Stephen Cooper, Head of Industrial Manufacturing and Automotive at KPMG in the UK, provides a perspective on the challenges and opportunities facing UK manufacturers.
It is no wonder that UK manufacturers are concerned about economic disruption. The EU has faced strong economic headwinds over the past year and concerns over the impact of a potential ‘Brexit’ likely had an impact on both domestic and foreign investment as executives waited to see what the referendum would bring.
The prospect of a continued slowdown in growth in the key emerging markets of India and China are also creating challenges for some – particularly larger multinational – UK manufacturers. And the bellicose tone of the US election campaign is creating concerns for UK manufacturers who rely on US operations or customers for growth.
At the same time, UK manufacturers have been highly focused on costs – both from a gross margin perspective and from an SG&A perspective – and many are now much more flexible and cost efficient than they were last year.
With cash being retuned through cost savings and little appetite for foreign investment (that is, until the world calms down somewhat), the big question is how UK manufacturers will use their capital to drive growth.
For some, the answer will clearly be through innovation. The UK has always had a rich heritage of excellence in production design and design capability; many clearly hope they can leverage these skills to drive new competitive advantages through R&D, particularly into automated and connected cars.
UK manufacturers may also want to consider channeling their investment capital towards improving their IT systems and architecture so that – when they are ready for more aggressive growth – they have the right foundations to compete effectively.
The UK has always been a strong, innovative and resilient manufacturing nation. With the right investment and focus, the country should continue this proud history – regardless of the size of the overall sector.
Q: What is the greatest threat to growth for manufacturers in the UK today?
Stephen: Economic uncertainty.
Q: What are UK companies doing differently do drive growth?
Stephen: Recycling IT cost out-takes into new technology.