Spring is officially here in the UK, and despite a frosty 12 months for the manufacturing sector, it appears the outlook could finally be thawing here too. The important survey that monitors the UK’s manufacturing health - the S&P Global / CIPS Manufacturing PMI - reported the first net growth in production levels in 12 months in March, marking the end of a year-long decline. This turnaround was largely attributed to the fastest rise in new orders since May 2022 and better operating conditions.
This tentative return to growth will come as a relief for manufacturers, and will be a boost to the economy. While this may encourage optimism, manufacturers should remain cautious and not be complacent. A year-long decline demonstrates multiple challenges for the sector that will not have simply disappeared, but there are strategic solutions that manufacturers can make to sustain recovery.
Challenging the crises
There were several significant changes that drove down demand, production, and output – and put manufacturers through exceptional challenges. They ranged from global permacrises to shipping blockages and delays, and fast-changing customer expectations.
The broadest challenge is perhaps geoeconomic fragmentation, which has stemmed the flow of energy, commodities, and raw materials from country to country – dramatically restricting production schedules and capacities. Soaring energy costs and raw materials have increased financial pressures on manufacturers. Even in March, the latest increase in purchasing prices were the steepest they have been for a year.
Meanwhile, the cost-of-living crisis has also had an impact on consumers, eating away at their savings and slowing the flow in demand. While inflation is slowing, businesses cannot count on a sudden rebound in demand.
The manufacturing industry responded to these mounting pressures by restructuring around new priorities, streamlining costs, and reducing waste. Many have made headway with green technologies and digitalisation, and by rethinking how their products are made and working with different original equipment, manufacturers can reduce risk and optimise costs. Because, while there’s no doubt that these times are challenging, manufacturers will be wary of slipping from wise caution into stagnation.
New infrastructure for new supply chains
With a fundamental shake up of how global supply chains work, there's also more recognition of the need to reshore from global to local – and a recent survey of UK manufacturers shows more than half of respondents are reshoring supply chains, with 90% reporting successful outcomes.
For manufacturers to successfully reshore some production capabilities, it’s vital that existing infrastructure can be upgraded to serve customers better, become more sustainable, and digitise operations. Given the level of investment required to reshore or change production processes, manufacturers are being urged to take this opportunity to upgrade the technology used, allowing them to regain some control, act strategically, and future proof their production line.
From automation and intelligence to digital twins and robotics, core and developing technologies can be applied across the entire production process to create significant efficiency gains.
Technologies are working hard
Reaping the benefits of advances in technology requires a profound shift in the way a manufacturer thinks about creating value and getting work done.
Generative AI, for example, holds promise for supply network operations, from designing and planning, through to aftersales and service. Many leading companies have also started to build digital twins of their extended supply chains and use simulation to “stress test” them, allowing them to optimise their supply chains for different scenarios – leaving them able to spot problems before they occur and optimise production processes. What’s more, leveraging digital twins increases an organisation’s energy efficiency, which is critical for handling high energy prices and looking after the environment.
Humans are always at the helm of change
While technology can play a key role in the transformation of the industry, machines can’t solve for production alone – because technological change is about how people, processes, and technology work together. With humans always at the helm, it’s vital that manufacturers upskill, and develop talent in modern engineering and digital manufacturing, in particular, the ability to handle automation and robotics.
It’s imperative to ensure they have a talent strategy, as well as a technology strategy. The UK’s skills shortage in manufacturing is particularly acute – with nearly 20% of current engineers expected to retire in 2026.
Securing the long-term future of the sector
To drive longer-term innovation, UK businesses are looking to invest in large scale capital programmes. Critical investment in programmes would allow businesses to start drawing on the UK’s strengths, such as expertise in the life sciences sector, as well as capitalising on new areas for growth, which include batteries, aerospace, and satellites.
There is already recognition that the UK has great potential in these areas. The UK harbours some of the world leaders in manufacturing R&D and academia, which should be harnessed to take a leading position on the next generation of manufacturing. Taking the National Manufacturing Institute Scotland as an example, Accenture is engaged with an ecosystem of partners looking to drive innovation and create growth collectively.
The UK’s manufacturing sector can only sustain its recovery if they embrace change from the technology revolution and ensure they have the modern engineering skills to embrace new ways of making things – while becoming more resilient and responsible in doing so.
Rising demand can’t reboot the sector alone. With the manufacturing minds we have in the UK, I’m confident we can get there.
