Forecasts reveal it will take until 2022 for manufacturing to recover to its pre-Covid-19 growth track, while it could cost a potential £35.7 billion in Gross Added Value this year alone, according to a major report published today by Make UK and Santander UK.
In the first detailed analysis of the Covid-19 impact on UK manufacturers, the report - ‘Responding, Re-setting and Re-inventing UK Manufacturing Post Covid’ - sets out the scale of the challenges ahead for the sector. It also highlights how quickly manufacturers responded at a time of national crisis – from filtration specialists who’ve turned their hand to creating personal protection equipment (PPE) face masks, to signage firms diversifying their products to create social distancing signage for customers across Europe.
Looking forward, the report does predict that the sector will be at the forefront of helping the UK meet its net zero carbon target through a mix of investing in green, sustainable processes and maximising the use of digital technologies. This can only happen through a re-purposed industrial strategy involving a partnership with Government and other stakeholders recognising the key value of the sector to the future of the economy and all regions of the UK.
The report makes clear the impact of Covid-19 on some of the world’s most established manufacturing nations, including the US and Germany, surmising that industrial production fell by 11.2% (monthly) and 11.6% (annually) respectively. It reiterates the importance of manufacturers diversifying their customer base to help achieve growth, maintain demand and avoid over reliance any one specific market or customer.
Commenting, Make UK Chief Executive, Stephen Phipson, said: “History has shown us that a strong industrial base provides the foundations needed to create a prosperous society. However, the UK has unfortunately become culturally tone deaf to the idea that manufacturing matters and can provide solutions to the challenges that we face, something the sector has amply shown during this crisis.
“A new digital, greener and more sustainable economy will emerge from this with an opportunity to catapult manufacturing, science and engineering once again to centre stage in the UK. Industry stands ready to work with Government to produce a new industrial vision which will benefit all regions of the UK.”
Paul Brooks, Head of Manufacturing at Santander, said: “Our manufacturers are the beating heart of the UK economy, and although sobering, this detailed analysis is vital to understand how businesses can rebuild as restrictions are eased.
“As leading global economies begin implementing recovery measures, looking to new overseas markets will be crucial to diversify and minimise overreliance on a single export market for UK manufactured products.
“While Covid-19 presents the most testing time for manufacturers at both ends of the supply chain, their aptitude to handle shock and change for the better is enduring, and we stand ready to support them.”
The report also looks at the impact of the disruption to supply chains and logistics management. It reveals the extent of dependence on China with 31% of small companies and almost two thirds of large companies (65%) sourcing components there or other affected countries.
However, the report reveals a striking desire to mitigate risk and build resilience in the future by reviewing supply chains with more than half of companies (53%) already reviewing them and a further third committed to doing so in the next year. This shift will be vital in helping Government with its exercise to map out supply chains and understand critical sectors and components which will be needed to build greater resilience into the economy overall.
Looking forward the report analyses the opportunities for building a new economy with a renewed manufacturing sector at its heart. In particular this will require industry to embrace the need for digital skills that can support the adoption of technology and the way it is deployed to rethink existing systems and processes, especially with the use of green and sustainable technologies. According to Make UK this will require the skills to support a digital transformation which must now be a national strategic priority with the creation of a National Skills Task Force.
The report also stressed that by embracing technological change this will help manufacturers get ready for the new international trading environment they will face both post Covid-19 but also outside the EU. This will help them take advantage of new markets and trading opportunities, possibly without having any physical presence on the ground.
Recognising UK manufacturing as a critical sector
• Identifying it as a critical sector for the UK economy and aiming for the UK to be in the top five manufacturing nations in the world.
• Work with the sector to put manufacturing at the heart of the regional economic recovery involving partnerships with key local stakeholders.
• Work with the sector to effectively map out a global supply chain resilience programme, agreeing coordinated action with key economic partner countries to maintain current trade flows and removing administrative restrictions.
• Supporting manufacturers to move goods, products and services with ease through smart supply chains and global logistics.
Powering a digital future through a new energy, data
• Provide additional fiscal incentives to ensure that critical industrial R&D capacity and spend are safeguarded as a means of improving national resilience.
• Roll out the Made Smarter Review approach to SME digital adoption nationally, with simplified funding streams and a lead partner coordinating efforts within Regions.
Encouraging and rewarding investment in the green economy
• Encourage manufacturers to lead the green revolution by making grant schemes simpler, fewer and more accessible for SMEs so that more take the leap to invest in green solutions. Upfront investment costs remain the biggest barrier to implementing energy efficiency measures for manufacturers.
Developing a National Skills Taskforce to meet the skills needs for the future
• Ensure that the surplus of skilled employees that will inevitably be leaving UK manufacturing businesses are matched with demand, including opening up opportunities for those skills to be transferred into other sectors where they are needed.
• Support employees to identify jobs where their skills have relevance and cross over within both the manufacturing and wider sectors.
• Develop a flagship upskilling programme that would see employees develop the digital skills they need for the new economy so the recovery can be future proofed.
About Make UK
Make UK, The Manufacturers’ Organisation, is the representative voice of UK manufacturing, with offices in London, Brussels, every English region and Wales.
Collectively we represent 20,000 companies of all sizes, from start-ups to multinationals, across engineering, manufacturing, technology and the wider industrial sector. We directly represent over 5,000 businesses who are members of EEF. Everything we do – from providing essential business support and training to championing manufacturing industry in the UK and the EU – is designed to help British manufacturers compete, innovate and grow.
From HR and employment law, health and safety to environmental and productivity improvement, our advice, expertise and influence enables businesses to remain safe, compliant and future-focused.
About Santander UK
Santander UK is a financial services provider in the UK that offers a wide range of personal and commercial financial products and services. At 30 December 2019, the bank had around 23,500 employees and serves around 14 million active customers, via a nationwide branch network, telephone, mobile and online banking. Santander UK is subject to the full supervision of the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) in the UK. Santander UK plc customers’ eligible deposits are protected by the Financial Services Compensation Scheme (FSCS) in the UK.
Banco Santander (SAN SM, STD US, BNC LN) is a leading retail and commercial bank, founded in 1857 and headquartered in Spain. It has a meaningful presence in 10 core markets in Europe and the Americas, and is one of the largest banks in the world by market capitalization. Its purpose is to help people and businesses prosper in a simple, personal and fair way. Santander is building a more responsible bank and has made a number of commitments to support this objective, including raising over €120 billion in green financing between 2019 and 2025, as well as financially empowering more than 10 million people over the same period. At the end of the first quarter of 2020, Banco Santander had a trillion euros in total funds, 146 million customers, of which 21.3 million are loyal and 38.3 million are digital, 11,900 branches and 195,000 employees. Banco Santander made underlying profit of €1,977 million in the first quarter of 2020, an increase of 1% compared to the same period of last year.
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