As the saying goes, the more things change, the more they stay the same. It’s certainly an apt phrase when looking back over the last 12 months of UK manufacturing.
It’s been eventful to say the least; we saw the demise of Britishvolt in the North East, a further decline in engineering and manufacturing apprenticeship starts against pre-pandemic levels and, at the recent COP28 conference, around 100 countries promised to treble world renewable energy use by 2030 – further highlighting the pressing need for industry to decarbonise.
On the bright side we’ve also seen the UK government unveil its Advanced Manufacturing Plan, setting out the actions being taken to position the country as the go-to place to start and grow a manufacturing business.
The plan, which according to Secretary of State for Business and Trade, Kemi Badenoch will, “invest in the future of manufacturing, open markets and remove obstacles for business,” follows the news that the Chancellor has committed £4.5bn to the manufacturing industry. This will aim to provide manufacturers with longer term certainty about their investments and ensure the UK remains at the forefront of the global transition to net zero.
Furthermore, as part of the Advanced Manufacturing Plan, the government also published its first ever Battery Strategy, outlining how it intends to facilitate the growth of a domestic battery industry, including a globally competitive battery supply chain by 2030. It is stated that the strategy is designed to help grow a thriving battery innovation ecosystem and become a world leader in sustainable design, manufacture and use.
A backdrop of challenges
Undoubtedly there is plenty of reasons to be hopeful and traction is being created for forward momentum in much needed areas of the UK economy. However, a consistent commitment to manufacturing is vital, no matter who is in number ten and, with a general election looming on the horizon, it’s important that these pledges are followed through and not mothballed in favour of a swathe of political point scoring as MPs head for the hustings.
As mentioned above, against this backdrop of disruption and change, many of the issues manufacturers have been grappling with have remained, with many challenges now thought of as a constant within the sector. Geopolitical unrest has left supply chains vulnerable to disruption and events such as COVID (the impact of which is still being felt in some quarters), Brexit, trade disputes between China and the US, blockages in the Suez Canal and war in Ukraine have all taken their toll.
It’s still unclear whether the recent unrest in the Middle East will have any significant and long-lasting impact on energy markets, but it’s important to note that events such as this invariably increase risk aversion – stifling investment and adding pressure on already vulnerable economies and markets. Indeed, attacks on multiple container vessels in the Bab al-Mandeb strait are continuing to cause global shipping companies to halt journeys through the Red Sea – disrupting vital trade through the Suez Canal an increasing transit times by up to ten days in some cases.
As highlighted above, recruitment is still proving to be a thorn in the side of many manufacturers, and while many are working closely with schools, colleges and universities, they are facing stiff competition for talent from other sectors which may appear, on the face of it at least, to be more attractive to the workforce of tomorrow.
Add to this the increasing importance of digital technology adoption and the drive to net zero, and it’s fair to say it’s been another challenging year for UK manufacturers. Here, The Manufacturer Editor, Joe Bush, speaks to manufacturers and sector experts to look back over the last 12 months to gauge the mood of the sector, and look ahead to the challenges, trends and opportunities coming our way in 2024 – see below.
Stephen Phipson CBE, Chief Executive Officer, Make UK
It’s fair to say that the last few years have been a rollercoaster ride for manufacturers who have had to deal with the pandemic, the shock to energy prices from the Russian invasion of Ukraine, not to mention the continued challenges posed by new trade arrangements with the EU and the ongoing skills shortage. That’s before you factor in the domestic political chaos of the last few years which shows no signs of abating anytime soon. I suspect for many manufacturers, they now factor in political instability as the new normal.
However, as we approach 2024, there may finally be signs of optimism according to the findings of Make UK’s latest quarterly economic survey which shows the first signs of stability in business confidence since before the pandemic. While challenges undoubtedly remain, especially around attracting and retaining talent, our surveys across a range of topics throughout 2023 have shown manufacturers backing this confidence up with investment in new products, expansion into new markets and taking advantage of the accelerating use of new digital technologies to improve their business.
These commitments should be boosted by the recent positive announcements from government on full expensing, the extension of the Made Smarter scheme and the creation of an Advanced Manufacturing Plan which puts the sector firmly front and centre of efforts to boost growth in the UK. While we have come a long way in the last few years in terms of government commitment to advanced manufacturing as one of five key growth sectors, we still need to see, however, a full scale industrial strategy with a long-term vision for the sector in the future.
Furthermore, despite these welcome policy commitments from government, it would be wishful thinking to view the prospects for both the UK and global economies in the near term as anything other than anaemic, while significant challenges remain in the faces of increased energy and employment costs, as well as access to domestic skills. Domestically we also face the looming prospect of a general election which may bring seismic change.
Despite this, however, the more positive aspects of manufacturers’ own operations as we approach 2024 are that digital technologies have the potential to boost productivity significantly, while companies also believe digitising operations will boost their operational efficiency. In addition, companies are seeing new technologies such as generative AI as a means to increase the productivity of their workforce, while many will be leveraging cloud and emerging technologies to reduce their carbon emissions and support their transition to net zero. I suspect the big story of 2024 for manufacturers will be the increasingly rapid and, widespread, adoption of these technologies.
Katherine Bennett CBE, CEO, High Value Manufacturing Catapult
Next year looks set to be an exciting and promising one for UK manufacturing, with many chances to continue investing in the research, development and at-scale commercialisation of green technologies. We are on the cusp of a new manufacturing and industrial revolution, which has the potential to drive sustainable economic growth across all regions.
As we progress toward net zero, UK industry must seize the opportunities that arise, supported by the High Value Manufacturing Catapult, the Catapult Network and Innovate UK.
One of these lies in electric vehicle manufacturing – and EV battery technology, in particular. The Autumn Statement committed funding from the Faraday Battery Challenge for CPI and WMG to create the Advanced Materials Battery Industrialisation Centre (AMBIC). Based between these two HVM Catapult industrial innovation hubs, AMBIC will produce and test performance-critical battery materials. This will be crucial in the wider domestic EV supply chain currently being established, and 2024 will no doubt bring further growth and investment in battery technology and manufacturing capacity.
The further development of a UK hydrogen supply chain will diversify our energy mix in 2024. Hydrogen could add 12,000 jobs and attract £11bn in private investment to the UK by 2030, but we need to move quickly to realise these gains. The next year will see the Hydrogen Innovation Initiative bringing together businesses, government and researchers – including the catapults – to coordinate the hydrogen industry’s efforts. Our aim is to boost access to this eco-friendly, low-carbon combustion fuel while ensuring the financial benefits of this new market are fed back into the UK economy.
Digitalisation will continue to reshape industrial processes, enabling and accelerating industrial innovation. Harnessing AI will help to create a net zero UK manufacturing sector, using data to maximise efficiency and minimise waste. Manufacturers can now use virtual reality-aided design and digital twins to analyse and test prototypes, saving them time, money, materials and energy, which is absolutely essential for UK industry to reach net zero.
Developing technology isn’t enough by itself. Manufacturers across the UK economy need to be able to take advantage of these innovations, and the emergence and wider adoption of these new manufacturing technologies require news skills in our workforce. That’s why next year will bring the next stages of Innovate UK’s Workforce Foresighting Hub which predicts and helps to address emerging gaps in the UK’s skillset. With the right training, UK workers won’t be at risk of being left behind in a globally competitive market.
No doubt, it will be an important political year for our country, with a yet-to-be scheduled general election on the horizon. Beyond our shores, geopolitical pressures such as conflict and trade sanctions are likely to continue to threaten energy, material and commercial stability in global supply chains. Formulating strategies to navigate a potentially tricky business environment while increasing productivity and sustainability must be a top priority for UK manufacturers of all shapes and sizes.
Karen Betts OBE, Chief Executive, Food and Drink Federation
It’s been quite a year for food and drink manufacturers. We’ve found ourselves deep in the aftermath of recent shocks – COVID, war in Ukraine and new trade rules post-Brexit – while being impacted by unpredictable weather events affecting harvests globally. This all had a stark impact on our input costs, and a visible impact on food and drink prices in the shops – with food and drink inflation hitting a 40 year high in the spring.
Cost pressures are now easing and should continue to do so in 2024. However, our input costs, from commodities to energy, are likely to remain significantly higher than they were pre-pandemic.
The labour market is tight too and regulation is introducing additional costs, not least those associated with packaging as the UK transitions to a better recycling system. Proposed new rules on ‘Not For EU’ labelling that the government wants to introduce for certain products are going to be costly too, not least since labels will need to change every time the EU changes its list of food and drink subject to official controls. On top of this, the introduction of checks on EU imports under the new Target Operating Model will increase costs to companies and consumers. So, while inflation will slow, we’re unlikely to see food and drink prices fall.
For many companies in our sector then, 2024 is about recovery. Companies limited price rises as far as possible during the worst of inflation to protect households, but in the coming year they will need to start to rebuild their margins.
Insolvencies are at an all-time high and operating margins are at an all-time low, falling from 6.2% to 3.9% in 2022 for the top 150 food and drink manufacturers. If companies cannot rebuild margins, they risk going under and/or failing to attract critical investment, in their day-to-day operations, in net zero, research, innovation and so on. We’re keen to work with government to ensure the UK is an attractive place for investment in our sector.
Despite the challenges, it’s heartening to see that 41% of our members plan to increase investment in 2024. Innovation is their number one priority to boost growth, with 81% saying they want to invest in new product development and innovative packaging.
Over 11,600 new food and drink products were introduced in UK shops in 2021, which speaks to our industry’s dynamism and the UK’s adventurous consumer tastes. This also reflects a focus among our members on creating new, healthier products to help consumers choose healthier lifestyles. Sustainability also remains a significant focus – from making sites more energy efficient to tackling food waste.
Dr Carlos López-Gómez, Head of Policy Links, IfM Engage
There will likely be five significant trends and drivers that UK and global companies should closely track in 2024:
Global competition for manufacturing investment: Supply chain relocation will likely continue in 2024 as multinational companies consider moving production away from China to various destinations in South East Asia, Eastern Europe, North Africa and Latin America.
The substantial incentives contained in the CHIPS Act and Inflation Reduction Act (IRA) are likely to keep encouraging global companies to expand their manufacturing operations in the US and contemplate nearshoring in Mexico and Canada.
In recent years, a lot of Chinese manufacturers have established factories overseas. However, in 2024, we might see new policy measures that will maintain some domestic capacity while easing regulations to attract foreign investment in the manufacturing sector. Global companies will closely monitor government signals throughout 2024.
Decarbonisation: The trend towards reducing carbon emissions is expected to further intensify in 2024. With the worldwide expansion of solar panel, wind turbine, battery and critical minerals processing facilities, there may be an oversupply of these products as countries seek to establish their own domestic production capabilities.
Additionally, there is likely to be an increasing number of pilot projects that utilise low-emission hydrogen, particularly in industries such as steel and refining, while less promising applications such as home heating are unlikely to take off. However, technologies that are still in their infancy stages, such as carbon capture and SOEC electrolysers, are unlikely to achieve in 2024 the economies of scale that are necessary for large-scale adoption.
Semiconductors: Semiconductor manufacturing is expected to remain a national security priority. It is uncertain whether Taiwan’s Semiconductor Manufacturing Company (TSMC) factory in Arizona will start mass production by the end of 2024, following reported labour shortages and other delaying factors.
TSMC’s second plant in Japan is anticipated to begin construction in 2024, targeting mass production initiation in 2027. There are reports that Intel’s €30bn factory in Germany is likely to also face skills shortages. China is likely to continue efforts to build its own semiconductor supply chain in anticipation of escalating tensions with the US.
Taking advantage of the UK’s leading capabilities in circuit design and IP development will be critical to support scale-up and innovation in the sector, as the country unveils further details on its £1bn National Semiconductor Strategy in 2024.
Electric vehicles: In the automotive sector, the shift toward electric cars continues in major markets, driven by policies like the EU’s ‘Fit for 55’ package. High growth is expected from 2024 as large manufacturers invest in new electric vehicle and battery plants.
The International Energy Agency anticipates that electric vehicles will represent around one-quarter of all car sales by 2025, up from 18% in 2023 and 14% in 2022. China is poised to maintain its rapid adoption of electric vehicles and is on track to achieve the 2025 national target of a 20% sales share for so-called new energy vehicles (including fuel-cell electric vehicles) well ahead of schedule.
Sales in emerging countries are likely to be constrained by higher purchasing costs and inadequate charging infrastructure. This sector will be heavily influenced by government policies. Some countries will increase tax credits but limit them to locally produced vehicles.
Digital manufacturing: The digitalisation of manufacturing will be a persistent trend in 2024, with an emphasis on proven and affordable efficiency-enhancing and energy-saving solutions. While AI deployment may not be widespread across manufacturing sectors, its impact is expected to be more pronounced regarding skill requirements rather than significantly altering job numbers.
Kevin Craven, Chief Executive, ADS Group
We live in a world marked by rapid geopolitical shifts and technological advancements and the manufacturing landscape is poised for a dynamic 2024. Against a backdrop of global uncertainties, the aerospace sector is experiencing a sustained recovery with an increasing demand for new aircraft, signified by a record-breaking order backlog. The challenge now lies with how manufacturers can respond to rising demand and rate ramp ups, especially when faced with ongoing supply chain and skills shortages.
Crucial to the advanced manufacturing industries’ sustained growth is a shift in perception. It is imperative that the manufacturing sector is no longer viewed as boring and mundane, but rather as it truly is: an incredibly exciting place to build a future. In our sector, the chance to work on cutting-edge technologies, contribute to global security priorities, and to play a vital role in the race to net zero should be loudly championed to attract talent to our industry.
The ongoing conflict in Ukraine and heightened global security tensions have exacerbated the demand for specialised skills in defence and security technologies. As nations increase defence spending, skills shortages pose a significant challenge for businesses striving to meet the demands of governments across the world.
As we seek to address the skills shortages there is a renewed emphasis on apprenticeships. Manufactures can nurture the next generation of skilled workers through practical training and hands-on experience while apprentices participate in highly skilled and well-paid work – it’s a win-win for both parties.
Amid exciting prospects of growth, manufacturers continue to grapple with persistent challenges. High inflation, rising material and labour costs, supply chain disruptions and ongoing issues demand adaptive strategies to ensure resilience and sustainability.
However, despite these challenges, 2024 is set to be a year of growth for our advanced manufacturing sector. Global events underscore the need for a strengthened defence and security industrial base. Programmes like the Global Combat Air Programme (GCAP) and AUKUS continue to advance and present enormous manufacturing opportunities for our sovereign capabilities. Furthermore, increased funding for space innovation can turbocharge the space manufacturing sector to reach new heights, positioning and retaining the UK’s position as a strategic leader in a global arena.
As we at ADS support our 1,300+ members in navigating the complexities of the upcoming year, it’s essential we adapt, innovate and fortify our manufacturing sector – the jewel in the UK’s industrial crown. By addressing workforce challenges, changing perceptions and embracing opportunities, we can ensure a prosperous and resilient future for manufacturing in 2024 and beyond.
Matt Boyle OBE, Chair, Driving the Electric Revolution Industrialisation Centres
While the UK has not yet established a manufacturing hub where supply chain needs are met in one geographical place, with a more considered effort to join the dots, our size and unique spread of resource could be our golden ticket.
The UK’s regional manufacturing success stories are acknowledged in the government’s recently published Advanced Manufacturing Plan. Tapping into these and connecting them up will be necessary for government and industry to reach their net zero targets. Not only that, but bringing this network together would also establish the UK as a global leader in manufacturing – as it was 120 years ago.
Connecting the dots before growing the operation: Much has been said about the need to upskill the UK’s current workforce, as well as to attract and train more talent to deliver our low carbon infrastructure. However, as an initial step, we need to tap into the existing pool of concentrated talent found within our specialist manufacturers around the UK. These centres of excellence have been developed because they have invested in their employees and nurtured homegrown experts ‘in-house’. They cannot be centralised, but it doesn’t mean they can’t be better utilised.
We are fortunate enough to have a network of SMEs with a set of capabilities built up over many years, which supports the UK towards becoming a global leader in transitioning to a low carbon society.
The UK’s manufacturing of semiconductors is one example of a well-established supply chain that is pivotal to electrification, with multiple facilities and capabilities that can be utilised. South West Wales is understood to be the manufacturing epicentre of semiconductors. What’s lesser-known is that there are more than 40 businesses – an entire ecosystem of semiconductor manufacturers – in the North East of England and Scotland, where power semiconductors have been made in high volume for many years. These pockets of talent will be needed to deliver the task at hand.
The international context: Other economies around the world are similarly still establishing their own low carbon supply chains. Unlike the UK, not everyone has the manufacturing facilities and capabilities within their domestic market, and many rely on components coming from outside of their borders.
For example, in the US there isn’t one semiconductor processor fabrication plant. They source them from Taiwan. They are looking to change that through the Semiconductor Act. Every market is relying on components being able to move around from one place to another. The UK is fortunate enough largely to have what it needs – if the dots are joined up properly – within its borders. When compared with our larger counterparts in the US and China, another advantage we have is our smaller size and the efficiency that offers to a complex, multi-level supply chain.
It’s common for supply chains to be spread across distances. The fabrication of semiconductors happens in one place, they are packaged elsewhere and then assembled somewhere else again. This division of activity is a well-trodden model used by more established supply chains. Linked to this, supply chains are most vulnerable when they rely on a component that can only be manufactured and purchased from one place. Taiwan, for example, manufactures 60% of the world’s semiconductors, meaning this part of the electronics supply chain is a vulnerability in many markets and applications.
‘Onshoring’ the supply chain: The UK is just beginning to understand how fragile its supply chains are in certain sectors and addressing the vulnerabilities accordingly.
Since the UK government’s intervention when a Chinese firm tried to acquire the controlling stake in the UK’s largest microchip factory, Newport Wafer Fab, in Wales last year, policy makers and industry alike are now scrutinising the rest of the jigsaw.
A litany of changes resulted in a shakeup of global manufacturing supply chains. In June 2019, the UK government legislated a net zero emissions target by 2050, with many countries following suit. December of that year saw the COVID-19 pandemic spread across the world resulting in a string of lockdowns. In January 2020, the UK left the European Union, then in February 2022, the war in Ukraine began.
These global events, which significantly disrupted well-established supply chains, are part of the reason there is currently an increase in policy makers developing frameworks aimed at growing domestic supply chains. China and the US are frequently limiting the export and import of certain products from one another’s markets, and this approach is happening elsewhere.
As supply chains are in this transitionary phase and investment can be difficult to come by it’s important that regional manufacturers take the time to explore partnerships that will allow them to innovate by using the resource that is on their doorstep. The funding landscape is competitive, so we advise SME’s to build up their own evidence and use cases for how they’ll engage beyond their own production line to bolster funding applications which will in turn boost chances for success.
A new era for UK Investment: For the UK to develop its low carbon economy, we need more investment in appropriate infrastructure and connectivity. We need to connect people in businesses who have shared objectives, or who represent the next step in the supply chain, so people know where their customers are, and customers know where their suppliers are.
As part of this, it would be great to see UK investors more readily channelling funds into British manufacturing, especially those dedicated to new ideas and processes. To make true progress, we need investors to look for the ground-breaking ideas full of possibility, rather than focusing too heavily on cash flow. In my own experience, US investors are less risk averse and always on the hunt for the next best idea. I’d like to see more entrepreneurial hungry UK investors taking risks with businesses whose propositions might be the next unicorn. This shift in approach will mean the UK is better able to retain innovative businesses and everything they bring to the UK.
UK investors have also historically favoured investments in projects coming out of ‘the golden triangle’ of Oxford, Cambridge and London, places which have become known for finding solutions to problems. Is this preference outdated, and limiting innovation and competitiveness? Given the changing pace of technology and the spread-out nature of our manufacturing supply chains, there are big opportunities outside of this triangle. You don’t have to look far to find great things going on elsewhere. For example, in Newcastle – where there have been great strides made in offshore wind and power semiconductor manufacturing for sensors and satellite comms.
Even further north in Scotland, DER-IC works closely with MarRI-UK to support the decarbonisation of marine through electrification. With a long history in marine engineering, the UK is well placed to lead on this next stage of marine technology.
Regional manufacturers hold the pipeline of existing skills, and we need to glue these ecosystems together. Reconnecting them with educational establishments is also part of this puzzle.
If these opportunities aren’t seized, other competitive markets will come in and buy up what we’ve got. We have pockets of manufacturing excellence across the UK’s regions, which DER-IC is currently connecting to complete the electrification supply chain. If we don’t use it, we’ll lose it.
Dr Mark Swift, Director of SME Engagement, WMG, University of Warwick
We approach 2024 with a positive outlook for UK manufacturing. The industry’s output is up this quarter (see Make UK Manufacturing Outlook Survey, Dec 2023) and a more stable economic environment seems likely for the year ahead, following investment announcements in the recent Autumn statement and the long awaiting Advanced Manufacturing Plan.
That’s not to say we expect all plain sailing. The ‘triple transition’ challenge of digitalisation, net zero and boosting productivity remains and as we continue to navigate global competition, energy cost uncertainty and fractured political landscapes, the UK manufacturing sector must continue to strengthen its resilience.
SME manufacturers should maintain investment in digital technology. We have known for a while, that there is a direct link to productivity, or manufacturing efficiency through digitalisation. Those companies that have digital backbones and access to factory data will be most well equipped to adapt to change – from unlocking the value of the invisible factory to new types of business models.
Newer technology areas like AI and large language models such as ChatGPT could, despite the hype, start to take hold to generate new product ideas, optimise production or supply chain interaction. We will be proud to continue to support the manufacturing supply chain and embrace digital technologies through the Made Smarter West Midlands scheme in 2024, which alongside providing companies with a digital roadmap, offers funding to help manufacturers invest in new equipment and capabilities. So far, the scheme has generated over £70m of additional gross value add to the UK economy.
In 2024, manufacturers will continue driving for greener, more sustainable operations. Reducing energy use and waste and identifying new ways to make manufacturing processes more circular and environmentally friendly is the future. In a bid to operate more sustainably, we will see manufacturers in the supply chain working closely together to minimise emissions, using more local options to source goods and materials, or collaborating to create solutions that are both better for the environment and profitable.
Manufacturers can expect to see more funding and investment in this area such as the Business Energy Advisory Service which we deliver to support energy intensive manufacturers monitor energy usage on the shop floor, save energy costs and devise new ways to meet future net zero targets.
The SME manufacturing supply chain will become increasingly ‘innovation active’. We are already seeing manufacturers striving to move up their respective value chains by investing in in-house design capabilities or creating products of their own to build better margins. Reshoring, or more importantly ‘green shoring’ will only increase in 2024 as manufacturers become more creative. There are new opportunities with emerging sectors such as clean technology and micro mobility, and manufacturers will need to look at how they can adapt their activities to access new markets.
Finally, skills. This is a trend that is not going to go away. Strengthening and upskilling the talent pipeline will be a focus for 2024 and organisations will need to invest time to bring new talent into the sector as well as encourage the development of existing staff to remain competitive. Workforce policies and flexibility will be key when it comes to encouraging more young people into the sector.
If you haven’t already, I would encourage you to check out our slick internship programme, which last year reached its 200th intern milestone. It simply works and helps early-stage engineers find their first roles with SME manufacturers.
Laura Capper, Head of Manufacturing and Construction, NatWest
Continued advancements in digitalisation and Industry 4.0 technologies as well as the integration of artificial intelligence and machine learning for process optimisation, will be required to boost productivity and overcome labour challenges.
It would be great to see greater adoption of robotics and automation in the industry to ensure we remain competitive within the global landscape. Utilising AI to enhance efficiency and support decision making will be a key enabler for the sector to scale and grow. For example, data led insight and decision making on quality control, predictive maintenance and supply chain optimisation.
We would anticipate an increased emphasis on sustainability and eco-friendly practices among manufacturers. They will play a key role in scaling new sustainable supply chains presenting a huge opportunity for manufacturers to capitalise on. Hopefully manufacturers can look to longer term benefits that a sustainable strategy will bring and where they can pivot into new areas and products which will drive a lower carbon UK economy for other sectors. Initiatives such as EV batteries, carbon capture storage – all of which will need manufacturers producing components to support new technologies.
There will be a growing reliance on flexible and agile manufacturing practices to be able to adapt to external factors (e.g. supply chain disruption, inflationary impacts to raw materials sourced globally etc). Manufacturers have shown real resilience to date, demonstrating agility to challenges they have faced throughout the last three years. I hope these learnings and the momentum this has generated will allow businesses to continue to adopt a future fit mindset.
Greater collaborations and partnerships to drive innovation – fostering relationships across the supply chain and eco-system will drive greater benefit to manufacturers and solve challenges in a more effective and efficient manner.
Dave Atkinson, Head of Manufacturing, Lloyds Bank
It’s been a turbulent year for the manufacturing sector, with inflation, supply chain issues and skills shortages continuing to present challenges. But businesses are ending the year with cautious optimism. Our latest Business Barometer recorded a confidence reading of 45% for the sector, up 16 points from January 20231.
Here’s what I foresee as the key trends and focuses for manufacturing in 2024.
Economic uncertainty will continue, but there is a silver lining
After several years of disruption, manufacturers are well aware of the risk geopolitical tension presents to supply chains.
Uncertainty is set to persist in 2024, with elections in both the UK and US, the ongoing Russia-Ukraine war, and tensions between the US and China. This will drive manufacturers to invest in reshoring.
Simultaneously, the UK itself will be looking to mitigate against future global challenges by securing its own production and energy, bringing opportunities for manufacturers. While the economic outlook is uncertain, manufacturing will be a priority sector for the government next year.
This month, the Department for Business & Trade published its Advanced Manufacturing Plan; one of the most significant national commitments to manufacturing we’ve seen in the past two decades, supported by £4.5bn of funding for the sector.
It’s clear there’s a genuine interest in investing in manufacturing, and a recognition of the value it brings to the UK economy. It’s a huge opportunity for businesses, and an exciting time for the sector.
Focus on skills shortages
Manufacturers have been plagued by staffing troubles this year, and they aren’t going anywhere in 2024. With a shortage of 74,000 factory workers, costing the UK economy around £6.5bn, bridging the skills gap needs to be a key focus for manufacturers next year.
Key to tackling this will be boosting diversity in the sector. Currently, women represent just 26% of those employed in manufacturing roles in the UK – unlocking this untapped pool of potential could go a long way in combating the issue.
Young talent will also be crucial. The Advanced Manufacturing Training Centre (AMTC) is one of the organisations supporting manufacturers to build its pipeline of future talent. With Lloyds Bank’s support, the AMTC has so far trained more than 3,000 apprentices, graduates and engineers; a figure that’s expected to rise to more than 6,000 by 2030.
Sustainability opportunity
The tide is turning on sustainability, with growing numbers of manufacturers viewing it as an opportunity, rather than a burden.
By decarbonising factory floors and manufacturing processes, businesses can differentiate themselves in the market. The UK’s best and brightest increasingly want to work for firms that are shifting the dial on climate change, giving manufacturers the chance to attract new talent.
For SMEs, reducing their own emissions also makes them a more attractive supplier to large companies, which are increasingly under pressure to report on their own emissions, including Scope 3 – the emissions of their supply chain. 2024 will see more manufacturers bolstering their sustainability credentials to give them the edge over competitors.
James Jones, Partner & Director, MasterMover
Despite headwinds of economic uncertainty driven by inflationary pressures, labour shortages and supply chain challenges, 2023 saw manufacturers of all shapes and sizes show immense resilience, continuing the legacy of unwavering fortitude and innovation the industry is known for.
As we look ahead to 2024, we anticipate global supply chain easing, however the inflationary cost base of labour and skills shortages are expected to continue to challenge manufacturers. With rising labour costs, 2024 will lead manufacturers to again assess their processes and address non-value adding tasks. For many, this will coincide with the exploration of automation and technology, as manufacturers look for more efficient, cost-effective solutions to carry out repetitive tasks – enabling the reallocation of skilled labour to more productive, value adding activities.
The adoption of automation will gain pace, as manufacturers across a diverse range of industries look to streamline processes and take advantage of more autonomous solutions. While more technologically-mature manufacturers have embraced technology, from automated guided vehicles to fully digital smart factories, for many, large scale automation still remains intimidating.
Manufacturing teams will mitigate these concerns and improve labour utilisation by focusing on automating simpler processes, through small-scale automation. For example, replacing the labour-intensive processes of transferring parts to the assembly line with automated guided vehicles (AGV), redistributing existing forklift truck or towing tractor drivers to more productive tasks. At MasterMover, we’re seeing customers across a diverse range of industries starting to implement AGV solutions to automate non-value adding tasks and applications, improving labour utilisation and productivity.
Automation was once an option only for large manufacturers, with big budgets and large internal engineering departments. As employment costs continue to rise and the cost of automation reduces, we are seeing a market trend whereby the benefits of automation are now available to the SME. Companies like MasterMover are well placed to offer both large and small fleet AGV solutions and can play an important role in supporting businesses of all size on their automation journey, even starting with just one machine.
In 2024, businesses will also be keeping a keen eye on a rapidly evolving sustainability landscape, as regulations and consumers look to see improvements towards net zero targets. As part of this, we’re already seeing further electrification of the material handling equipment market as manufacturers reassess their reliance of diesel-powered equipment, particularly within intralogistics processes.
For manufacturers already progressing towards their environmental targets, many will be looking to replace their existing equipment fleets with battery-powered alternatives. The recent autumn budget, announced by the Chanceller in November, introduced permanent full expensing, enabling companies to continuously invest in new equipment. The bill, which cuts taxes by up to 25p for every pound a company invests in plant or machinery, will support businesses looking to invest in new machinery and equipment – encouraging investment.
2024 is set to be another exciting year in manufacturing, as businesses continue to adapt and develop to become more efficient, flexible and sustainable. I’m looking forward to seeing what our wonderful diverse sector has to offer next year.
Andy Hill, Global Marketing Manager, Philadelphia Scientific
As we step into 2024, which, hopefully, is a step further away from the issues we’ve faced in the past couple of years, the UK manufacturing sector seems to be gearing up for a year full of promise and positive change. Ideally, an improvement in global affairs, mixed with a few technological advancements and a shift to a more stable economic arena, will come together to deliver positive growth for the industry.
Having been part of the judging panel for the MX Awards this year, I’ve seen that factories are becoming smarter every day, thanks to the incredible wave of digital transformation. The likes of the Internet of Things (IoT), artificial intelligence (AI) and robotics are no longer just buzzwords; they are what is enabling true innovation in the sector. Not only do they make manufacturing processes super-efficient, but they also open up possibilities for manufacturing companies to explore options that were otherwise unavailable to them.
One big trend, both in terms of outbound marketing, and in terms of actual implementation, is sustainability. Everyone’s tweeting? x-ing? Talking about it, and rightly so. UK manufacturers are stepping up to the plate, adopting eco-friendly practices left and right. From greener supply chains to reducing their carbon footprints, companies making products are driving forward with new ideas resulting from an increasingly environmentally conscious consumer base.
The best part is that consumers love it, putting their support behind businesses waving the sustainability flag high. In my sector we’ve seen swings into lithium and hydrogen, and then swing back into traditional lead-acid batteries as they are 99% recyclable, and if cared for properly can last up to seven years before going back into the cycle. Companies really are focussing on the entire chain from top to bottom.
On to Brexit – the lingering topic in the room that still hasn’t left after the party(gate) has well and truly ended. The aftermath is still sending ripples through the manufacturing sector. With new trade relationships, changed regulations and implementation headaches as part of UKCA, and supply chain changes are like puzzles that all companies, not only in manufacturing, are all trying to solve. Some manufacturers are using this shake-up to boost local production and secure a forward supply of components in the face of global supply chain uncertainties.
Speaking of parties, the pharmaceutical and life sciences sector is throwing quite the bash within the UK manufacturing realm. With a surge in demand for healthcare goods post-lockdown, it’s a sector that’s poised for growth next year for sure. There is also a huge shift underway with EVs – not only the manufacturing of the cars themselves but the power infrastructure that goes along with it.
In a nutshell, 2024 is looking like a year where the UK manufacturing sector gets to shine. With tech-savvy moves, green initiatives and a splash of post-Brexit adaptability, the stage is lit, the audience is waiting and our manufacturing sector is ready to take the spotlight.
Bjoern Klaas, Vice President and Managing Director, Protolabs Europe
Geopolitical tensions, continued supply chain disruption, rising costs new workforce demands and sustainability goals have created a sense of urgency and a need to innovate in manufacturing. Meanwhile, emerging technologies are introducing many new possibilities.
Smart factories: 2024 will see a greater transition to smart factories, with increased integration of AI, 5G, Internet of Things (IoT), data analytics and cloud computing. This will bring benefits such as cost savings, product quality, safety and sustainability.
Protoyping is still the top application for 3D printing but we are seeing increased production of end-use parts, especially with metal additive manufacturing (AM), meaning it will continue to grow as a fully-fledged manufacturing method.
Decentralised factories: There are multiple benefits of manufacturing products as close as possible to where they will be used. This addresses the need to be more sustainable, avoiding lengthy part and product journeys and helps organisations to navigate supply chain uncertainty. It’s not always possible due to resources, specialisms and supplies, but working with local facilities or suppliers enables businesses to be more flexible and responsive to changing customer needs and market trends. Manufacturers will increasingly adopt a hybrid approach where they can use both a centralised factory and a network of more local facilities to suit their requirements.
Post-pandemic, and with continued uncertainty about supply routes and energy sources created by recent geopolitical tensions, we are increasingly seeing ‘friend shoring’ – where countries are shifting their supply chains and production to a country with similar values and culture as their own. In our research, 55% of those exploring restructuring the supply chain were focusing on friend shoring.
We are also seeing vertical consolidation as a way of avoiding supply chain challenges, particularly in the aerospace sector. Organisations want to have more control over the level of quality and capability in the supply chain, especially with new, emerging technologies such as hydrogen. Both of these options mean that businesses can be more confident about the provenance of energy, employment ethics and recycling and waste standards.
Workforce: Recent news has seen a renewed concern that AI will eventually make the human workforce redundant. No doubt AI and other technologies, such as cobotics, are changing the way we work, but our research shows that manufacturers see human creativity as the crucial element in innovation. More than half of respondents (56%) believe cobots will lead to improved employee productivity, and 57% say it will support better idea generation.
New skills are needed in the workforce, and employees are more mobile and have different expectations of employment. Businesses have to adapt to attract and retain talent. One solution is introducing more flexible working but the four day week trialled across other industries is proving more difficult to implement in this sector.
New materials/ 3D to 4D: Soft robotics and new materials will have the biggest impact on how robotics manufacturing will develop in the next five years, as our 2023 Robotics Manufacturing Status Report reveals. Soft robotics is expected to see a compound annual growth rate of 35.1% between 2022 and 2027, with biomedicine, food and agriculture set to benefit. Using new materials and technology requires several iterations for testing and refinement, so digital manufacturing is a key element in speeding up the development cycle.
New materials are also being introduced in shape-morphing systems, also known as 4D printing. By using responsive materials that react to external elements like heat, light, moisture, electric current or pressure, 4D printed objects can change shape or properties.
Sustainability driving innovation: Sustainability is still a top priority in manufacturing, both in organisations’ processes and the products they are manufacturing. Sectors like aerospace, automotive and energy have legislation goals to reach, such as getting to net zero by 2050, so much of their product development is around de-carbonsising and incorporating ultra-efficient technologies.
Our own study of 450 manufacturing executives shows that sustainability is a key driver in innovation, and a key reason for manufacturers to develop new products. Digital manufacturing has an important part to play as it enables localised production and results in less waste, as outlined above.
Manufacturing is in a really exciting place and there are great changes happening across multiple sectors, both in the way products are being developed and in the products themselves. Manufacturers have told us that they’ve never felt as much pressure as they do to innovate right now, and this sense of urgency is accelerating the pace of change. I can’t wait to see what 2024 brings, and how can digital manufacturing can play its part in driving innovation.
Chris Goodall, Vice President, Customer Service and Supply Chain, CCEP
As the UK’s largest manufacturer and distributor of Coca-Cola products, we are committed to finding solutions to shared sustainability challenges and are continuously setting ambitious goals and innovating our operations to help create real change across our supply chain.
We are on a mission to achieve our short-term target of a 30% reduction in our absolute Scope 1, 2 and 3 GHG emissions by 2030 vs 2019, and our longer-term science-based target to reach net zero by 2040. It’s our work with sustainable suppliers and third-party logistics providers that is keeping us on track to do so.
We are pleased with the progress we have made alongside our partners this year, who operate both inside and outside our manufacturing sites. For example, we are transporting products by rail to reduce miles on the road, powering around two-thirds of our haulage with hydro-treated vegetable oils, and investing in materials-handling equipment, including switching gas-powered forklift trucks to lithium-ion battery-powered alternatives.
The investments made across our sites are also supporting more innovative production capabilities as we enter the new year. We have invested £120m since 2017 into our Sidcup site, and most recently we’ve invested £28m to fund a state-of-the-art high-speed canning line, which will elevate the site’s production capabilities and support the production of sustainable packaging.
A further £31m has been invested into our Wakefield site, Europe’s largest soft drinks plant by volume. The investment will help develop a canning line which will be operational in 2024 and will be capable of producing 2,000 cans per minute. Funding will also go towards infrastructure upgrades including new raw materials storage facility which will greatly improve production at Wakefield in 2024 and beyond.
We remain focused on introducing significant changes to our packaging; most recently we have rolled out attached caps on our plastic bottles across our portfolio of brands to boost collection, recycling and help prevent litter. We’ve invested £7.5m across our GB manufacturing sites to reconfigure our existing lines making the production of the new format possible.
The transition will continue into 2024, with all our sites across GB having the capability by the end of the year.
Our innovative bottles support further changes we’ve made to reduce the impact our packaging has on the planet, including the acceleration of (rPET) in our 500ml plastic bottles from 50% to 100%, and the replacement of plastic shrink wrap with sustainable cardboard outers on our multi-packs.
Continued supply chain collaboration will be crucial in helping us meet our goals and I look forward to working with our sites and supply chain partners in 2024 as we continue to evolve our manufacturing capabilities while supporting our sustainability ambitions in the months to come. Our most recent investments in Wakefield and Sidcup sites will allow us to continue modernising our manufacturing technologies and processes in the new year, while we take the next step in our sustainability journey.
Todd Moore, Global Head of Data Security Products, Thales
Advances in machine learning and artificial intelligence will enable new participants in collaborative networks, seeing humans collaborate with intelligent autonomous systems.
For some time now, businesses have doubled down on collaboration as a survival strategy following several years of a huge amount of uncertainty and economic and societal changes.
For industries like design and manufacturing, real-time co-creation is now the name of the game, but as ML and AI advance, we’ll increasingly see autonomous entities working as part of this equation, not just human beings in multiple organisations. We will need new models for how we govern, manage and secure these networks as a result.
In addition, the search for standards and stewards of cyber attack accountability will begin. In the wake of the landmark SolarWinds case, the role of security leadership for companies will be under a microscope in the coming year. Public companies are now being called to task by the SEC, and leaders will be looking internally to determine how security will be handled moving forward.
Where compliance and security leaders were originally separate, more harmonisation will take place to make sure best practices and legal needs are both being met – and many will look to audit companies and certifiers for indemnification and protection.
That being said, there will be major calls for a mandate or national standard that these providers can measure against, and while we have the building blocks of best practices – ISO standards, SOC2, CSA – we don’t yet have enough solid ground to make audits a simple process for public companies.
Those who will be held accountable for cyber events at the C-suite and board level will be pushing for more clear requirements on a federal and international level.