The UK’s manufacturing sector has had some notable positive coverage in the last year or so, largely as a result of the improving performance of the UK and global economies – but also a direct result of the Government’s efforts to try and reverse the fortunes, and image, of a sector that has suffered a well-documented and long-term decline. And whilst most commentators and manufacturers are being cautious about predictions for 2014, there are many reasons to believe the UK’s manufacturing sector is set for a strong performance over the coming years. On the face of it, the UK is already performing well – with less than 1% of the world’s population the UK accounts for almost 2% of total manufacturing output.
This statistic, according to the United Nations, puts the UK at number 11 in the league table by output. Whilst many of our commodity manufacturers have disappeared – many through economic drivers to areas of cheaper labour, and some as a result of management mistakes, what are left are manufacturers that excel at producing things which customers in the UK and around the world need – often technology-led products that can be configured to the demands of many different markets. Be it a mechanical seal, sensor, or medical product for example, these are integral components for customers who rely on highly engineered expertise from companies whose names have never been heard of by the man on the street…… Scratch beneath the surface of many of our major manufacturing sectors, such as automotive, aerospace, building products, chemicals, electronics and precision engineering, and energy - and you will find leading global businesses that are either already delivering strong results or expecting to ride the wave of the next upturn in international markets.
Add to this a well-educated workforce that is particularly strong in engineering and design, and an entrepreneurial zeal amongst many of our ‘small-to-medium’ sized manufacturers that are so prevalent across the UK, and the right ingredients are there to capitalise on an improving global landscape. As the financial markets improve, we are beginning to see more innovative businesses – including technology spin-offs from our leading universities – seek investment through joining AIM or the main market.
Our main trading partner, the EU, has stepped back from the brink – and whilst there is still some way to go in many countries the picture is significantly healthier than it was 12 months ago. The political and economic instability of the US has also abated, and China has avoided a credit crunch, alleviating more uncertainty. Of course, the picture is never truly uniform, with each manufacturing sector experiencing its own economic cycle. But the ‘snapshot’ of some of these markets points to a justified optimism for the UK.
Total R&D spend by the world’s automotive OEM’s is at a record level as companies invest in technologies that will produce more fuel efficient and ‘connected’ vehicles. The UK’s volume car manufacturing sector is in the best shape it has been for many years – and produces cars that are exported throughout the world. Whilst these are ultimately owned by international parent companies, it is largely British designers and engineers that are enabling these companies to be so successful.
The house-building sector is set for a dramatic return in 2014, albeit from a very difficult period of several years, with some building products manufacturers predicting double-digit sales growth for the next three years at least. And a recent survey by Deloitte of UK Chief Financial Officers found that most are looking to increase capital spending in 2014 – which would represent a significant boost to the UK and international economies.
None of these facts on their own will have a significant impact on the UK’s manufacturing performance, but collectively if the global picture continues to improve, this year may be the start of a well-deserved return to consistent growth in GDP and productivity. Now, could a shale gas revolution in the UK deliver the same positive effect to manufacturing as it has in the US?
Jonathan Burke is a Principal Consultant in Berwick Partners, and specialises in leadership roles within the UK’s manufacturing and engineering sectors.