How Five Years Shaped the Future of UK Manufacturing

Foreword from Protolabs

Manufacturing is a vital part of the UK economy.  According to Make UK (formerly EEF), the country is the world’s eighth-largest manufacturer by output, employing 2.6 million people.

The challenge is to maintain or even improve this position, and to do so, manufacturers must constantly innovate and evolve. Back in 2019, when we started this research with The Institution of Mechanical Engineers to conduct an annual survey of engineers for five years, we never realised how much our world would change in that time.

Of course, there were known events such as Brexit and the ongoing issue of recruiting skilled people, but who could have foreseen a global pandemic that would shut down much of the worldwide economy, a European war, and international tensions that would lead to an energy crisis and supply chain disruptions? When you add the ongoing urgency of climate change and the pressure to create more sustainable products, you can see that the pressure for change has never been greater.

Over the past five years, we have spoken to 717 respondents working in some of the most impacted industries, including aerospace, automotive, energy, rail, and medical.

It proved that engineers and manufacturers will adapt in times of crisis to survive and stay competitive.  The last five years have stress-tested the state of UK manufacturing, but in that time, it has not just survived, but the best have adapted and thrived.

This report looks at how manufacturers have managed to stay competitive and what lessons we can learn for the future. The UK manufacturing industry will never be the same again, but it cannot stand still. Even after such a period of extreme pressure, the pace of change will only increase. 

Read on, and you will get an insight into how UK manufacturing reacted and evolved under extreme pressure and uncover the thinking of the engineers who worked through this time. Based on these collective thoughts and our experience helping manufacturers innovate and change, can we glimpse how manufacturing needs to evolve further? We think so, but more on that later…

Bjoern Klaas

Managing Director & Vice President EMEA

Protolabs

Foreword from IMechE

The UK’s manufacturing industry has suffered a tough few years. The uncertainty caused by Brexit followed by the economic downturn driven by the pandemic has made the investment environment uncertain for business.

However, there are signs of a renaissance. The auto industry and government have come together to recognise what needs to be done to save a vital and historic British engineering sector, and a commitment has been made to create new gigafactories to service a growing electric vehicle industry.

The Institution of Mechanical Engineers have called Net Zero the ‘largest engineering project undertaken by humankind’. To deliver it will require one of the greatest recruitment and training – and retraining – programmes ever. Heat pumps, electric vehicle charge points, nuclear power stations, wind turbines, and large scale energy storage will all need to be manufactured in the next two decades. The demand for skilled engineers and technicians will be huge. However, it is important that we grow the pool of skilled people, rather than have a competition between sectors.

But we should see this as a opportunity and not a threat. The UK is a leader in scientific research and high value manufacturing. As engineering becomes more automated, the value of cheap labour diminishes, and reshoring becomes more likely. Co-locating research, design and manufacturing provides many benefits for business. The UK should recognise the opportunity and grasp it.

This report by Protolabs is important and could not be more timely. Whoever forms the new government after the 2024 election needs to recognise the vital importance of manufacturing to the UK’s economy and have a strategy where government and industry comes together to make sure the technologies of the future are developed in the UK.

Matthew Rooney

Head of Policy

Institution of Mechanical Engineers (IMechE)

Introduction

We asked our respondents for their views on various topics relating to their business each year.  What was essential to their business, and where should they focus their attention?  It’s interesting to see how their perspective evolves in response to changing events and technology. 

This report is based on a mixture of quantitative and qualitative research. We explore general trends over time and seek to elicit more nuanced viewpoints. It is split into four chapters, followed by some final thoughts, summarising what we have learnt and predicting what needs to happen in the next five years.

Accelerated responsiveness is the new normal

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Like any business, manufacturers are there to make money, and at the heart of this is meeting the needs of their customers. So, it was not a surprise that when asked to rank the most important factor for their business to be competitive over the next 12 months, responsiveness was the top factor in three out of the five years in 2019, 2020 and 2022.  It was only pipped into second place in 2021 and 2023 by “investing in the right talent and being able to develop highly skilled employees”.

As we will see in Chapter 3, these two factors are inextricably linked. Many cite the lack of skilled labour as a major problem for their business, so they develop new products and embrace new technology to help them become more efficient.

Of the other two factors we asked about, price was also important, coming in a close third each year, with location coming in a distant fourth throughout the five years of our survey. Despite the well-publicised concerns about the supply chain and sustainability, most UK manufacturers still operate on and often supply on a global stage.

Our research from 2023 reinforces this notion, showing that the industry prefers to “friend shore” its supply chains (55%) rather than “onshoring” (33%) or “nearshoring” (12%)¹.

Achieving responsiveness

Our survey defined responsiveness as “being the first to answer a need expressed by a customer.” Understanding that need is the first step, but as a manufacturer, the real challenge lies in the speed of response.

This means that you need to be faster through all the stages of product development, from concept to prototyping to manufacturing.

And customers’ needs change over time.  There is for example a real demand for sustainable solutions which can go well beyond the initial product offer and tackle the life cycle analysis² both in economic and sustainable terms. 

Whatever the driver of a customer’s need, technology is finding new ways to meet it more efficiently and sustainably. Manufacturers can now more precisely meet granular customer segment needs. The ongoing development of additive manufacturing and new ways of cost-effectively scaling down production, for example, with rapid injection moulding, means we are moving away from mass production to a new era of mass customisation.

Speed of response was one of the major lessons we learned in the pandemic. Never before has there been a greater need for human ingenuity and innovation. Innovation was literally a matter of life and death. Many manufacturers adapted their expertise to develop new solutions in previously unheard-of time frames.

Consequently, speed has become the new norm. Today, UK manufacturers must meet a sense of urgency and be faster to a solution than their global competitors. It’s a challenging but exciting time to be an engineer in a manufacturing business.

The role of R&D and innovation

Our research corroborates this sense of urgency in developing new ideas. In each of our five-year surveys, we asked our respondents to select up to three of the most important areas their business will invest in over the following 12 months.

Service or product development topped the list in 2019 and 2020 before dropping to third place in 2021, fifth place in 2022, and then rising again to second place in 2023.

Closely related, innovation came in second place in 2019, 2020, and 2021, first place in 2022, and third place in 2023. 

Manufacturers recognise that they must constantly change, whether to develop new or existing products or seek completely new solutions or new technology through innovation.

Going back to our research, what displaced service or product development from the top spot? In 2022, four other factors scored more heavily. While innovation took the top spot, other areas that demanded investment were equipment, upskilling staff and, training new employees, and sustainability.

We believe that after coming through the pandemic, where manufacturing cut back on core investment, it was time to reinvest in areas that had been neglected to get back to business as usual.  Innovation was still at the top of the investment priorities, and service or product development was not too far behind, but other areas of business clearly needed attention.

And perhaps the focus of innovation changed. Our previous research, The Balancing Act: Unlocking Innovation in Manufacturing¹ from 2023, shows the drivers for innovation are multifold, with 73% in that research citing the need for new product and service development, 70% talking about enhancing efficiency and cutting costs and 64% mentioning “responding to external challenges such as supply chain disruption or rising costs.”

By 2023 UK manufacturing had moved on again and was starting to look outwards rather than inwards.  Now, the biggest single area of investment was reaching new markets and developing their business.  Is this an ambition to expand or as a result of losing access to other markets due to geopolitical factors?  We suspect it’s a mix of both.

Upskilling and training staff was still a big concern in 2023, coming in equal second alongside innovation.  As we move forwards the lack of skilled staff is still a big issue for manufacturing but as we will see industry is finding its own solutions. Although service and product development is in fifth place in the 2022 survey, don’t be misled, it is only a fraction (0.03%) behind second spot.  Clearly, we are entering a more complex world for manufacturing and there is a lot to focus on.

Global competitiveness

UK manufacturing does not exist in isolation.  As an island nation we have always worked hard to export our expertise and products.  We asked our respondents what they felt UK companies needed to do to retain their position in global manufacturing.  Here they could tick any of the eight factors that we listed.

From 2019 to 2022, greater investment in research and development was consistently at the top (2019, 2020, and 2022) or near the top (second in 2021) of the list, with two-thirds or more respondents stating that businesses needed to focus on this area. In 2023, only 38.61% ticked the greater investment in R&D box when it came in third spot.

Our research reveals that another factor looms large in 2023, with “a greater focus and investment in STEM talent in the manufacturing and industrial sector”, but as we will see in the next chapter, UK manufacturing is tackling this issue head-on.  Also cited as an area that needs greater focus in our 2023 survey is the need to embrace Industry 4.0 and the use of big data with 45.55% of respondents highlighting this, which is what we will tackle in chapter 4.

Managing the skills gap

Delving deeper into our question about how UK companies can maintain their position on the global stage, one factor looms large.  The need for a greater focus and investment in STEM talent was the top priority in 2023 and a close second out of our eight factors in each of the four preceding years.

More than two thirds of our respondents highlighted this as an area that needs investment in each of the five years of our survey. 

Clearly the lack of skilled labour is serious and could be a major factor in derailing the future success of UK manufacturing.

Manufacturing is entering a new digital age that demands new skillsets and a younger generation of people who have grown up with technology to drive forward this progress.  When asked what was the greatest challenge UK companies faced when adopting digital manufacturing techniques? A lack of expertise was cited as the top reason from 2019 to 2022.

But encouragingly, by 2023, this became the lowest factor out of four for this question. It was replaced in the top spot by cost as the main issue. We believe that engineers are becoming better trained through necessity as technology moves forward and that other factors are coming into play, such as the increasing role of digitisation, AI, and the use of cobots, taking away some of the more repetitive tasks from skilled labour. This will free up people to concentrate on more value-added tasks.

Grow your own talent

The skills gap is not a new problem. Industry has complained about the lack of skilled labour entering companies for years, and there is still a dire need to encourage more new talent to enter the UK’s manufacturing sector.  But as the Financial Times highlighted in its special report in 2022, Future of Industry³, there comes a point where such skills shortages demand that you adopt a “grow your own” training approach.

One positive outcome of the coronavirus pandemic is that we are now more aware of and open to digitalisation. Commenting on a McKinsey report, Daniel Swan, a manufacturing and supply chain expert from the consulting firm, says there was a “clear recognition” among executives that addressing the digital skills gap was a priority even before the pandemic.

In the FT article he says: “Everybody’s looking for the same talent right now, so you can’t just go and hire these people. No doubt about it – you’ve got to hire some – but people are going to have to train their existing workforce.”

Given the speed with which new technologies and digital developments are happening there is a need for ongoing updating and training of skills anyway, as even new recruits will fall out of date within a few years.

Our survey indicates that UK manufacturing is coming to terms with this new reality and the need for ongoing upskilling of the workforce has become embedded. Some of our respondents think that the skills gap is still there, but at least it may be shrinking.

When asked to comment on what challenges their company faced in adopting digital manufacturing techniques, there is a marked difference between the comments we saw pre-pandemic in 2019 and post-pandemic, five years later in 2023.

Back in 2019, 139 of those surveyed chose to comment, with just 23 ignoring the question.  Of those commenting, 47 talked about the lack of expertise within and outside the company.  Typical comments included “Lack of skilled integrators in the UK” and “It requires a very different mind and skillset that needs to be fused with fundamental manufacturing and engineering knowledge”.  Our survey from 2019 was littered with such freely expressed comments.

Move forward five years to the survey in 2023 and we see a very different set of comments.  When asked the same question, only 49 people commented, with 53 skipping the question.  In addition, only six mentioned lack of expertise and even those that did tended to talk about training rather than recruitment. 

The comments in 2023 tended to focus on the practical elements of integrating digital processes, but more on that in the next chapter.

Is this a case of needs must by UK manufacturing, or has digitalisation and technology got to the point where developing the right skills is given, which is, in turn, freeing people up to concentrate on innovation and problem-solving?

Whatever the answer, it appears that UK manufacturing is proactively addressing the skills gap rather than simply waiting for skilled new talent to emerge. It is vital that we do not become complacent, however, as we still need new people with new skills to enter the UK manufacturing workforce.

Is digitisation and automation the answer?

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While digitisation and automation will help free skilled engineers to concentrate on innovation and research and development, it also demands new skillsets.

As the last chapter revealed, UK manufacturing has made a real effort to train its own staff. This has led to significantly more confidence in the adoption of digital processes.

In each year of our survey, we asked our respondents, “How prepared do you think the manufacturing industry is for Industry 4.0 or the ‘rise of digital’ processes?”  In 2023, there was a big rise in confidence, with 65% of our respondents feeling that they were very prepared or prepared, which is more than double or even triple what it was in the previous four years.

Going back to 2019 there was real doubt about the lack of expertise available for manufacturers to succeed in its adoption.  This and lack of awareness of the technology were the two biggest challenges faced by manufacturers.

Despite this lack of confidence, there was still an awareness of its importance.  65.38% of respondents replied that UK companies needed to invest more in digital manufacturing techniques to retain their position in global manufacturing, and more than 50% recognised the need to embrace Industry 4.0.

Five years later, in 2023, there is much more confidence.  While the skills gap is still ever-present, it has become less of a factor.

In 2023, our survey reveals that only 33% of people cite lack of expertise as one of their top two challenges for adopting digital technology. While lack of awareness is still worryingly high at 50%, cost is now the most dominant challenge, with a figure of 70%. 

UK manufacturing has clearly moved forward in our ability to adopt new technology in the last five years.  As individuals, we are more used to using digital technology in our business and personal lives, and to some extent, this is being mirrored in industry. Perhaps this is one the few positives of the pandemic.

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How automated is UK manufacturing?

While awareness and skillsets for digital manufacturing are improving, more worryingly, the adoption of automation appears to remain low.

In each of the five years, we asked our respondents how much of their business was automated – see infographic to the left.

While there is some variance between years, recently there seems to be a slow but very limited adoption of automation.  Few manufacturing businesses from our survey are heavily automated but there appears to be a rise in those adopting some automation.  In 2023 half (49.50%) claimed that between 25% and 50% of their business was now automated, this is almost double the figure from previous years.

According to our survey, cost is the biggest barrier to its greater implementation in 2023.  Manufacturers remain cautious about investing in automation despite increasingly recognising the need to do so.

When asked specifically about what challenges our respondents faced in adopting digital manufacturing techniques, typical responses included:

We have … “little to no experience or expertise in its use and the implementation time has been too long.”

“Competing budgetary demands.”

“Core technology is in short supply.”

“Cost and making it fit with our business and manufacturing model.”

While lack of expertise is still a concern among some, there are noticeably fewer respondents referencing this as a challenge.

Will tomorrow’s technology ever arrive? 

UK manufacturing appears to understand that it needs to invest in digital technology, but there is a feeling that this is always a medium—to long-term aim.

The danger with such an approach is that the UK industry will be left behind its global competitors. While the industry is adopting digitisation, it is slow progress—where is the sense of urgency?

Revisiting our question, “How much do you expect automation in your business to increase?” We gave our respondents two timeframes: the next 12 months and the next 5 years.

Our survey covers five years, so how did UK manufacturing measure up over this period?

In 2019, looking forward to the next five years, 62.58% expected moderate, extensive, or complete automation in their business. Of these, more than a third (34.84%) expected extensive or complete automation over the next five years.

Moving forward five years to 2023, while there is limited progress, 88% still report that less than 50% of their manufacturing is automated.

Digging a bit deeper into these 2023 figures, the picture is a bit brighter; almost half (49.50%) report that it accounts for 25 – 50% of their manufacturing services, while just over a third (35.64%) state that it is less than 25%. This is a distinct shift from 2019, when only a quarter (25.69%) claimed that between 25 – 50% of their manufacturing was automated.

The question is whether there is further room for automation within UK manufacturing businesses or are we close to what can currently be automated?  Most of our respondents believe that further progress is still needed.

The 2023 survey shows a greater sense of urgency to automate than in 2019. These later figures show that 59% expect either moderate or a lot more automation in their business in the next 12 months, compared to 38.56% in 2019. Many more businesses are also expecting a lot or complete automation in the next 12 months, 27% in 2023 compared to just 8.49% in 2019.

In summary our survey reveals that engineers have seen real change in automation in the last 12 months compared to the previous four years and they expect this to accelerate.

And it does make a difference to UK manufacturing competitiveness. At the beginning of this report, we highlighted that according to Make UK, the UK is now the 8^th largest manufacturing country in the world, which is up from 9^th in 2022.  As we accelerate our adoption of digital technology will the UK move even higher up the list?

Final thoughts from IMechE

The report by Protolabs is of the utmost importance and arrives at the perfect time. After the 2024 election, the incoming government must realise the crucial role of manufacturing in the UK's economy and devise a comprehensive strategy to ensure that future technologies are developed domestically.

The survey's participants have identified innovation, skills, and sustainability as essential elements for the success of their businesses. To establish a thriving manufacturing sector in the UK, industry, government, and the wider engineering community must unite to deliver in all these areas. The IMechE will play a critical role, particularly in ensuring that individuals receive training in the skills that will be necessary in the future rather than those that have been used in the past. These skills are evolving rapidly.

A greater focus on decarbonisation

There will be a much greater focus on decarbonisation and Net Zero. Decarbonisation in the UK has largely been driven by the power sector, with huge deployment of offshore wind capacity and the phasing out of electricity from coal. But the other sectors, like manufacturing, will have to catch up. In the short term this will involve more efficient use of valuable resources and increasing levels of remanufacturing. But businesses, particularly in heavy industry, will have to begin to tool-up for a transition to zero-carbon production methods.

Preventing carbon leakage: A UK opportunity

Taking a lead in clean manufacturing may present an opportunity for the UK. As wealthy nations decarbonise, there is an increasing emphasis on so-called ‘carbon leakage’. This is when a country introduces an environmental levy, such as a carbon tax, that incentivises companies to move their manufacturing facilities to countries that do not impose such levies. A proposed solution are carbon border adjustment mechanisms (CBAMs). CBAMs impose a tax on a product based on the embedded greenhouse gas emissions that were involved in producing it, no matter where it was produced. In theory, this would allow UK manufacturing to invest in low carbon production techniques without the risk of carbon leakage. The UK Government has committed to introduce a CBAM by 2027 which, if well-designed, could make the country a pioneer in low carbon manufacturing.

Increasing digitalisation and automation

Artificial intelligence and automation are considered by many to be a threat and even ‘job-killers’. But this worry is not a new phenomenon – manufacturing output per worker has been steadily increasing for decades. This report has described the last five years as ‘one of the most disruptive periods ever experienced by UK manufacturing’. The next five years is likely to be more disruptive. Survey results suggest that companies are more prepared for Industry 4.0 than they were four years ago. The extent to which companies embrace these new practices will determine the state of the sector in five years’ time.

Reskilling and upskilling

There is a broad acceptance about the need to continually evolve the training of engineers and technicians at degree and apprentice level to ensure they have the right skills to enter a sector that is rapidly changing. However, it is perhaps easier for young people straight out of tertiary education to adopt to the world of AI and digital twins. A greater challenge will be to reskill those who have spent decades in one paradigm who will need to adapt to a new one. Businesses will increasingly need to invest in their workforce to ensure it is comprised of versatile and digitally literate problem solvers who are prepared to be lifelong learners.

The return of Industrial Strategy

The big challenges facing the world cannot be delivered by industry alone. Net Zero is an industrial mega-project beyond any we have seen before. A more active state is an inevitability, with government, industry and academia working closely together. State intervention has been required in the auto-industry to prevent this historic British industry from waning, but this presents an opportunity for a revival of manufacturing that could boost the prospects of economically deprived areas around the country. Low carbon clusters, giga-factories, nuclear power stations, and new technologies like floating offshore wind and large-scale energy storage mean that the requirement for – and competition to hire – engineers is only going to grow.

Matthew Rooney

Head of Policy

Institution of Mechanical Engineers (IMechE)

Final thoughts from Protolabs

Our survey with the IMechE covered one of the most disruptive periods ever experienced by UK manufacturing. The results show evidence of real change in attitudes, thinking and adoption of new technology. 

The global pandemic taught us that in times of immense pressure, manufacturing would develop innovative solutions in timeframes that were previously thought impossible. That speed of response from identifying a need to a finished solution has become the new standard. To succeed, you need to be faster and more efficient than the opposition, and today, that means you need to seriously shorten the timeframe from concept through prototyping and testing to final production.

The pressure on research and development and innovation is enormous. As a manufacturing business, you simply cannot stand still. To its credit, our report shows that UK manufacturing has gotten the message. 

In 2019, the biggest barrier to adopting digital manufacturing and Industry 4.0 was a lack of expertise and awareness. Comments that we received mentioned the labour force not having the right skills and not enough new talent entering manufacturing.

By 2023, there is a recognition that while we do need more people with relevant STEM qualifications, it is time for manufacturers to upskill their existing workforce. After all, the pace of change means that even newly qualified engineers will be out of date in just a few years.

While the adoption of digital manufacturing, automation, and “industry 4.0” is slow, it will be evident by 2023. Half of our respondents (49.50%) reported that 25 - 50% of their manufacturing was automated, with a further 12% reporting automation of between 50 – 75%. This is a big increase from previous years; it was just 25.79% in 2019.

So, the journey to digital manufacturing and industry 4.0, or even 5.0, has started, but to prosper, UK manufacturing needs to pick up the pace of this change and invest in its workforce and technology.

While we must not become complacent, UK manufacturers are working hard to secure their future, and there are reasons for guarded optimism. Research from Make UK⁴ shows that we have moved up the global manufacturers league table from 9^th to the 8^th largest manufacturing base globally.

They report that their research shows that almost half of respondents expect conditions to improve in 2024, which is more than double those expecting conditions to get worse. There is still a heavy dose of realism however with the same report showing that we are in danger of losing ground to India, China and the US.

Taking the lessons from the last five years what can we learn so that the next 5 years cement the success of UK manufacturing?

Bjoern Klaas

Managing Director & Vice President EMEA

Protolabs