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Skills and costs are now the biggest fears for UK manufacturers

10 January, 2022

More than half of UK manufacturers say that their biggest challenges have changed over the past 12 months. According to a new survey by Make UK and PwC, almost six in ten (58%) now see access to labour seen as being the biggest risk they face, with almost 90% being worried about losing skills not only from their own businesses, but from the entire UK manufacturing sector. Their second-biggest concern is now over inflationary pressures.

Despite this, Britain’s manufacturers are positive about their growth prospects for 2022, and have more confidence in their own companies than either the global or UK economies. Almost three quarters of companies (73%) predict that conditions for the sector will improve in 2022, with a similar number (73%) believing the opportunities for their businesses outweigh the risks.

Furthermore, almost two thirds (63%) of companies feel that the UK is a competitive location for manufacturing, with just 13% believing it is uncompetitive.

For more than two thirds (67%) of UK manufacturers, up-skilling or retaining existing staff is now the biggest priority, followed by new product development (60%) and investment in capital equipment (54%). Almost half (45%) of companies say they are planning to invest in Apprenticeships during 2022.

The survey shows more than a third of companies (35%) are planning to tackle supply chain problems by using UK-based rather than international suppliers, while almost a third (31%) planning to re-locate at least part of their production back to the UK.

The 2022 Make UK/PwC Senior Executive Survey is based in responses from 228 UK manufacturers collected last November.

Make UK says that manufacturing grew by 6.9% in 2021, but it is predicting that growth will more than halve to 3.3% in 2022.

One year on from leaving the EU, just 5% of UK manufacturers are reporting that it has been beneficial to their businesses, with 66% saying that Brexit has hampered their activities, either moderately or significantly. More than half (56%) fear a further impact this year from customs delays due to import checks and changes in product labelling.

Only 5% of UK manufacturers are seeing benefits from Brexit
Source: Make UK / PwC Executive Survey 2022

But almost 40% of UK manufacturers expect their exports to the EU to increase this year – with slightly more expecting exports to the US to expand. Around a quarter (26%) are expecting growth in Asia and 21% in the Middle East. However, for 10% of companies, exports to the EU will see their biggest drop during 2022.

The survey also reveals an increasing drive towards “net zero” emissions for UK manufacturers with 49% of companies saying they plan to invest in green technologies or energy efficiency measures during 2022. A third report that their investment in this area has already increased.

“It’s testament to the strength of manufacturers that they have emerged from the turbulence of the last couple of years in such a relatively strong position,” comments Make UK CEO, Stephen Phipson. “While clouds remain on the horizon in the form of rapidly escalating costs and access to key skills, the outlook is more positive for those that remain adaptable, agile and innovative.

“To build on this,” he adds, “we now need to see a Government fully committed to supporting the sector at home and overseas. This requires more than a Plan for Growth but a broader industrial strategy that sets out a long-term vision for the economy and how we are going to achieve consistent economic growth across the whole country.”

Cara Haffey, who leads PwC’s UK industrial manufacturing and automotive activities, says: “Despite facing an unprecedented combination of continued Covid pressures, cost inflation and supply chain issues, our manufacturers are responding with an impressive amount of agility and resilience, which will stand them in good stead for the year ahead. They have learned valuable lessons about their supply chain vulnerabilities and the resilience needed to respond to unforeseen international or domestic risks, and are strengthening their businesses digitally as well as continuing to focus on talent and skills.

“We are particularly pleased by the breadth of net zero ambitions reflected in the report,” Haffey adds. “Across the UK we’re seeing an increasing number of businesses underpin their environmental, social and governance strategies with practical applications to decarbonise their operations and ambitions to build out their green skill base through the recruitment of 'green' jobs, a move that has already been flagged as outperforming the UK sector average in our recent Green Jobs Barometer.”

Make UK:  Twitter  LinkedIn

PwC   Twitter  LinkedIn

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