Five reasons manufacturers shouldn’t be pessimistic about the UK’s productivity outlook

With new research showing most economists expect productivity growth to remain sluggish this year, chairman of process engineering firm BPE Ian Shott tells us why we could be positive about our future prospects and how manufacturing technology could turn our fortunes.

There’s no denying that the UK is stuck in a productivity rut. UK workers are no more productive now than they were on the eve of the financial crisis and productivity only grew by 0.3 per cent over the first nine months of 2017.

Add to this, recent research from the Financial Times found most economists believe there’s unlikely to be any pick-up in productivity growth this year.

So why the pessimistic view? Of course, Brexit plays a big part. Uncertainty about the UK’s future outside the EU is expected to weigh on investment spending and we know the fear of increased red tape from new import and export rules – which are yet to be decided – is unsettling some manufacturers.

There have been other contributing factors in recent years, including the fact that manufacturing now makes up a smaller percentage of industry while our service sector is growing. It means there are lot of people in employment but generally on lower wages, pulling productivity levels down. We’ve also had less investment than countries like Germany and Switzerland, something that’s needed to unlock our growth potential.

So how can we improve productivity if we’re a nation with high employment rates on the brink of a monumental parting that’s got foreign investors’ knees wobbling?

At BPE we’re right at the forefront of innovations in the manufacturing industry and we believe there are plenty of reasons to be positive. Here, we’ve compiled our top five reasons the manufacturing sector should be cheerful about our future productivity prospects.

Reason to be cheerful #1 – Common sense will prevail when it comes to Brexit tariff rules

 

There are fears that new import and export rules could cripple manufacturing firms. We’ve been so used to a frictionless movement of products across borders that the thought of having to battle our way through red tape is unsettling.

That said, I don’t think we should be suffering sleepless nights as a result. As a CEO I’m optimistic and others should be too. In the private sector our natural instinct is to accept the situation and work out how to manage it. That’s what we’ll do collectively.

There are sensible business people on both sides of the channel who see it the same. Before Christmas the Chemical Industries Association put out a joint press release with their European counterparts, saying what they expected from Brexit and the expectations are identical.

Whether it’s a soft or hard Brexit doesn’t matter. What matters is both sides do a deal that’s sensible and I remain confident that common sense will prevail. Brexit will consume more airtime than it should but I also believe that businesses will focus on the opportunities that present themselves from whatever is the outcome and change always generates opportunity often unexpected.

Reason to be cheerful #2 – Brexit could be a solution, not a problem

 

For decades we’ve been reliant on Europe for imports of certain goods. With Brexit on the horizon, ministers are looking at how we can make a change and start to replace that with local manufacturing on UK soil. From the conversations I’ve been having with ministers it’s clear they see Brexit as a golden opportunity to stimulate what we do here in the UK and they’re highly motivated to support a reindustrialisation of the country supported by the Industrial Strategy, increased Government funding for Science and Innovation and a number of fiscal levers such as R&D tax credits, lower SME corporation tax and Entrepreneurs relief.

Reason to be cheerful #3 – We have money and a plan

 

For the first time in decades, we have a clear industrial strategy that’s underpinned by real investment. Westminster is injecting £4.7bn into innovation and research this term and promising to add £2bn more per year thereafter.

Businesses will feel this on the ground as industrial challenge funds start to open up. Arcinova, a Contract Research and Development Organisation of which I am managing director, has just won a grant of more than £1m to develop small scale modular continuous processing for drug manufacturing. We’re expecting there to be more where this came from. An Industry 4.0 fund is definitely in the pipeline and we’re predicting an industrial challenge fund for bio technology soon, which BPE could take advantage of in helping its clients to develop new processes.

Reason to be cheerful #4 – We are a nation of innovators

 

The UK has a strong heritage for innovation; we sparked the industrial revolution and can claim host to some of the world’s greatest scientists and inventors.

Now, our manufacturing industry is using technology to improve efficiency across the board and I have no doubt that Industry 4.0 will play a significant role in boosting productivity over the next 12 months.

At BPE we’re working with some big-name companies to design new plants and facilities and they’re really embracing automation and a move towards a ‘smart factory’. The environment is very receptive to using technology to solve efficiency issues. We’re also using computer aided systems to design more productive plants for our customers and make our own operations more efficient too.

Reason to be cheerful #5 – We’ve only just scratched the surface of what continuous processing can achieve

 

Continuous processing will become even more prevalent in 2018, as increasing numbers of small volume high value manufacturers cotton on to the efficiency benefits it brings.

The pharmaceutical sector is already coming on-board, spurred on by a need to maintain profitability amidst the government’s increasing regulatory and pricing pressures on the industry.  The patent cliff of the last decade was the danger warning pharmaceutical manufacturers needed to reassess their processes and look at how they could make them more efficient. Now they’re doing that by switching their small-scale production from batch to continuous.

At BPE we’ve seen a marked increase in continuous processing projects in the last few years and this will continue to drive opportunity going forward. We’re already looking at ways we can make this even more efficient in a bid to help our clients boost their productivity.