BY Fraser Tennant
As we head toward what purports to be the endgame for the Brexit process, three in five UK manufacturers blame the imminent departure from the European Union (EU) for a slump in investment in their business, according to a new report by KPMG.
‘How to gain a competitive edge in UK manufacturing’, KPMG’s survey of 300 firms across a cross section of regions and manufacturing sectors, reveals 62 percent of UK manufacturers have delayed or paused investment as a result of Brexit. Automotive firms reported the hardest impact, with 78 percent indicating a slowdown in investment.
The report’s key findings include: (i) 90 percent of UK manufacturers report obstacles in realising their digitalisation strategies; (ii) talent and infrastructure are the top drivers for internal manufacturers to invest in the UK; (iii) 67 percent of manufacturers view technology disruption as a threat to their business model; and (iv) the availability of talent is viewed as the main obstacle to realising the benefits of industry digitalisation.
“Recent headlines have shown just how much the automotive sector in particular is feeling the pinch and this was echoed by our findings,” said Stephen Cooper, head of industrial manufacturing at KPMG UK. “Factors such as macroeconomic trade wars, regulation, technology and the fast pace at which the world is moving means that manufacturers must be more competitive and agile if they want to remain viable and thrive. Disruption is everywhere, but if viewed as an opportunity and navigated strategically, it can help businesses retain the edge the UK needs to have on its international peers.”
The KPMG report also found that over half of UK manufacturers (54 percent) are planning to relocate some elements of their operations abroad during the next three years.
“With squeezed margins, productivity challenges and a tumultuous geopolitical environment, it is little wonder that manufacturers are unsettled,” suggests Mr Cooper. “However, it is rarely ever one way traffic, so while some may be looking at other destinations, the UK has many redeeming qualities for manufacturers, so they must ensure that any moves being planned are for strategic reasons.”
That said, the report also found that almost half of UK manufacturers (44 percent) believe that the UK’s quality of infrastructure, talent and skills are drivers for international firms choosing to invest.
“The UK’s attractiveness to international firms should not be downplayed,” adds Mr Cooper. “For it to be sustainable in this environment, however, more can be done, such as further government support to strengthen infrastructure and international connections and a focused effort on strategic growth, productivity, skills and innovation.”
As Brexit, in whatever form, presumably approaches, UK manufacturing leaders are in no doubt as to what they must do to invest in their long-term future and stay competitive at a global level.