UK manufacturing hamstrung by skills and Brexit in digital adoption

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UK manufacturers are making seismic shifts in attitudes and investment intentions but risk falling further behind global competition as skills and Brexit distractions temper digital adoption, says a new report from accountancy and business advisory firm BDO.

BDO’s Digital Transformation Report 2019 tracks manufacturers’ investment in and attitudes towards digitalisation and industry 4.0 technology.

According to the report, almost half (46%) of manufacturers now have a good understanding of industry 4.0 technologies and digital transformation, marking a seismic shift in attitudes since the 9% reported in 2016.

BDO says 10% of manufacturers have already invested £5m or more in the last two years, and another 14% plan to do so over the next five years.

ONS statistics show that UK manufacturing productivity fell by 1.1% in the fourth quarter of 2018 compared to the fourth quarter of 2017. 85% of manufacturers say that increasing productivity levels is a key benefit of their investment in digitalisation.

Benefits are transcending the factory floor, with three quarters (74%) of manufacturers saying that digitalisation improves customer relationships. Back-office support functions in marketing, finance and supply chains are reaping the rewards too.

The proportion of companies making no investments in digital projects has fallen considerably in the last three years, yet 21% have curtailed spending plans as Brexit uncertainty takes its toll, says BDO.

In addition, despite moves to foster digitalisation, UK manufacturers remain hamstrung by the skills set of its current workforce.

The vast majority (84%) say the Government must do more to deliver skills for manufacturing digitalisation, with 78% stating the education system is failing to deliver the right STEM skills for the future.

Tom Lawton, head of manufacturing at BDO, says: “Companies are trying to embrace a ‘digitally fluent’ future but they need better support from a government that is mired in Brexit and seemingly forgetting that the world is moving on without us.

“We need our manufacturing sector to compete on a global stage but they are up against countries that are much further ahead in the digital adoption process.”

According to BDO’s report, a fifth of manufacturers in the UK are already using robots in their factories and a further 29% are planning to invest in autonomous or collaborative robots in the future.

But it is investment in cloud solutions (52%), 3D printing for prototyping (46%) and modern Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) software that are proving the most popular technologies.

Tom Lawton adds: “Major investment in robotics and AI will not necessarily represent the best value for money for the typical manufacturer seeking to digitalise their businesses.

“Starting small is often where the value proposition is clearer. More modest first steps like ensuring your CRM and ERP software is up to date can improve productivity without the need to invest millions of pounds in to major projects.”

He adds: “Manufacturers’ investment in digitalisation is quite often driven by the needs and demands of major clients. For example, in the automotive sector, major car makers now often require their original equipment manufacturers (OEMs) to use digital technology that gives them real-time information on movement in the supply chain.”