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How The Manufacturing Sector Has Shown Agility And Resilience Moving Into 2022

One year on following Brexit, and one of the few sectors within the UK economy that remained open during the pandemic, manufacturers have proven their resilience and agility. Latest forecasts have predicted a 6% increase in growth in 2022 for the manufacturing sector.

In a survey of 228 companies conducted by Make UK in 2021, it stated that “despite many challenges across the past 12 months; UK manufacturing companies hit a record high of output levels and order growth.” This was attributable to a surge in response to the UK and overseas economies reopening and bouncing back after their respective Covid-19 lockdowns. UK manufacturers reported a positive outlook overall going into 2022, with 55% stating they were “optimistic about improving economic conditions”. Although some have reported a positive outlook for the year ahead, there are still fears (56%) around the challenges ahead.

Challenges To Overcome

Over 50% of companies said the biggest challenges, they face have changed in the last 12 months. Two thirds (66%) of British manufacturers stated that Brexit had hampered their business either ‘moderately or significantly’. Furthermore, reporting that the impending rules on customs, increased checks and costs and the changes to product labelling that have resulted from Brexit will be a significant challenge for their business in 2022. However, within the survey 73% of individuals agreed that “the opportunities will outweigh the risks in 2022” leading to a successful year within the manufacturing industry.

Despite the challenges facing the industry Make UK members were reportedly optimistic about the future ahead. “Almost three-quarters (73.1%) of surveyed firms expect conditions for their industry to improve overall in 2022. That includes almost a quarter of manufacturing firms (23.8%) who believe 2022 will see a significant improvement in conditions for their subsector.” Moreover, 45.2% of companies agreed that the UK will be a more competitive location for their manufacturing activities in 2022.

Stephen Phipson, Make UK chief executive comments “It’s testament to the strength of manufacturers that they have emerged from the turbulence of the last couple of years in such a relatively strong position. While clouds remain on the horizon, in the form of rapidly escalating costs and access to key skills, the outlook is more positive for those that remain adaptable, agile, and innovative. To build on this we now need to see a government fully committed to supporting the sector at home and overseas. This requires more than a Plan for Growth, but a broader industrial strategy that sets out a long-term vision for the economy, and how we are going to achieve consistent economic growth across the whole country.”

Export Expectations In 2022

Even following Brexit there still remains a strong focus on exporting to the EU in comparison to other regions. With “75% of manufacturers stating that trade with the EU will increase or stay the same in the coming year”. However, UK manufacturers are additionally strengthening their focus to include new markets. In 2021 the Department for International Trade’s (DIT) refreshed it’s export strategy to support British businesses looking to export to the global market. Within the 12 point plan it provided commitments “to help UK manufacturers to develop the necessary skills and abilities to develop their export strategies.” Following this and once further trade agreements between the UK and third countries have been finalised, data predicts increases of trade across various regions. 40% with the USA, a further 26% in the Asia Pacific region and 21% in the Middle East.

Investing In People

The UK manufacturing sector is highly skilled, and many companies pay significantly higher wages than the national average. The Make UK survey suggests that businesses are investing in their staff and making this a key priority of 2022. With many UK manufactures using this positive shift in demand to improve productivity and increase employee numbers.

“Manufacturers told us the biggest risk to their companies was access to domestic labour and skills. In order to meet this, two thirds (67.1%) of companies say that upskilling or retaining existing staff is their main priority, and encouragingly, almost half (44.7%) say they plan to invest in apprenticeships. 15.8% anticipate a significant increase in permanent employees within their firm”. Additionally, 17.7% of the surveyed companies expect their productivity to increase significantly in 2022 off the back of improved business conditions.

Technology To Provide Growth

In addition to labour, UK manufacturers have reported having investment plans for technology in order to grow and increase their business. Significantly, 60.1% of manufacturers surveyed stated that they will be developing new products in 2022. With 44.7% of companies stating they “have made concrete plans to invest in automation, artificial intelligence (AI), additive manufacturing or other forms of digital technologies over the next year”. Moreover, 54.4% want to invest in capital equipment.

Likewise, manufacturers are reportedly moving rapidly towards net zero targets, with a third (64%) stating this attributed to COP26. With 49.1% stating they “plan investments in green technologies or energy-efficiency measures over the next 12 months and a further 21.5% saying they will make these investments within the next 24 months.”

PwC’s UK industrial manufacturing and automotive leader, Cara Haffey, comments “Despite facing an unprecedented combination of continued Covid pressures, cost inflation and supply chain issues, our manufacturers are responding with an impressive amount of agility and resilience, which will stand them in good stead for the year ahead. They have learned valuable lessons about their supply chain vulnerabilities and the resilience needed to respond to unforeseen international or domestic risks and are strengthening their businesses digitally as well as continuing to focus on talent and skills. We are particularly pleased by the breadth of net zero ambitions reflected in the report. Across the UK we’re seeing an increasing number of businesses underpin their environmental, social and governance strategies with practical applications to decarbonise their operations, and ambitions to build out their green skill base through the recruitment of ‘green’ jobs, a move that has already been flagged as outperforming the UK sector average in our recent Green Jobs Barometer.”

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