Introduction
The government is developing an industrial strategy to concentrate on sectors that offer the highest growth opportunities for the economy and businesses. Eight growth-driving sectors have been identified. Mickledore has considered the drivers of change in these sectors and the implications for business support and investment.
What is Advanced Manufacturing?
There is an irony that regions are often criticised for claiming to be strong in multiple sectors rather than focusing on their core strengths. A similar criticism could be aimed at the government for failing to identify the sectors that can drive change and packaging them under ever larger umbrellas. If ever there were a case in point, it would be advanced manufacturing, although the phrase has endured.
Advanced manufacturing is often applied to sectors such as the automotive, aerospace, and machinery and equipment industries. Still, an altogether more attractive definition is that advanced manufacturing is any manufacturing that utilises automation, sensors, and robotics. On the basis, however, that almost any manufacturing that remains competitive in the UK will incorporate at least some of these techniques, the ‘sector’ is more or less all new manufacturing investment.
Drivers of change
Across manufacturing, there has been an ongoing drive to increase productivity and reduce the cost per unit, whilst at the same time driving up quality. Japan drove the process of continuous improvement and lean manufacturing, but with lower-cost labour and a similar focus on scale and productivity, China has continued the progression. Upper-tier manufacturers have sought to simplify their supply chains by using single-source suppliers; however, the sustainability of this approach has been undermined by global shocks.
The key drivers of change in manufacturing are therefore considered to be:
- Continuing adoption of manufacturing technology to drive down labour costs and improve quality consistency
- Create a distributed model of production to ensure resilience to environmental and geopolitical shocks
- Develop an ability to deliver mass customisation using automation in goods ordering and production processes to vary a basic specification significantly
- Environmental demands have required many manufacturers to consider reducing energy and raw materials usage, whilst at the same time embedding an ease of recycling in the original design
- Many of the drivers of change have reduced the labour force requirement but increased the skills of the remaining staff required
UK Position - opportunities and issues
UK manufacturing has been much maligned, but while UK employment in manufacturing declined by 39% over the 25 years from 1998, UK manufacturing output, measured by Gross Value Added (GVA), increased by 44% over the same period. The result was that over the 25 years, the proportion of the economy attributable to manufacturing remained at more or less 10% (for purists, it declined by half a percentage point in 25 years).
UK manufacturing, though diminished over the very long term, has now reached a new equilibrium. There is potential for the sector to grow more rapidly, with a longer-term government strategy focused on clear procurement signals. With automated manufacturing investments becoming increasingly expensive to undertake, businesses require a stable environment of anticipated demand, trade policies, and taxation. In 2025, much of this has been in short supply.
The key opportunities are:
- The UK remains a significant and affluent market which is attractive to a consumer-facing manufacturers
- The UK retains a large number of tier-one manufacturers (UK and foreign-owned) who require a resilient source of suppliers
- Reshoring of suppliers, while somewhat overstated, remains an important driver of change
- Government policy can stimulate investment – new policy goals related to transport, energy, defence, and housebuilding can all attract the interest of businesses able to contribute to the supply chain
- The UK has a significant track record in creating early-stage businesses from new areas of scientific discovery (even if in the longer term these have been less likely to scale than international comparators)
- The UK continues to secure roughly 10% of all foreign direct investment projects relating to manufacturing across Europe.
Securing growth and investment at a local level
Advanced manufacturing is probably the sector with location determinants most reliant on a previous track record, due to the importance of having access to relevant skills and suppliers. To consider an investment strategy centred around some aspects of advanced manufacturing, there is a need to develop a local proposition related to:
- Employment land – most manufacturing is now specialist in nature, and new investment typically requires bespoke facilities on land allocated for manufacturing
- Proximity to market (B2B or B2C) – Transport costs for most manufactured products are significant, as is the reliability of supply. Proximity and good transport links are essential.
- Suppliers – Supply chain analysis and development in economic development has become less fashionable in recent years. Still, any manufacturer needs certainty of both supply and support, and the closer to the facility, the better.
- Skills – all industries need skills. Manufacturing skills vary between sectors, but an additional consideration is whether the local workforce is accustomed to typical manufacturing shift patterns.
- Cost – The UK remains competitive only in high-value production, even after automation is incorporated into the process. Very high-cost locations are unlikely to sustain very large-scale manufacturing in the long run.
- Recognition and support – Large amounts of media commentary had begun to suggest that the UK no longer considered itself a manufacturing nation. Those areas with a strong and prepared manufacturing narrative can differentiate themselves significantly in pursuing manufacturing investment, but will still need to specify the sub-sector of interest.
- Specificity – any location pursuing advanced manufacturing needs to understand its specific strengths – every manufacturer in the world classifies itself according to the sector it serves rather than the activity it undertakes.
Conclusion
Manufacturing is not a lost cause in the UK, although new investment is likely to be significantly more capital-intensive and less labour-intensive than investments of the past. Given the geopolitical shocks of recent years and a disrupted global trade environment, new manufacturing investment in the UK is likely to be tied to major UK projects (such as the power grid) or related to UK consumers (such as the agri-food sector).
Manufacturing is increasingly likely to require specialist production facilities, and as such, an available and serviced land supply related to manufacturing is a crucial factor in securing investment. However, the availability of skills, engineering support, and suppliers is also essential. An industrial heritage ensures that workers with the appropriate skills (and in some cases accustomed to shift work) are available, short-notice repairs to industrial machinery can be accommodated to minimise downtime, and there is a choice of the basic inputs of production.
In short, a focused strategy can drive investment in those areas with a proven track record in manufacturing. For those areas now distant from their manufacturing history, returning to that former glory is likely to be a step too far.
Mickledore is an economic advisory business focused on strategy, investment, business cases and evaluation. We have worked on sector strategies across the UK. For more information or a discussion about specific local circumstances contact Nigel Wilcock at nwilcock@regionaldevelopment.co.uk