Huge opportunity to make UK manufacturing great again

Chris Iveson, founder and CEO of Sheffield-based FourJaw Manufacturing Analytics, believes the UK Innovation Report, published ahead of the Chancellor’s Spring Statement tomorrow by Cambridge the Industrial Innovation Policy group, part of the University of Cambridge, fails to recognise the progress achieved by the UK manufacturing sector in recent years.

He said: “While the UK Innovation Report provides robust research into the long-term fortunes of the manufacturing sector, its focus on the past 25 years paints a bleak picture, and digital technologies are set to change this narrative. There is a huge opportunity to make UK manufacturing a major growth industry once again.

“UK manufacturers have encountered fierce global competition in recent decades, and we are not alone in losing market share to lower-cost locations. But we have avoided a race to the bottom by focusing on higher-value products and production processes. That adjustment was tough, and inflation has been brutal in the last couple of years, but today’s picture is more positive: UK manufacturing has stabilised post-Covid-19, digitalised faster than any other part of the economy, and achieved productivity gains that exceed those in other major manufacturing economies.

Transformative technology adoption
Mr Iveson continued: “Economic shocks have done significant harm to UK manufacturing output in the last 25 years, the value of which fell by 13% during the 2008/09 financial crisis and by 12% in 2020 due to Covid-19 — the financial crisis followed a decade of declining output. Furthermore, Brexit made manufacturers nervous about investments that would support growth and productivity, and while Covid-19 was devastating for many, it prompted a wave of transformative technology adoption around automation, data analytics and artificial intelligence (AI). These new technologies are already making UK manufacturing more efficient, more productive, and more cost-competitive globally — those that embrace them will be well placed to prosper, now and in the future.

“There are fewer manufacturing workers in the UK than in 2000, but that contraction happened in the noughties, and the workforce has remained fairly constant since 2010. But it is the value of their work that is most striking. UK manufacturing output was worth £91,000 per worker in 2000 and it has risen well ahead of inflation to £237,000 today. This is why manufacturing can pay better wages than many other sectors and can attract top technical and engineering talent. World Bank data shows that the value added by factory workers in the UK increased more than in any other major manufacturing economy between 2018 and 2023. Today, only US factory workers create more value more efficiently than we do in the UK.

“Necessity has been the mother of invention since 2020. The adapt-or-die climate forced more manufacturers to adopt technologies and working methods previously only pursued by deep-pocketed pioneers and early adopters seeking first-mover advantage. At the start of 2024, just 9% of UK manufacturers had yet to make any effort or plans to transform themselves with digital technologies, a lower proportion than any other sector of the economy.”

Cutting-edge research
He added: “But innovation also caught up with the needs of mainstream manufacturers. Cutting-edge research from institutions such as the University of Sheffield’s Advanced Manufacturing Research Centre became a commercial reality, and – crucially – the rise of cloud computing and Software-as-a-Service business models made it possible for many more manufacturers to adopt automation, data analytics and AI, and to achieve substantial returns from what have become relatively low-risk investments.

“The Cambridge Report suggests UK manufacturers could invest more in R&D, and some will. However, most producers should be looking to buy rather than build new manufacturing technologies and processes. Research institutions are spinning out more and more companies with world-leading technologies that manufacturers can adopt easily and achieve rapid return on investment (ROI).

“It is far less costly and risky for manufacturers to adopt these solutions, whether at the pilot stage or when fully proven, than to focus on developing their own innovations in-house. We cannot change the past, but we can change the narrative. UK manufacturing is no longer a declining industry; it is highly innovative, high-value, and globally known for producing high-quality products.”

Mr Iveson concluded: “It is leading the way with digital technologies and leading the world in productivity gains. This is a sector with massive growth potential. We need to champion it, show it is still a place for ambitious and exceptional talent, and incentivise manufacturers of all shapes and sizes to adopt the new tools and technologies to give them a compelling competitive edge in today’s global economy.”