Invest in digital skills and innovation to get UK manufacturing firing on all cylinders

23/02/2017

Help from Government to invest in new technologies and a better educated workforce top the wish list for manufacturing executives in London and the South East, according to a new report from KPMG.

 

London and South East ranked most attractive regions for manufacturers

Over three quarters (77 per cent) of manufacturers in the region surveyed by KPMG said financial support from the Government is needed to help them increase investment in new technologies, including artificial intelligence, advanced robotics and augmented reality. Stronger links between research institutions and the private sector and access to a better educated workforce both came a close second, with 68 per cent of respondents stating that an improvement in the availability of skilled talent could help them increase productivity in their organisations.

David Taylor, R&D tax specialist at KPMG in Cambridge and East Anglia said:“More than three quarters of the manufacturing executives surveyed in the region named financial support from the Government as a top priority to help them boost their investment in R&D and digitisation. In fact some 53 percent of manufacturers in the region expect the amount of R&D their organisations conducts in the UK to increase over the next three years.  Clearly there’s an appetite to embrace emerging technologies, as highlighted in the recent industrial strategy. Through such funding, the UK has an opportunity to position itself as a globally attractive and competitive base for advanced manufacturing. 

“This must go hand-in-hand with a coordinated approach from businesses, government and educators to train up the next generation of the workforce and deliver the skills required, both now and in the future. Having access to the right skills and investment will be crucial to ensure Britain’s manufacturing sector unlocks its full potential and remains fit to compete on the international stage.”

When asked which UK region the 205 respondents would rate as the most attractive for their business as a new investment destination London was ranked top with a fifth of respondents, with the South East coming in a close second with 18 percent of respondents.

Brexit may change the international trade landscape, however, the report also revealed that, encouragingly, almost half (43 per cent) of outward investors in the region are undeterred and don’t believe that it will make it harder to recruit. Less than a third (30 per cent) of respondents in London and the South East are considering relocating some of their operations out of the UK as a result of the uncertainty, while 58 per cent have no plans to move.

Putting this into context, Karen Briggs, Head of Brexit at KPMG, commented: “When our survey was carried out in January, two thirds of respondents expected the uncertainty from Brexit to be bad for economic stability. However Britain’s makers are an especially resolute group. Although some fear increased raw material costs, labour pressures and higher indirect taxation, they are also taking a range of practical measures to prepare. These include partial relocation, supply chain management, increased business development, and new sources of financing.  UK manufacturers realise that Brexit will demand a burst of innovation from both the private and public sectors if the UK is really going to reach new global markets and deliver on its potential.”

If faced with rising costs, the majority of respondents in the region (60 per cent) plan to make up for these by either saving costs elsewhere, or by absorbing them, while 40 per cent expect to pass these on to the customer.

Further questions discussed in KPMG’s Rethink Manufacturing Survey 2017:

  • If the UK government increases its focus on setting an industrial strategy for the manufacturing sector, would that be a positive or negative development for your organisation?
  • How will the UK's attractiveness as a destination for manufacturing FDI change if the country leaves the EU Customs Union as a result of its Brexit negotiations?
  • How would you describe the UK government's current approach to regional development?

About KPMG’s Rethink Manufacturing Survey 2017

KPMG commissioned in-depth interviews and extensive survey research among FTSE 100 and FTSE 250 UK manufacturing executives. The aim of the research is to understand how they anticipate the impact of Brexit on their organisations, and their priorities for a long-term and coherent industrial strategy from the Government.

Over half of our 205 respondents are CEOs, Managing Directors or Heads of Departments, providing us with reliable results about the opinions at the core of the manufacturing industry. 109 of the respondents are based in London and the South East. Almost half of respondents are suppliers of products direct to the customer, while 16 per cent supply intermediate products or components to others who perform further processing. 34 per cent supply a mix of the two.

The survey was conducted online and took place between December 2016 and January 2017.

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For media enquiries please contact:

Jo Chileshe, KPMG Corporate Communications
Tel: 0121 232 3343
Mobile: 07919 211 803
Email: jo.chileshe@kpmg.co.uk

Follow us on twitter: @kpmguk

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KPMG LLP

KPMG in East Anglia has over 140 staff in the region drawing on our experience to advise clients on; audit, tax, pensions and advisory services. We are a centre of excellence for technology, providing specialised expertise in this sector sitting alongside a broader client base across a variety of industries.

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