UK manufacturers call for R&D and Industry 4.0 focus from government

20 November 2017 Consultancy.uk

Investment into UK research and development remains a priority for the manufacturing industry, with the emerging technologies of Industry 4.0 being seen as key to the future development of the industry. According to a new study, the UK government’s strategy could do more to support regional manufacturing development in engaging with these technologies.

The UK manufacturing industry continues to exhibit a relatively positive outlook, with a low pound boosting exports globally. The industry remains in a period of acute uncertainty, however, driven by sector specific and wider government policy factors relating to Brexit, alongside the disruption from automation and Industry 4.0, which are lurking on the horizon.

As it stands, British investment in manufacturing R&D lags behind other developed countries. The UK invests around 1.7% of its GDP into manufacturing innovation, well behind the OECD average of 2.4%. The US and Germany, key competitors, stand at 2.79% and 2.88% of their GDP respectively, while Japan and China invest 3.49% and 2.1% respectively.

In a new report from KPMG, the Big Four professional services firm explores key themes affecting UK manufacturing, from Industry 4.0, to Brexit, as well as wider government focused sector specific support - including recently launched new measures to boost R&D efforts in the sector.

Disruption on the horizon

The report notes that British manufacturers are increasingly aware of the impact of disruptive technologies on their industry, from automation to 3D printing. These technologies, which are often integrated into a wider ‘Industry 4.0’ transformation of the factory floor and supply chain integration, may result in significantly improved efficiencies, while cutting long-term costs.

Industry 4.0 impact

When UK manufacturers were asked about the impact of Industry 4.0 on their operations, there was broad agreement that they would ‘present an unprecedented opportunity to revitalise UK manufacturing’, as 22% strongly agreed and 34% somewhat agreed. In terms of impact on business model, around 40% at least somewhat agreed to a major impact, while 44% said that they neither agreed nor disagreed to it having a major impact.

Around 45% of respondents said that they somewhat agree that their organisation has a coherent strategy when it comes to Industry 4.0, with a further 46% being neutral on whether they have a coherent strategy. Finally, 43% of organisations note a lack of talent and skills necessary to capitalise on Industry 4.0’s potential, although 20% said that they have such skills on board.R&D focus

Innovation

The noted importance of Industry 4.0, reflects manufacturers’ continued embrace of innovation. When asked if innovation is, and will remain, the bedrock of the UK sector, 29% of respondents strongly agreed, while 49% said that they somewhat agree – 1% of respondents said that they somewhat disagree. Yet, while businesses are keen to innovate, with Industry 4.0 cited by many as the next level of innovation, getting there appears to be difficult.

When it comes to expected changes in research and development (R&D) over the next three years, 40% said that they expect activity to be stagnant, while 12% expect a decline. Those who think that activity will increase somewhat come in at 38%, while those who think it will increase a lot stand at 10%.Manufacturing priorities for future strategy

KPMG’s report also noted that many respondents back government financial support of emerging technologies (including Industry 4.0), 27% to a great extent and 43% to some extent. Supporting UK based manufacturers by encouraging consumers to ‘Buy British’ is another way of supporting the industry. Additional channels noted as being able to improve the industry’s innovation output include initiatives that improve access to finance for manufacturers, cited by 60% as a top priority, at least to some extent. Meanwhile, 54% said that a regional approach to industrial development is at least a priority to them.

Disjointed sectoral approach

In terms of the current regional approach championed by the government, much is left to be desired in most sectors – according to the respondents. In the medical devices segment, for instance, 24% said that the current strategy is extremely disjointed and unclear, while 53% said it is somewhat disjointed and unclear. For engineering & industrial products, 57% said that the government’s strategy remains somewhat disjointed and unclear, while 17% said it is extremely so.Government’s regional approach

In the automotive industry, which continues to face acute Brexit related concerns, 58% of respondents said that the government’s strategy is somewhat disjointed and unclear, while 15% think it is extremely so. Only in aerospace and defence is there a relatively (33%) high number of respondents who think there is at least a somewhat coherent and clear strategy – although the vast majority remain concerned.

Regionally focused projects, such as Northern Powerhouse, may create positive returns. However, respondents see the current strategy as relatively disjointed, raising concerns that industry needs may not be met with current efforts. When asked what would spur investment decisions about particular regions across the UK, supply chain preference took the number one spot, at 20% of respondents, followed by reliable and resilient infrastructure, at 18% of respondents. Existing manufacturing clusters were noted as important by 16% of respondents, while strong regional government and local council support came in at 12% of respondents. Low land prices were noted as the most important factor by 4% of respondents.Regional investment prioritiesAsked what would spur investment decisions about particular regions across the UK, supply chain preference took the number one spot, at 20% of respondents, followed by reliable and resilient infrastructure, at 18% of respondents. Existing manufacturing clusters were noted as important by 16% of respondents, while strong regional government and local council support came in at 12% of respondents. Low land prices were noted as the most important factor by 4% of respondents.

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