A warm welcome to the SWMAS Manufacturing Barometer Autumn 2019-20 (Q2) report for the South West of England.
It is now 10 years since the first Manufacturing Barometer began mapping the opinions and performance trends of the UK’s SME manufacturing sector.
With the challenges of a downturn still evident and, at the time of writing, both Brexit and a potential change in government ongoing causes of uncertainty, the Manufacturing Barometer shows how manufacturers are planning operations for a potentially very different world. While manufacturers find their ability to recruit, invest and increase sales is increasingly restricted, finding technological solutions is becoming increasingly important.
The Manufacturing Barometer this quarter looks in depth at the attitudes to robots exhibited by UK SME manufacturers, and reveals some unique insight into what this means for manufacturers, equipment suppliers and the next government. See the 'Special Focus' below.
Every quarter, the SWMAS Manufacturing Barometer records both actual and projected performance of UK SME manufacturers in sales, profits, investment (machinery and premises) and sales.
LAST SIX MONTHS
This quarter, we are left in no doubt that the sector is experiencing one of the toughest periods recorded during the 10 years of the Manufacturing Barometer. More SME manufacturers have experienced a reduction in sales, profits, and recruitment than ever seen before.
This is most remarkable in manufacturing profits where 45% of businesses experienced a reduction. This means an incredible 14% more manufacturers are dealing with fewer profits compared to last quarter.
Supporting the evidence that this is the worst performing quarter for nearly a decade, 37% of respondents said their sales figures have dropped in the last six months, and more than ever, nearly 25%, reported an active reduction in their staff numbers (driven, as reported previously in the Manufacturing Barometer, by talent shortages and the effect of uncertainty on growth plans).
There is slightly better news in the investment of new machinery and premises. Reflecting intentions previously expressed in the Manufacturing Barometer, 41% of UK SME manufacturers tell us they have increased their investment in machinery and premises.
NEXT SIX MONTHS
Looking ahead, is there more reason to be cheerful? Although approximately a fifth of manufacturers note ‘survival’ or ‘getting through Brexit’ as an aspiration, around a fifth talk about growth and around one third reference investment whether in machinery and premises or people, automation, new products, and establishing new markets.
However, anticipated future performance figures evidence the lowest level of confidence expressed by the sector in nearly 10 years.
It is significant that for the first time less than half (40%) of SME manufacturers are expecting sales to increase. On top of that, 25% believe they will see a decrease in sales.
The picture is similar in profits where never have we observed so few manufacturers expecting an increase (32%).
In investment, nearly one fifth expect to reduce their expenditure. Looking at future employment, nearly one sixth are to actively cut staff numbers, while the number expecting to take on new staff falls to one third.
SPECIAL FOCUS - ROBOT ADOPTION: THE SME CHALLENGE
While the UK ranks as the 8th largest industrial nation, we just 22nd in the global league of robot adoption (1). Earlier this year, the International Robotics Federation reported that the UK was falling further back in the global automation stakes as UK robot sales sank 3% in 2018. Comparatively, Europe has more robots per 10,000 workers anywhere in the world, and robot sales here increased by 12% (2).
The UK government’s Industrial Strategy, the continuing drive to improve productivity, and the need to find new ways to operate with fewer staff, all indicate there is opportunity to do more with robots, so why are we not?
This quarter’s Special Focus looks at where SME manufacturers are successfully using robots, and where they are not, and what we can learn from them.
The context of this Special Focus is immediately set with just 18% of SME manufacturers in the South West saying they already use robots. Nearly 70% either do not plan to, or do not know if they will, use robots in their businesses.
Of those already using robots in their businesses in the South West, the impact on their business operations is clear: lower cost of operations, improved safety/well-being of staff and better quality and repeatability feature highest in the benefits of utilising the technology. ‘Faster operations’ is beaten into fourth place, but as a top four this mirrors the national response.
The biggest drawbacks to using robots for this group are the high implementation costs, a shortage of programming and maintenance skills, inflexibility coping with product variation, and products not easy to handle. How this differs to the barriers perceived by those “not sure” or “not planning” to use robots begins to highlight the challenges to greater adoption of robots by SME manufacturers.
Both those “not sure” and those “not planning” to use robots share the concerns about the cost of implementation but are twice as worried about the technology’s inflexibility when it comes to coping with product variation.
When asked ‘Do your competitors use robots?’ Over one third of manufacturers who do not yet use robots in their businesses are unsure if their competitors do. This raises questions regarding a general lack of awareness and benchmarking across the sector.
UK SME manufacturers’ confidence remains low, and their projected sales, profit and recruitment figures continue to be affected by the ongoing national uncertainty.
Robots could help to address relevant factors such as talent shortages and provide efficiency-boosting solutions that would positively contribute to profits and the economy. However, there are chasms to bridge.
One is between the significant number of SME who manufacture low volume and bespoke products and the providers of robots able to cope with products that are variable or are not easy to handle. We call on manufacturers to look at how their competitors are using robots, and for robot suppliers to look at solutions. If there is not a robotic solution for the large group of manufacturers who consider their products to be difficult to handle, the drivers for robot adoption could fail.
It also seems to be true, as BEIS highlights (3), that a lack of awareness around robots is harming the productivity of businesses, particularly for SMEs. For the potential of robots to be realised, the UK SME manufacturers need better information and tailored advice and support to help them plan and integrate robots into their businesses.
Download the full Autumn 2019-20 Q2 Manufacturing Barometer South West report: