In for the long haul

There were a few us yesterday daring to believe that the government might finally be starting seeing the bigger picture on the economy. 

The budget contained some promising initiatives including patent and researchers and development (R&D) tax credits, investment in North Sea oil and gas and Northern rail networks as well as a UK Centre for Aerodynamics.

But as Stephen Tetlow, chief executive of the Institution of Mechanical Engineers, rightly pointed out, it represents a ‘piecemeal approach’ – what is lacking is a ‘bold, ambitious industrial strategy.’

And that is the key thing here. We’re talking about a long-term vision for what we want out economy to look like 20 or 30 years from now. As a nation we have to wean ourselves off the immediate, easy and ultimately fraudulent returns that were on offer from the financial sector.

It will not be easy and it may take time to see real results, but it will certainly be worth it, putting in place a more stable economic base.

The problem is that other countries are waking up to the exact same realisation and will be in direct competition with the UK.

We need an edge.

Listening to people involved in UK manufacturing recently – particularly at the excellent Renaissance of UK Manufacturing; Automated Britain event – there seems to be a consensus of four key strategic policy areas that must be addressed: collaborative R&D; infrastructure; skills; investment culture and productivity.

On the first point the UK has always punched above its weight in terms of fundamental research, which should continue apace. But traditionally, it’s the carrying of these ideas and fledgling technologies forward that has been more challenging. The work of the Technology Strategy Board (TSB), particularly in delivering the ‘Catapult’ technology and innovation centres, is starting bear some fruit here.

Regarding the second point we need to hold our nerve and firmly commit to key infrastructure projects in a few key areas, such as high speed rail, wind energy, nuclear, electric cars and accompanying charging networks. This will provide the confidence to create a supply chain and the jobs backing it up. It is still a contentious point, but the balance of evidence suggests that infrastructure does in fact provide tangible benefits for the economy at large (for a full analysis see The Engineer’s in-depth piece Building Society).

The third point of skills is a particularly thorny one; apprenticeships and similar schemes will help, but there are wider issues around the perception of engineering and professional accreditation and status protection.

Arguably though, it’s last area of investment and productivity where the where the UK is particularly lagging behind. In 2011 manufacturing investment in Germany stood at €53.3bn compared with €14.2bn in the UK. This has a direct impact on productivity, efficiency and ultimately global competitiveness.

Advanced manufacturing and automation holds part of the solution. Clearly we are never going to compete with emerging economies like India and China on labour costs, but it’s interesting to note that these countries are actually spending more on factory automation and robotics than the UK. We have to keep pace

Juergen Maier, managing director, Siemens UK Industry Sector had some interesting views on the topic at the Renaissance of UK Manufacturing event.

‘What we’re excellent at in the UK is process improvement, squeezing that last bit of productivity out of factories – another 2 per cent, another 3 per cent, every year to improve the productivity,’ he said.

‘The problem is we’re not good at investment, we don’t invest in the best of automation, the best of capital equipment, robotics, and it’s those areas that get the 10 per cent, 20 per cent even 30 per cent productivity improvements.’

‘We’re almost proud in the UK, to say: “we’re going to keep this technology going for another 30 years” rather than saying “what have you got that’s new and better with which we could transform productivity”.’

One reason for this is access to finance, and manufacturing companies large and small are still struggling in this regard despite numerous initiatives like Project Merlin, growth funds and enhanced capital allowances (ECAs).

In addition, the Department for Business, Innovation and Skills has put up £600,000 for a scheme run by the British Automation and Robot Association to encourage the uptake of automation among UK manufacturers, which will run until March 2013.

But in the end it’s simply not enough, we really need to see those big investment figures that will allow the UK to compete globally.