sized companies (the M in SME): the fabled, yet elusive “Britlestand”.
Too often it seems the chance to develop medium-sized powerhouses is lost to companies
being snapped up by foreign companies or PE houses.
 FINANCING INVESTMENT 35

Our respondents wholeheartedly agree and suggest the government should incentivise
long-term investment in digital technologies so that businesses can chart much longer
growth periods.

Inevitably, this relates to the Smart Factory section where respondents remarked on the
need for SMEs to be incentivised into adopting digital technologies if we are to develop
a broader base of decent-sized companies in the UK. So much of the background to this
is both political and ideological: political, in that there is a horror in some parts of the
political establishment at the thought of ‘picking winners’, and ideological because for
some in politics creative destruction is the only way to keep the body economic healthy.
It is not clear how many who hold that view have ever tried to start a business.

N E E D F O R LO N G -T E R M , H O M E G R OW N B U S I N E SS E S

35%
33%

The traditional
Government needs
UK system of
to incentivise long- 24%
build-up/cash-
term investment
out company
in digital
ownership,
technologies,
often to foreign
and the supply of
investors, is good.
patient capital, if
It encourages
the UK is to remain
5% start ups and
competitive
2% reinvention.
1%

But for those who have started a business, there is the question of what to do with it
when retirement beckons. As already mentioned, cashing-out quick holds its charms,
and why not? A big pay day followed by a gentle ride into the sunset has its obvious
attractions. And yet it is a characteristic of so many manufacturers we meet that they
are not in it for the big pay day alone. They do care what happens to their business and
their workforce.

T R A NS I T I O N O F CO M PA N Y OW N E R S H I P

40%

(For business
26% I have no idea
owners) I am
how to secure
confident I have
succession. We are
sufficient resources
very poor in the UK
to ensure a positive
at nurturing
succession/
11% 11% good companies
transition when I
8% long-term
retire
5%

That is not a powerful endorsement of the notion of succession planning, which is part of
the process of developing medium-sized companies that have the chance to grow over
the course of generations, which implies a positive approach to succession, whether it
be through founders’ families or employee takeover.
36 Annual Manufacturing Report 2020

Business owners do not seem completely confident that they know how the future of
their business will play out, and that will clearly impact whether they will grow as a UK
asset or risk being snapped up by foreign companies who routinely demonstrate greater
faith in the quality of UK companies than we do.

“
Succession planning across the sector’s SME’s is notoriously poor. We often hear that
Brexit or being slow adopters of digitilisation will be the downfall of many businesses.
In reality it is quite simply a lack of leadership capability across senior management
teams, deeming many highly successful and profitable businesses un-investable from
an investor point of view.

Owner-managed businesses often find it difficult to relinquish control whilst building

future leadership capability. The sign of a true leader is someone with the ability to
build capability within their team, so that should they have to suddenly step back, the
business would continue to function with minimal disruption.

Anonymous

And then there are companies who have chosen creative succession routes.

“
The majority shareholder of our company is an Employee Benefit Trust. As such, we plan
and execute over a longer term than many other companies. Our financial strategy is
based on prudence, which also allows us to undertake swift action when needed or
when an unexpected opportunity arises.

Barely a week goes by without us receiving an approach from one bank/company/

institution who wishes to invest in our business.

Rupert Broome, Group Managing Director, Killgerm Group Ltd

That last sentence may appear a bit cynical, but it reinforces a definite sentiment in the
sector that when it comes to financing business in the UK, banks and institutions appear
to want a one-way bet, and are only really ready to invest in companies that are already
winners.
 FINANCING INVESTMENT 37
 38 Annual Manufacturing Report 2020
www.themanufacturer.com

PEOPLE AND SKILLS

 PEOPLE AND SKILLS 39

Skills: The perennial issue

Britain’s manufacturers are facing the and universities, and they provide excellent we are one of the largest manufacturing
largest shortage of skilled workers since career pathways. However, because we have nations in the world, solving many of the
1989 with many citing this shortfall as their such an abundance of small manufacturers problems that preoccupy their everyday
biggest challenge. Despite post-Brexit and very few medium-sized ones, the war for lives. Remember, we are the nation that
immigration rules being unclear, companies talent is fierce. gave the world the telephone, television,
still need to be able to access skills at all lightbulbs and the electric motor.
levels without heavy costs or bureaucracy. The manufacturing industry needs to speak
with one voice and take responsibility for We should be promoting our impressive
If we are to see the sector continue to thrive what is required to move forwards, steering history and vision for the future. That
in the post-Brexit era, UK-wide perception away from the ‘government should provide’ careers in the sector are financially
of the industry must be addressed. We are attitude we currently hold. A fine example rewarding, exciting and diverse, that there
faced with a myriad of negative influences of a country doing this well is Germany, are clear opportunities for progression and
which place manufacturing low on the list of where training is organised and specified by skills development.
career options young people of today want manufacturers and the government provides
to pursue. the teaching facilities. How the manufacturing sector starts to
develop that argument is, as always, a tough
We are seen as a post-industrial nation. Due to an array of voices including job, but acknowledging the need is a pretty
That we don’t make things anymore. associations, trade bodies and education good start.
Manufacturing jobs are seen as male- providers, it’s hard to see how we could ever
dominated, dirty, low-paid and monotonous. emulate Germany. But we have seen brilliant Dan Kirkpatrick
examples of companies working together Head of Customer Success,
This is perpetuated by a decreasing number to devise their own local and regional Hunter
of parents and grandparents who have or training facilities, such as the Marches
have had jobs in manufacturing and a lack Centre of Manufacturing and Technology in dan@trusthunter.co.uk
of teachers who truly understand the career Shropshire, or companies developing their www.trusthunter.co.uk
opportunities in the sector. own training courses in-house.

Government policies such as the Many companies are already having to

Apprenticeship Levy have actually managed devise courses for retraining and upskilling
to send recruitment into reverse. And, there workers whose jobs are being taken over by
is the inevitable drive to send children to automation, so the more they diversify their
university, even if a vocational career would courses to include homegrown training for
be more suitable, because education budgets young people and collaborating with other
are geared to incentivising schools to cram businesses to do this, the more effective and
as many children as possible into 6th form. prosperous the sector will be.
And, even if children do decide to try for an
apprenticeship, the quality of training on But we still have to overcome the bias
offer in some FE colleges is dismal, after against manufacturing that infects the
years of budget cuts. national psyche. As some of the respondents
in this survey suggested, perhaps it’s time
Very large companies have become a magnet manufacturing made more of a noise about
for the best talent emerging from schools itself. Young people should understand that
40 Annual Manufacturing Report 2020

One of the highlights of 2019 for The Manufacturer was the chance to interview Sir David
McMurtry, the legendary inventor who founded Renishaw. He made a particular point of saying
that apprentices are the lifeblood of his company. How much better is it to develop talent that you
have brought in at an early stage, he said, than it is to recruit people who have grown up under
different value systems? Our respondents agree, as they have increasingly in the last three years,

75%
that apprenticeships are a valuable career path.

A R E A P P R E N T I CE S H I PS VA L UA B L E ?

said apprenticeships
30%
are coming into
22% 23% their own
The
Apprenticeships apprenticeship
are coming into system is
their own, not just expensive,
seen as ‘second 11% confusing and
best to uni’ 8% only benefits big
5% companies

But when we ask whether the Apprenticeship Levy, which was devised by the Cameron
government as a way to turbocharge apprenticeships by imposing a levy on companies with a
greater than £3m annual wage bill, to be used by all businesses to fund training, the answer is
emphatically negative.

I S T H E A P P R E N T I CE S H I P L E V Y WO R K I N G?

34%

57%
23%
The Apprenticeship The Levy is simply a
Levy is working well tax on employment
and will boost the 14% and is a very
numbers of young 12% inefficient way of
people coming into 11% stimulating skills
manufacturing
6%
development said the
Apprenticeship Levy
is simply a tax
And it is little wonder. The Levy is accused of being clumsy, complex, and it has had the on employment
unintended consequence of actually putting into reverse gear the drive to attract young people
into manufacturing careers. This is a complaint we hear often.

Government is like any business – there is the potential for departments to become siloed,
and apprenticeships is a classic instance of a policy that the business department, BEIS wants
delivered effectively, but the power to do that rests with the Department for Education. Little
wonder then that the broader question about how well the government is doing at narrowing
the skills gap, so that industry has available a satisfactory talent stream, met with more
negativity.
 PEOPLE AND SKILLS 41

“
Apprenticeships are working, particularly for big companies such as Rolls-
Royce and Dyson with their degree apprenticeships, but they are difficult
to access for small companies, with the service providers providing rather
dumbed-down offerings. As an SME, we would love to use the Levy to train
our own graduates and undergraduates, but it is just too confusing.

Richard Bruges, Chair, Productiv Ltd

G OV E R N M E N T E F F E C T I V E N E SS O N S K I L L S GA P

27%

22%
19%
The government
The skills gap
needs to do much
is at last being 15%
more, including
taken seriously by
revitalising
government, with 11%
colleges of Further
effective policies in
Education that
place 6%
have been allowed
to decline.

The system is still geared to the 20-year-old, class-driven mantra that 50% of young people
must go to university – whether it is the right thing for them or not. With the inevitable decline
in the status and funding of FE colleges that flowed from that policy, it is little wonder that the
vocational route to a career is stunted. And manufacturers want, and need, that to change. It
should come as no surprise that our respondents believe the entire education system, from
early days to graduation, is not working for manufacturing.

The education system may not be wholly monolithic, given the emergence of new types of
schools and programmes, but it certainly feels that way. Public debate over liberal arts and
music versus technical skills is presented as a zero-sum argument, when there is no reason
why both should not be supported.

“
There is too much emphasis on going to university after school. In the
Gloucester area all the schools want is a tick in the ‘went on to university’
box. There is little or no true careers advice on what’s available for
apprentices, what alternative careers you can do, in what industry. School
leavers need to know there’s a whole other world out there that might be
a better fit - and without the burden of large uni fees that will need to be
repaid.

Peter Miles, Managing Director, Larchtower Engineering,

T/A Forge Motorsport
42 Annual Manufacturing Report 2020 

“
We find recruitment of skilled CNC Operators very difficult and it is impossible

59%
to find CNC machine programmers. Whilst we have a new local “technical
college” which has CNC machinery, the students are not allowed anywhere
near it. The closest they get is CADCAM. In the old days, youngsters did
manual turning and milling at school, never mind college. There is too much
emphasis on people going to university to get meaningless degrees.

Elaine Slater, Managing Director, Hydraulic Projects Ltd

said the
education system
is failing
I S T H E E D U CAT I O N SYST E M S E RV I N G M A N U FAC T U R E R S’ N E E DS?

23% 24%

19%
The education The education
system is at last 16% system is failing.
preparing young It cannot keep
people for a career 12% up with the pace
in the digitally- of change in
driven industry of manufacturing
the future 6% technology.

Perhaps it boils down to manufacturers stepping up to the plate and taking responsibility for
their own skills needs.

W H O S H O U L D S H A P E T H E WO R K F O RCE O F T H E F U T U R E ?

39%
35%
Manufacturers have
a responsibility 30%
to get involved
in schools and
training - maybe
even work with
21%
It is government’s said the skills gap
other companies to responsibility to
provide us with the
is being
create independent
training centres
10%
workforce we need taken seriously
to shape the
workforce of the by the government
future 3%
1%

Given that manufacturing companies are capable, by dint of their size, to be more agile than
lumbering government, there is hope in this positive response. Not least because manufacturers
are becoming aware of something the government is unlikely to understand.

This is a profoundly important issue. Anyone from a professional background who has visited
schools to encourage young people will recognise the handicap under which schools operate.
 PEOPLE AND SKILLS 43

“
The education system is starting to recognise what needs to be done but
unless it moves quickly it will always be behind the business needs. Many
businesses are ready to lend their support but Government need to lead the
way to help schools change more quickly and bring business and schools
together to solve the problem.

Roy Haworth, Engineering Manager, Airbus

For instance, young people are often trained on outdated and obsolete software and equipment,
because that is all the school can afford, or all the school understands.

So perhaps it is character that matters.

A R E W E T R A I N I N G F U T U R E L E A D E R S P R O P E R LY?

36%

We believe in 27%
leadership training
22% We have never
for all levels of
deployed
management, and
formal training
have a
programmes for
workforce
10% management or
development
workforce
programme
in place
3% 2%

Given the paucity of management training in many areas of the economy – the UK has never
shone at the ‘soft skills’ business – this is a heartening response. Today’s young manufacturers
will produce the leaders of tomorrow. How they understand the critical challenge of the
Industry 4.0 era, which is to balance the demand for productivity with the requirement for a
skilled workforce capable of delivering it, will be crucial to the future.

That is why the responese shown in the graph overleaf is heartening . Businesses overwhelmingly
understand that using automation to save money by shedding staff is a loser’s game.

“
We’re focusing on the wrong things. No one knows what skills the world of
manufacturing will require in a few years’ time, as it is changing dynamically.
What is not changing is the need to have people with the right attitude,
mindset and resilience to go out there and get themselves trained/educated
in whatever will be needed. whenever. Our focus needs to move towards life
skills and mental strength.

Raam Shanker, Founder, Equitus Engineering Limited

44 Annual Manufacturing Report 2020 

W I L L AU TO M AT I O N K I L L J O B S?

89%
41%

It seems odd to be
The replacement
promoting digital,
of many shop floor 24% 24% largely automated
jobs by automation
technologies and say the replacement of
means new recruits
need to be even
simultaneously
urge young people
many shop floor jobs by
more highly-skilled
to operate our
into manufacturing. automation means new
Will the jobs
digital future 6%
5% even exist? recruits need to be even
0%
more highly-skilled to
Which brings us back to the issue of in-house skills training. A manufacturer capable of growing
into the future will need to be constantly upskilling and re-skilling its workforce, which is
operate our digital future
why the response to our final question was so welcome. If there is one imperative to emerge
from this survey it is that manufacturers need to take immediate action to bolster their skills
budgets and develop quality training programmes. If that is beyond them, they should reach
out to similarly placed companies and develop a collaborative solution.

D O YO U H AV E A N U PS K I L L I N G / R E S K I L L I N G P O L I CY I N P L ACE ?

39%

We have in place a 26% This is difficult and

policy for upskilling costly to provide.
21%
and retraining our Until it becomes
workforce, and easier, we will
believe in life-long recruit/replace
learning 9% staff when needed.

86%
3% 2%

A question we have asked in this survey in recent years involves the image of manufacturing
in the UK, and what should be done to improve it. After all, we should want young people to be
attracted to the sector. This last comment sums up what we might have been told had we asked
that question this year. It is one we should all take to heart. have in place a policy
for upskilling and

“
retraining their workforce,
The manufacturing sector needs to get better at promoting itself and and believe in
aligning its messaging to attract future hires. Younger generations are
motivated by purpose and a desire to work in an organisation that is helping
life-long learning
solve some of the planet’s problems and not causing them. The sooner
companies respect this, the sooner we will see more young people choosing
manufacturing as a career of choice, because they will feel connected to
what their company does. Engineering and manufacturing businesses will
provide the answers to many of the planet’s issues, yet I doubt many young
people currently entering the workforce would think that.

Anonymous
12 November 2020 | Exhibition Centre Liverpool

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