Here, City-REDI’s Amir Qamar discusses the fate of British manufacturing after Brexit.
The fate of the British manufacturing industry is currently unclear, with many organisations concerned about the effects that Brexit may have on their business; however, the potential impact will become much clearer once the government negotiates with the EU and concrete trade deals are established. Although these deals will inevitably affect the position of the UK manufacturing industry, it seems as though Brexit concerns have diverted the attention of firm’s from tackling more apparent obstacles, namely, the skills gap, security, innovation and energy costs.
As discussed in my recent Chapter ‘Re-shoring within the UK Manufacturing Industry: An inevitable decline’ (Dissident Voices in Europe: Past, Present and Future), the British economy is not producing a workforce with sufficient engineering skills in order to sustain the output of the manufacturing industry, let alone grow. For instance, the EEF found that as the current engineering workforce primarily consists of workers aged within their late 50’s, due to retirement, there will be less workers entering the industry relative to the proportion of the engineering workforce retiring. This is extremely worrying, and unless there is major policy reform to promote STEM or apprenticeships, the future for the UK manufacturing industry looks rather bleak.
A second issue that has been commonly overlooked concerns data protection and cyber security. The EEF recently reported that approximately 50% of manufacturing organisations have not increased their investment in cyber security initiatives within the last two years. In an age where the touch of a button can have severe consequences, this is concerning news, especially for those firms operating in high-tech industries. If such organisations fail to address this concern by increasing security initiatives, they may find themselves as ‘sitting ducks’ in the face of security and cyber-attacks. However, firms will inevitably need to re-think and prepare for changes that may be required in conjunction with the recent EU General Data Protection Regulation (GDPR), which was released last year.
Third, given the increasing rate of change in consumer demand, product life cycles are continually becoming shorter. With this in mind, R&D and innovation are important factors for manufacturing firms who wish to simply survive, never mind those who wish to grow. Therefore, manufacturing firms not only have to innovative in terms of practices, but must accept that ideas such as 3D printing and automation are key for future prosperity, especially with the onset of Industry 4.0. Although these initiatives may pave the way for growth for the British manufacturing industry, organisations are reluctant to pursue these initiatives due to the high costs associated with the implementation of such practices.
Finally, given that re-shoring has attracted notable media attention over the last few years within the UK, it is important to note that the EEF found that over 70% of British manufacturers identified high-energy costs as a direct obstacle to locating manufacturing activities in the UK. For instance, British firms pay extremely high-energy costs in comparison to the median energy costs in the EU, and it is important to note that both the EU and UK have remarkably higher energy prices in comparison with China and the US. In order to overcome this obstacle, manufacturing firms within the UK must acknowledge this potential disadvantage and explore their options with regard to renewable energy.
In summary, in this current period of uncertainty for the British manufacturing industry, it seems as though organisations are primarily concerned with what trade deals can be secured by the British government in the wake of the decision to leave the EU. Brexit will undoubtedly affect the industry, however, given the other challenges for the industry which have been outlined in this blog, there are other concerns which warrant urgent attention. Although, of course, it is sensible to try to plan and forecast for what may happen post-EU membership, the terms of Brexit are largely uncontrollable for UK manufacturers. It therefore appears as if firms have ‘taken their eye off the ball’ in terms of what they can do to ensure future competitiveness, regardless of what trade deals Brexit negotiations will bring.