Investment is key to manufacturing upturn in UK
The UK has an opportunity to bring high-end, advanced manufacturing back, ensuring more jobs and growth from new and growing areas of industry, writes David Davies, managining director of South Wales-based Axiom Manufacturing Services.
The UK has often been questioned on whether it has what it takes to compete on a global scale, and whether it can strengthen the manufacturing sector in the face of increased global competition and persistent economic challenges.
During these times of austerity customers are more cautious and shrewd. They are looking more towards the total cost of acquisition, especially in this industry; they have to consider the value of the product, the logistics costs given rising fuel prices, the security of the supply chain and much more.
Manufacturers have to be able to promote and deliver the best possible return to their customers, yet this doesn’t necessarily mean through cost. It is becoming apparent that customers are increasingly concerned about quality, security and the value a purchase can bring to their business.
Despite this, many UK manufacturers have been transferring their production to low cost regions all over the world, still with the prospect of cost savings. However, these savings may not be as great as they seem. Although cheaper labour can be obtained, there are many hidden costs, and not all are monetary.
Most significantly is the cost of transferring intellectual property (IP) overseas transferring all knowledge to low cost regions at the detriment of the UK. Not to mention the engineering support expenditure; the cost related with the protection of the IP.
The stark reality is that not all goods can be produced more cheaply in low labour-cost locations. While labour might come cheaper, components may be more costly.
As a result so-called ‘cheaper destinations’ are riddled with hidden costs. Even labour costs are increasing, for years companies have been shifting manufacturing to China attracted by the cheap labour, this is now no longer the case as wages and costs are escalating.
Recent events such as the recession and natural disasters like the Thailand floods, affect thousands of customers and producers alike, encouraging manufacturers to re-consider offshoring their outsourcing, creating opportunities for UK manufacturing.
More and more companies are increasingly opting for manufacturers that offer bespoke solutions that can be delivered ensuring flexibility and resilience in their supply chains, creating opportunities within aerospace and defence, security, medical and renewable energy where high end, high value manufacturing is required.
The UK has an opportunity to bring high-end, advanced manufacturing back, ensuring more jobs and growth from new and growing areas of industry. In order for the industry to do this we need investment not only in human capital to tackle the engineering skills challenge, but also in R&D to remain competitive on the global stage. It is for this reason, investment in capital equipment is crucial; it is also the perfect time to buy.
Contrary to popular belief, manufacturing is alive and well in the UK and the economic outlook for UK manufacturing is positive, despite it being a tough market.
However, it is important businesses don’t mistake the positive outlook for a chance to sit back and expect the opportunities to come knocking.
Complacency will make a company’s chance of survival slim; businesses across all sectors need to work hard to make the most of the opportunities the downturn creates.