Digital technologies essential for UK manufacturing to power international competitiveness but SMEs still lagging behind

November 3, 2020 Editor

Additional dedicated Government support for SMEs across the country key to success – Make UK/Infor analysis

Bespoke dedicated support for manufacturing SMEs in digital adoption must be rolled out nationwide
Additional Government investment allowances for technology-based investments should be introduced
Significant progress over last two years with the number of companies doing nothing about digital adoption down by 19%
Companies at full digital revolution phase of implementation up to 14% – a 9% increase from two years ago
But 44% of manufacturers, although aware of benefits, still not adopting IDTs due to lack of skills, technical knowledge and absence of finance, particularly for SMEs
Manufacturers must accept that digitalisation is for everyone, and make it a strategic priority to prevent British manufacturing’s international competitiveness being further eroded

British manufacturing companies have taken significant steps in adopting digital technologies with some 80% confident that Industrial Digital Technologies (IDTs) will be a reality in their businesses by 2025, according to new research, ‘Bouncing Back Smarter: Innovation Monitor 2020’, published today by Make UK – the manufacturers’ organisation – and Infor. The use of 3D printers, AI, Internet of things, Augmented and Virtual Reality are making a real contribution to business operations across companies of all sizes -especially around the recent need for remote production and monitoring – but a significant number of small to medium sized businesses remain at the digital starting block.

The two years since our last Innovation Monitor have seen little change in the barriers to digital adoption, particularly for SMEs – lack of skills and technical knowledge remain top of the list but scarcity of finance is becoming a more significant block, with companies stretched due to loss of business caused by the pandemic. But a lack of knowledge of available Government schemes, and an absence of targeted digital implementation help for SMEs is further holding back progress. Other countries, such as Germany and Japan, have extensive support systems in place to help their manufacturing SMEs modernise – giving them a significant boost to their international competitiveness.

While manufacturers are aware of the benefits of IDTs, the report found that many (44%) are not yet adopting them. Regional variation is also stark. The Government’s Made Smarter pilot in the North West has been impressive in terms of digital adoption – with 20% of small businesses in the area already at the highest level of IDT adoption. This is second only to the South East at 33%. The NW pilot programme provides a comprehensive package of SME digital support – financial help for IDT investment purchases, access to a complete advisory service to ensure the right choice of technologies and training in how to use them to best advantage. Support for change management skill building is also an integral part of the Made Smarter programme.

The research shows clearly that this model is working, making a strong case for national rollout. The West Midlands is a prime example where its large proportion of traditional engineering manufacturers mean a very high proportion of companies have done nothing about digitalisation (18%) with only 9% at the highest technical revolution phase of implementation. Performance in Wales too is also notably below average, with a quarter of manufacturers not yet considering digitalisation and none at the highest level of development.

The current COVID crisis has renewed the focus on resilience, creating significant opportunities for investment in IDTs. However, the pandemic will hit many manufacturers’ spend on in-house R&D with two-fifths planning to decrease investment, so access to bespoke advice to choose the most appropriate technologies is a must to enable businesses to make the best choices.

Fiscal incentives to support digitalisation and research and development spend must be increased: starting in the forthcoming budget. Additional investment allowances for technology related investments would be a good way of doing this. But industry too must play its part in delivering a strong digital future for British manufacturing. Manufacturers, particularly SMEs, must accept that digitalisation is for everyone, and make it a strategic priority to maintain Britain’s competitiveness on the global stage.

Stephen Phipson, CEO of Make UK, the manufacturers organisation said:

“In recent months manufacturers have faced unprecedented challenges with the need for Industrial Digital Technologies never more important. Remote working, whether that be monitoring of equipment or remote production processes, have without doubt been the saviour of many companies. Digital programme rollouts have been achieved in a matter of months when such change would normally have taken years to achieve.

“In the coming months, as supply chains return to normal, it is important to build resilience and further accelerate digital adoption to give UK manufacturing that turbo charge to deliver even greater international competitiveness. Digital adoption allows companies to work as effectively and efficiently as possible and it is vital Government steps up to work with industry to make sure Britain’s smaller and often most innovative companies get that bespoke help they need to make the most of the technologies available to them.”

Andrew Dalziel, vice-president, Industry Solution and Strategy, Infor added:

“This report shows clearly that there is an emerging set of leaders within UK manufacturing that have embraced digital opportunities, scored early wins and are carving out strategies for further competitive advantage,” said Andrew Dalziel, vice-president, industry solution and strategy, Infor. “These businesses will not only be the most resilient in the demanding post-Brexit climate, but beyond any short-term market volatility they will be more agile, smarter and more responsive to customer change.

“Any one of those benefits makes a compelling case for a business to start embracing digital technologies now and join this elite. Taken together they show that businesses must embrace a digital evolution urgently and rapidly if they are to survive.”

https://www.makeuk.org/news-and-events/news/bouncing-back-smarter