The 2017 Manufacturing Report

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The age range of the Mix team is quite significant – and we have very different views on manufacturing and the relative value to the UK.

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None of the Mix team is over 100 years old and therefore won’t recall when Britain was the largest manufacturer and exporter in the world, or, for that matter, was around in 1948 when manufacturing was still 48% of the UK economy. A couple of the team were around in the 70’s when manufacturing output was still at 30%. It comes as no surprise that manufacturing has continued to decline and now accounts for less – in fact 13% of the national economic output.

Perhaps a little context is necessary. Britain is no longer a land-grabbing imperial power, whose objective was to dominate for the case of trade, as it was at the turn of the century. Equally few would have predicted that the result of the two world wars would leave the country all but bankrupted with the obvious impact on manufacturing output. But things are not all bad; productivity is at its highest ever, perhaps not surprising due to increased automation (for example, according to the EEF, productivity in steel has increased eightfold between 1978 and 2006), along with exports that saw an increase of 0.8% month-over-month to £49.4m in January of 2017. This represents the fourth consecutive monthly increase and the highest value on record.

June 23rd 2016 did give the manufacturing industry something quite spectacular to think about. Brexit. The Prime Minister will lead the UK out of the European Union with Article 50 being triggered any time soon. However, the British Furniture Confederation (BFC) stated in its recent manifesto that ‘Brexit has galvanised our industry to take a fresh look at new export markets, most notably the USA, Africa and India’.

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Our survey appears to agree with the BFC and suggests a more positive state of mind since the Brexit decision. Nevertheless, it is clear that Free Trade Agreements (FTA) with the rest of the world are high on the agenda for most. According to PwC, without a trade deal, goods exported to the EU would face an average tariff of 5.3%.

What does the fall in the pound actually mean?

Positive
A weak pound means those that export can sell their products cheaper or increase their profit margins and therefore be more competitive
UK firms who earn profits abroad (eg. have manufacturing plants overseas) will benefit

Negative
Firms importing raw materials
Those who employ foreign workers

Brexit may make the UK less attractive for foreign workers, who may potentially choose elsewhere in Europe (an unexpected bonus for those Brexiteers who had an immigration focus to their decision).

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Taking advantage of this fiscal opportunity may be short-lived but many are hoping that the nature and quality of ‘Made in the UK’ will give them a longer lasting foothold in new markets. That being said, the message we are getting anecdotally and through our survey is that furniture prices will be going up; those price increases range from 3% to 12% the average being 5%

In our survey, we asked about the ‘client’ wins (see page 56), and people’s significant moments in the last 12 months. You will see that the responses varied enormously, however, investment in the latest technology appears regularly. Unlike areas such as the workplace, productivity in manufacturing can be easily monitored and those in charge are looking at every opportunity to improve their output. Our spies tell us that regular meetings are taking place with academics to help the Government understand the implications of where jobs will be replaced by robots.

Industry 4.0 is gaining more traction, defined by consultants at McKinsey as the ‘fourth major upheaval in modern manufacturing’ and the ‘next phase in the digitization of the manufacturing sector’. It follows ‘lean’ in the 1970’s, outsourcing in the 1990’s and more automation, which characterised manufacturing in the 2000’s.

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Industry 4.0 is driven by four disruptions including increased data volumes, emergence of new analytics capabilities, new human-machine interactions and improvements in transferring the digital into the physical world, using technology such as 3D printing.

It seems that there has never been a more interesting time to be in the world of manufacturing, whether you are supplying or designing.

Sources: Mix research, The British Furniture Confederation (BFC), EEF, House of Commons, PwC, The Manufacturer