Tackling local barriers to innovation in the manufacturing sector

The Industrial Strategy White Paper establishes a clear ambition to “propel Britain to global leadership of the industries of the future”. Even with “world-leading sectors and companies”, the “best universities and research institutions in the world”, a “high calibre workforce” and “prosperous places” the UK still has businesses, people and places whose productivity is too low.

The Autumn Budget 2017 reiterated the UK’s productivity challenge and its role in boosting wages and improving living standards. Productivity growth expectations in the short and medium term have been revised downwards. The UK now needs to tackle the underlying challenges of upgrading infrastructure, improving skills and helping businesses to invest. The National Productivity Infrastructure Fund, launched in 2016, is a key component of the plan. The Budget increased the fund from £23bn to £31bn over the 2017/18 to 2021/22 period and is the largest boost to R&D support for 40 years.

I want to focus on one of the five foundations of productivity: ideas and what that means for manufacturing. I want to draw reflections from some of our recent work at Regeneris. Our research for LEP and local authority clients has explored the opportunities and barriers to growth that the manufacturing sector faces. This includes, among other things, attitudes to and investment in, innovation.

The UK has a rich heritage of manufacturing and a strong mix of the traditional, alongside advanced products and processes. The concept of the 4th Industrial Revolution aka Industry 4.0 is driving a new wave of automation, propelled by artificial intelligence. New technologies and techniques will lead to new products and processes, and create value across the entire sector. Our primary research has shown manufacturing businesses are tangibly driving performance growth and envisage significant impacts going forward.

We have however identified important threats to the innovative potential of manufacturers:

  • Translating innovation into growth: our research finds that some manufacturers lack the impetus or wherewithal to implement new techniques. The time and cost implications of investing in change is particularly acute for SMEs and micro businesses. They cite access to talent, access to technology, and access to finance as barriers to innovation. Risk-averse attitudes and low levels of ambition among some manufacturers (particularly those in family ownership and with ageing workforces) are also holding back innovative activity. Innovation support needs to be targeted and tailored to tackle attitudinal and supply-side barriers.
  • Taking advantage of transformative enabling technologies: innovations such as 3D printing, artificial intelligence, big data, composites and robotics are not being exploited fully and a sizeable minority of businesses are not using digital technologies at all. The UK has a globally significant concentration of HEIs and internationally renowned research centres, yet local manufacturers do not seem to be able to take full advantage. Innovation assets need to be embedded in their local economies while also being focused on nationally set strategic priorities and internationally excellent know-how.
  • Skill gaps: the limited supply of people with the know-how and right attitude is the most significant barrier to innovation-led growth. The ageing workforce and difficulties recruiting new entrants are exacerbating this challenge. Specialist skills as well as management and leadership are particularly hard to obtain. New disciplines such as data analytics require a whole new set of skills that many businesses have not traditionally employed. Businesses need to recruit and then support essential staff to implement new methods, concepts and technologies, and this can often require dramatic shifts in working cultures.

Our research reveals a disconnect between appetite and action among many manufacturers. These challenges highlight the importance of supporting businesses to create the time and space to innovate, and provide a dynamic ecosystem which also demonstrates the bottom line value of innovation to manufacturers.

Do the Industrial Strategy policy levers go far enough to address the real barriers to innovative activity that we have identified?

Our research found that manufacturing businesses need real practical solutions, communicated in a way they can understand. I believe that the Industrial Strategy proposals have the potential to create a step-change in attitudes towards and take-up of innovation

This is not the first time that the United Kingdom has stood on the brink of a new industrial age. It is also not the first time that economists have pondered the necessary conditions to achieve widespread adoption of new techniques and innovations. Our models of economic growth have always been founded on the big ideas such as steam, electricity or the factory system. We now appreciate that future success will also be built on shop-floor innovation and the willingness to innovate. Solutions therefore need to target business leaders’ appetite and clearly demonstrate the business benefits of investing time and money in innovation.

This may mean local solutions for local manufacturers and local industrial strategies (LIS) should hold the key to new ways of working and responsive solutions to the issues we have identified.

 


Recent Relevant Studies

  • Opportunities for Growth in the Greater Manchester Manufacturing Sector (GMCA)
  • Marches Sector Study (Marches LEP)
  • Advanced Manufacturing Skills Action Plan (Lancashire County Council)
  •  Tees Valley Sector Action Plans (TVCA)
  • Appraisal of the AMRC NW (Lancashire County Council)
  • Feasibility of a Regional Skills Centre in Manufacturing (Calderdale Council)
  • Leeds Advanced Manufacturing FDI Research (Leeds & Partners)

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