REGIONAL REPORT
“ Most notably , the improvement is driven by strong demand in the electronics and mechanical equipment sectors , with the balance of orders in the electronics sector extremely strong . This could be due to several factors , including companies investing in digitalisation and extra capacity to counter labour shortages or to take advantage of the final period of the super deduction scheme before it ended . Demand for electronics goods is especially strong from overseas , in particular the EU ,” commented Make UK .
However , inflationary pressures are still very evident for UK manufacturers with increased costs still being passed on .
UK Steel , the trade association for the UK steel industry , has confirmed that high energy prices and weak demand are taking an enormous toll on UK steel production . Production levels of steel made in the UK during 2022 dropped to their lowest level since the Great Depression , falling by 17 % year-on-year to six million tonnes ( mt ). Steel trade activity reduced both in the UK and globally as supply chains were disrupted and demand has reduced . In 2022 , UK market demand for steel fell by 15 % to 8.9mt , only slightly higher than 8.6mt in 2020 during the COVID-19 pandemic . Raw material costs remained at historically high levels and energy prices soared .
“ In February 2023 , the UK Government announced policy plans for renewable levies , capacity charges and network costs to alleviate energy cost burdens for steel producers and improve competitiveness . However , regulations may not all take effect until 2025 ,” commented Make UK .
Brexit and COVID-19 combined have also resulted in the loss of key labour , with many returning to their homelands
Market challenges
UK manufacturers are facing various challenges in 2023 including rising costs , labour woes ( shortages and strikes ) and inflationary pressure . This year ’ s ‘ Make UK Executive Survey ’ outlines that shortterm challenges hampering manufacturers are stifling labour shortages , the rising cost of doing business and ongoing supply chain disruption .
“ The difference now is that it is not just skilled labour , but labour in general , that is scarce . In the UK , for example , 600,000 people aged over 50 years old have been added to the economically inactive . That is a huge loss of expertise and skills . Brexit and COVID-19 combined have also resulted in the loss of key labour , with many returning to their
Inside Bentley ’ s factory in the UK . Image courtesy of SMMT .
Make UK apprenticeships .
homelands ,” Stephen Morley , President of the Confederation of British Metalforming ( CBM ), told ISMR at the ICOSPA conference in Birmingham ( UK ) in October last year .
“ We need more people back into work or a focus on using the unused apprentice levy funds to fund a scheme to get economically inactive people back into work and recoup those lost skill levels . We also need to set migration criteria at a lower level to keep industry and the economy going . Policies to encourage this are key for manufacturers . For example , why not put training schools in migrant centres to upskill people in preparation for jobs when their applications are approved ?” he continued .
Some manufacturers are looking to upskill or retrain existing staff in a bid to find the skills they need for their businesses , as well as offer hybrid working and flexibility across operations to meet employee expectations . Research published by the International Longevity Centre- UK ( ILC ) projects that , as a result of population aging , COVID-19 and Brexit , the UK economy could see a shortfall of 2.6 million workers by 2030 , almost twice the workforce of the NHS . Amid continued labour market challenges , ILC has called on the UK government to develop a comprehensive workforce strategy to tackle future shortages .
According to analyst PWC , some manufacturers are also using energy-efficiency measures , such as the adoption of green technology , as a means of reducing expenditure across the value chain . Staying on top of working capital is crucial , despite the challenge of supply chains lengthening .
“ To remain competitive in this ever-changing landscape , manufacturers must find ways to manage their costs without compromising on quality or customer service . Many businesses are altering their business practices to try and reduce their expenditure over the next year as energy , transport and employment costs continue to climb . Unsurprisingly , the highest cost manufacturers expect to face is for energy with some organisations planning their own on-site electricity generation to ensure responsible and sustained growth in 2023 ,” commented analyst , SharpCloud .
Skyrocketing energy costs are a massive issue for UK manufacturers . The action to offset high energy costs is driven by the need for manufacturers to remain globally competitive . Automation not only helps to reduce manual labour costs but also helps to increase efficiency and accuracy . Minimising waste , maximising materials and optimising processes are also key . Investing in ESG ( environmental , social and governance ), green tech and decarbonisation has seen many UK manufacturers insulating buildings and installing better performing heat systems or on-site generation . New digital technologies , such as augmented reality or 3D printing as well as data analytics , can also offer a path to efficiency savings and greater innovation .
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