It is widely publicised that the coalition is intent on rebalancing the economy given the now common view of our over reliance on the financial and service sectors before the downturn. Government policy is therefore more supportive and aligned with public opinion that Great Britain should be known once again for ‘making things’.
The manufacturing sector has actually performed well given the challenging economic conditions over the past couple of years – and, indeed, outperformed the wider economy with growth last year of 3.8%. But if it is to reverse the general fortunes of the past two decades, the time has come for the sector to commit to a long-term plant and equipment investment strategy.
This will in turn provide a solid foundation for future, manufacturing-led success and is fundamental to our national interest in high value manufacturing. We need to move away from an ingrained culture that has seen technology investment mired in poor understanding of the benefits and our natural bias to protect jobs, methods and short term financial statements.
An interesting indicator shows that the UK lies well behind continental Europe in the application of automation and robotic systems in manufacturing. A recent study conducted by The Engineering and Machinery Alliance (EAMA), found that Germany has an installed base of 144,800 industrial robots – the UK stands at just 15,000. This proportionate difference also reflects the respective market sizes for Programmable Logic Controllers (PLCs) a technology at the core of industrial machines and processes.
There are clearly sector strengths, such as automotive, that explain some of the difference. However, it is evident that a significant proportion of automation technology investment in Germany stems from widespread proven experience that it delivers real competitive advantage in the form of production quality, productivity gains and growth.
Along with the clear installed base disparity, the investment responses to the downturn in the two countries have been notably different. In 2010, €167.4bn was invested in plant and equipment in Germany – a startling figure that was a 9% increase on the previous year. Meanwhile UK investment levels, which are dwarfed by Germany’s, declined by an adjusted 5.1% over the same period, which in turn was 21% down on 2008.
It is clear that automation technology uptake has been slow in the UK. According to EAMA’s study the reasons range from low awareness, with not enough UK manufacturing businesses clear on what can be automated, and the costs involved, to a ‘risk averse’ culture that does not want to change existing manufacturing systems. Skills shortages are also an issue, with British manufacturing lagging in the number and orientation of engineers to apply automation technology. Thankfully, the engineering demographic issue and our manufacturing growth intentions have led the coalition to include skills as a central theme in their Advanced Manufacturing Growth Review. This has at least increased focus on vocational training, including apprenticeships and the re-introduction of technical academies such as the Black Country UTC* which Siemens is supporting and opens in September.
The benefits of automation technology are many, but it primarily drives improvements in productivity. The British Automation Robotics Association (BARA) summarised this in their document ‘Automated Manufacturing’: “when applied appropriately automation of the manufacturing process not only drives costs down, it improves quality, reduces waste and optimises energy use” – a scenario manufacturers of all sizes can relate to positively.
Returning to the German example, it is perhaps no coincidence that this country continues to thrive: it is a high wage economy with a robust manufacturing base using automation technology as a central element for long-term investment policies. While the recent Q2 GDP figures for the UK show a marginal 0.2% increase – and manufacturing decreasing by 0.3% - the German economy, and manufacturing within it, motors forward with 1.5% GDP growth recorded at the end of Q1 signalling it is set to outperform the UK yet again.
For the UK to attain aspired levels of manufacturing output in niche and domestic sectors and develop sustained success we need to focus on our strengths. It is clear that we can no longer compete with the might of China in low value bulk manufacturing. Instead, we should focus on areas such as low-carbon technology and aerospace & defence, while recognising the danger in complacency as China too reveals more about its intentions to adopt this direction. Automation technology and digital software capability are not just essential in high value manufacturing. They must be central to our progress in commercialising new ideas, and enabling domestic and foreign-owned companies to see the UK as the right manufacturing location for higher value customised goods. Our manufacturing sector needs to address the challenge of mass customisation through flexible automated manufacturing processes. After all, the cost of running an automated plant is not so different in China compared to the UK once you take away core building and initial labour costs, but domestic automated plants create higher skilled jobs and regional supply chain advantages.
To succeed in replicating (or surpassing!) the German manufacturing template, a cultural shift must occur with increased investment in technology to build on much of the manufacturing excellence evident in British Lean and People processes. Drawing closer links from design to production and production to management can help accelerate progress. Benchmarking across sectors is essential. Technology providers too need to do a better job of demonstrating benefits, and manufacturers need to recruit and train staff who can address the technology challenge.
Automation technology can make a real difference to the British manufacturing landscape – an area increasingly vital for our future economic health. To date, it is clear this is an aspect of industry that has been under-exploited. It is imperative we now use technology to shape and develop our manufacturing base to protect current strengths and realise future growth. l
*University Technical College