Is UK Manufacturing Ready for the Fourth Industrial Revolution?

Estimated reading time: 4 minutes

The new fourth Industrial Revolution (4IR) is driving the transformation of manufacturing across the world, encompassing breakthroughs in artificial intelligence, big data, the Internet of Things and 3D printing.

And, as the World Economic Forum’s Klaus Schwab summed it up earlier this year, “When compared with previous industrial revolutions, the fourth is evolving at an exponential rather than a linear pace.”

So, is UK manufacturing 4IR ready? Well, according to a white paper authored by Mike Rigby, Head of Manufacturing, Transport and Logistics at Barclays, the answer very much depends on how willing UK industry is to embrace, and invest in, new technology.

As the white paper highlights, a commitment to greater investment in 4IR has the potential to accelerate the UK’s recovery, to enhance global competitiveness and to address the notorious productivity gap.

Conversely though, the decision to retain the status quo, or to reduce investment stands at best to stall manufacturing growth, or at worst to result in decline.

So, what are the likely outcomes if the UK manufacturing industry maintains a “business as usual” approach? What if it allows itself to fall behind in the global race? And what if it chooses to step up its investment in 4IR technologies?

In this article, we highlight the key predictions of the three potential scenarios.

Business as Usual

Assuming that UK manufacturers continue to invest on their current, and recently forecasted, trajectories, research suggests that the manufacturing industry will generate annual turnover of close to £661bn and economic output (GVA) valued at just over £207bn over the next 8 years.

Output is predicted to continue to grow across most sectors - with vehicles and other transport equipment demonstrating the strongest growth.

However, four sectors—fuels, chemicals, pharmaceuticals and computer/electronic equipment—would be likely to see a decline in output and the shedding of jobs.

Reducing Investment in 4IR

Should manufacturers choose to slow down their investment in digitization (with the projections based on manufacturers spending 11.8% less than currently expected) modelling suggests that this would result in a 10% reduction in total turnover below the “business as usual” scenario.

The effect on Gross Value Added (GVA) would also be similar, reducing by an estimated 10.1%. Those heaviest hit are predicted to be basic metals and metal products (which could see a 16.9% reduction in GVA) alongside rubber, plastics and non-metal products; vehicles and other transport; and other manufacturing.

Employment would also be predicted to decline by 6.3% by 2026 compared with the “business as usual” scenario, equating to the loss of 164,000 direct jobs and a further 72,000 jobs lost indirectly.

Increased Investment in 4IR

Should respondents choose to build on their awareness and appetite for investment in 4IR, the outlook is promising—with the widespread adoption of 4IR technologies and processes projected to result in increased production, lower costs and improved productivity.

Key predictions are that enhanced investment in 4IR technology could grow the UK's GVA by £31.6 billion per annum, add £102 billion per annum in additional revenues for manufacturers and create an additional 101k direct jobs and 44k indirect jobs within the industry by 2026.

Sectors anticipated to see the greatest benefit are Transport Equipment (with revenues expected to grow by 25%), Other Manufacturing (24.1%) and Rubber, Plastic and other Non-Metal Products (19%.)

Other key findings

Promisingly too, the white paper reveals a widely upbeat mood within the manufacturing industry, with 83% of respondents expressing confidence in the international prospects of the sector over the next five years.

Of those expressing positivity, over half point to buoyant domestic demand for their products, with almost as many again citing strong international demand. Of those who indicated a lack of confidence, 80% cited the potentially negative impact of Brexit, as well as fears about skill shortages and cost pressures.

Of respondents who have invested in 4IR, 51% report improvements in their productivity, benefits in terms of cost reductions and the freeing up of their staff to focus on higher-value activities. However, 23% of manufacturers say they are still unconvinced by the return on investment in new technologies.

In a recent address to the All Parliamentary Group on 4IR, Digital Minister, Matt Hancock, commented: “The risk is not that we adopt new technologies that destroy jobs. The risk to jobs comes from not adopting new technologies.”

Looking forward then, what initiatives would be best placed to help the UK manufacturing industry step up and embrace the 4IR challenge?

When respondents were asked what would help them to start investing, or to invest more, 36% cited the availability of more government funding, 35% said they would value additional information about the benefits and return on investment (ROI), and 33% said they would be positively influenced by a reduction in the cost of 4IR solutions.

Clearly then, the availability of greater support—whether it be in terms of financing, education and implementation—is going to be crucial in helping to accelerate the UK manufacturing industry’s much-needed investment in 4IR.