Most of you that know me are aware I don’t really do politics, but I make an exception one day a year for the EEF Manufacturing Conference. This is always a great insight into how global economic and political trends will impact the future of Manufacturing in the UK. Some of the key themes remain the same with the Skills Shortage in manufacturing remaining one of the critical issues for growth. A bit disappointing that this has been a recurring theme for over ten years with no real evidence of a strategy to resolve it.
Brexit of course was also high on the agenda. The Rt Hon John McDonnell MP commenting that the vote for Brexit was a clear vote for change and a symptom of the dissatisfaction and alienation many feel regarding the current political and economic landscape.
The Rt Hon Greg Clark, Secretary of State for Business Energy & Industrial Strategy focused heavily on the Industrial Strategy Paper. He emphasized the need for businesses to work with his department to make the Industrial Strategy a success. The only slightly challenging question that Clark faced was regarding the ‘deals’ being discussed with the automotive manufacturers – the response was unfortunately but expectedly vague.
Alison Rose, CEO Commercial and Private Banking, Natwest noted that their had been no real decline in investment and financing following Brexit. She also commented that whilst the economic forecast is bleak those companies that will weather what is to come are those that are taking action and progressing and not remaining stagnant and paralysed by uncertainty i.e. manage what you can but keep moving forward.
As always Martin Wolf of the Financial Times brought a serious but light-hearted look at the current economic forecast and how this may impact manufacturing. This is without a doubt the most informative and useful parts of the conference so a little disappointed he was reduced to being part of a panel discussion. However his ‘six’ minutes were worth the train fare!
The key elements that came from this were:
- A large fall in currency will lead to increased inflation
- Real income is set to decline which will likely lead to reduced consumer confidence.
- Productivity rates – UK continues to lag behind the world and has recently dropped further. Since 2007 all measures have shown stagnation
- Whilst the UK is the fastest growing country in the G7 we still lag behind globally
The panel discussion on Where Next for Manufacturing in the Global Economy did raise a good point that the lack of investment in capital equipment could be due to the perception that the cost of investment is so much higher than the cost of labour. We have historically had access to low cost labour – but as this is about to change Manufacturers may invest more in automation and therefore improve productivity levels.
So what are the best companies doing? The panels response was clear – they are addressing and controlling issues that they can. Developing a good understanding of hedging and developing an awareness of the impact of currency fluctuations.
Wolf was clear that he does not believe there will be any agreement on a post-Brexit plan or strategy which will lead to further uncertainty.
There was a great discussion from the Heads of Siemens and Nissan in the session on Making Britain the Best Place to do Manufacturing. Juergen Maier of Siemens talked of their plant in Congleton as being one of the best in the world due to a culture of continuous improvement and Lean. Whilst Colin Lawther of Nissan expressed their commitment to purchasing more in the UK to rectify their currency imbalance which is excellent news for the UK Supply chain.
Changing customer demands was also raised as one of the key drivers in future growth. Lawther from Nissan noted that customers used to go to the dealer seven times before buying a car, now due to social media and available information they go once. He believes as manufacturers they need to be in a position to forecast accurately what people are going to buy. He was also quite clear that productivity whilst a useful measure is not necessarily the most important when considering future growth.
So in summary, the key points:
- Skills shortage still a major concern for Manufacturers
- Real income is set to decline which will further reduce consumer confidence.
- Productivity rates remain stagnant and one of the worst globally.
- Brexit – unlikely to be any resolution in the short term but to survive essential that companies manage what they can and have a clear growth strategy that they can control.
- The larger manufacturers will be looking to UK supply chains to rectify currency imbalances.
- The government is seeking engagement of manufacturers in the Industrial Strategy.
- Politicians never disappoint in their ability to avoid answers!
For a summary of the key points of the Industrial Strategy visit