The time is now for UK manufacturing to invest in smart tech and avoid falling behind global competitors, says Barclays report
- Following a recent Government review on industrial digitisation, Barclays cautions that failure to adopt ‘fourth industrial revolution’ technologies will be a lost opportunity for manufacturers
- 83% of manufacturers are confident about Britain’s ability to compete on an international scale over the next five years, yet many are putting off necessary investment in transformative tech and blaming a lack of skilled workers for the delay (21%)
- New Barclays manufacturing report predicts that the cost to the British economy could be as much as £102bn per year[i]
- Additionally, 101,000 jobs would be created in the next 10 years if manufacturers invest in smart factory technologies
New research from Barclays Corporate Banking shows four in five (83%) manufacturers are confident about Britain’s ability to compete in the international marketplace over the next five years, mirroring the findings of the Made Smarter report published earlier this month. Two fifths (43%) attribute their confidence to ‘fourth industrial revolution’ (4IR) technologies, such as machine learning, sensors and big data, which they believe will boost the productivity of their business.
Confidence isn’t translating into investment
Of those that have already invested, over half (51%) of manufacturers report that the adoption of 4IR technologies has improved productivity, while just under a third (27%) are already seeing return on investment. Yet, there is still resistance to investing in the very latest innovations. The Barclays Corporate Banking Manufacturing Report, Intelligent manufacturing: an industrial revolution for the digital age, is based on the views of over 500 manufacturing industry decision makers. It found that, while basic forms of automation, like robotics, have a high rate of adoption (76%), two fifths (43%) of manufacturers are yet to invest in 4IR technologies like artificial intelligence.
While UK manufacturers are broadly confident about future UK competitiveness, respondents to the survey are acutely aware of the strong position of our global competitors. Asked how the productivity of the UK sector measures up against other international manufacturing hubs, they position the UK behind China, Japan, South Korea, Germany and Taiwan. They also sense that the UK invests less in 4IR technologies than its international counterparts.
Yet economic modelling included within the report predicts that manufacturers could boost the sector by an additional £102bn per year by 2026, provided 4IR sees greater adoption and investment over the coming years.
Mike Rigby, Head of Manufacturing at Barclays, comments:
“Our research shows that manufacturers see the benefits of this cutting-edge technology, and many have started to match their intentions with investment. However, we are at a watershed. While the outlay may seem expensive for many at a time of uncertainty, the industry needs to raise its levels of investment in the skills and infrastructure needed to harness these new technologies and keep us more productive than other international manufacturing hubs. Businesses that make the leap will be rewarded.
“British manufacturing is going through another industrial revolution but confidence alone does not translate into success and benefit. With sterling currently weaker and a robust appetite from domestic and international markets for British goods, the industry is in a strong position to take advantage of the opportunities investing in fourth industrial revolution technologies can bring.”
Weighing up the benefits
Contrary to popular perceptions about the impact of AI, investment in 4IR technologies has the potential to create jobs for Britain. Barclays has found that 101,000 jobs would be created in the next 10 years if manufacturers invest in smart factory technologies, and textiles and clothing (12.6%), pharmaceuticals (8.3%), wood, paper and printing (6.9%), and fuels (6.7%) would benefit the most.
As well as creating jobs, investment in technologies like AI were also understood to have a positive impact on the quality of work people experienced. Of the manufacturers that have already invested, 32% of said it freed up staff to concentrate on more highly skilled work.
The study shows that the industrial heartlands would benefit most from investment in 4IR technologies, such as sensors, big data, energy self-generation and machine learning, with the North West (13,000) and Yorkshire & Humber (11,000) ranking high, as would the Midlands, West (14,000) and East (11,000), with all these areas set to see a big hike in employment.
Tackling barriers to investment
The skills gap is a major barrier, as highlighted by the Made Smarter review. Barclays’ research further reveals the scale of the problem faced by the industry. One in five (21%) manufacturers cited a lack of skilled workers as the reason for putting off investment in 4IR. Additionally, of those that aren’t confident about the UK’s ability to keep its competitive edge internationally, 40% attributed their pessimism to difficulties around recruitment due to a skills shortage.
With the research reporting that 19% of manufacturers believe the Government’s industrial strategy will have no impact on their business, it is clear that more targeted communication is needed to underscore the potential of 4IR. The Made Smarter review recommended strong leadership and better branding to make a difference. Survey findings show that 36% are not aware of the strategy at all, underlining the point made by more than a third (35%) of manufacturers, that more education and information on the tangible benefits of 4IR technologies would encourage them to invest.
Although manufacturers have been slow to act, this is not to say that they don’t have plans to do so in the future. 78% of manufacturers have committed to investing in automation over the next five years: over two-thirds see more potential in sensors, big data, energy self-generation and machine learning. And just over half predict more use of 3D printing over this period. This suggests that the industry has confidence in its ability to transcend these barriers, and propel Britain forward into a new industrial age and onto a global stage, but timing will be key.
The Barclays Corporate Banking 2017 Manufacturing Report, Intelligent manufacturing: an industrial revolution for the digital age, is based on a survey conducted by Opinium and Economic Modelling conducted by Development Economics. The survey was conducted in September 2017 with 508 decision makers in the manufacturing industry.
- i) Based on economic modelling, if UK manufacturers invest in £5.06 billion of capital investment in 4IR technologies per year by 2021 and £7.75 billion during 2026, the UK economy could benefit from an extra 101,000 additional direct jobs and 44,000 indirect jobs by 2026, £31.6bn per year in additional GVA accruing from the manufacturing sector and £102bn per year in additional revenues for manufacturers.
The Barclays Corporate Banking 2017 Manufacturing Report, Intelligent manufacturing: an industrial revolution for the digital age, is based on a survey conducted by Opinium and Economic Modelling conducted by Development Economics. The survey was conducted in September 2017 with 508 decision makers in the manufacturing industry.
- ii) Based on economic modelling, if UK manufacturers invest in £5.06 billion of capital investment in 4IR technologies per year by 2021 and £7.75 billion during 2026, the UK economy could benefit from an extra 101,000 additional direct jobs and 44,000 indirect jobs by 2026, £31.6bn per year in additional GVA accruing from the manufacturing sector and £102bn per year in additional revenues for manufacturers.
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