Exploring how the manufacturing industry can build back better

The CBI was delighted to host Minister for Business and Industry, Nadhim Zahawi MP and Barclays’ Head of Manufacturing, Lee Collinson on a webinar exploring how the manufacturing sector can build back better.

The event – held in partnership with Barclays – was attended by over 90 manufacturers from across the UK, and was chaired by Tom Crotty – Chair of the CBI’s Manufacturing Council and Group Director at Ineos.

Here are some of the key takeaways from the event:

1. Manufacturing is critical to the UK’s resilience

The pandemic has served to highlight the world-leading capability of the UK’s manufacturing sector and demonstrate the importance of the sector to the UK’s resilience in times of crisis. The minister showed great appreciation for the way manufacturing firms stepped-up to the government’s drive to produce thousands of ventilators, PPE and other essential products and materials. This has shone a light on the world-leading expertise and capability of UK manufacturing.

The initial shortages of Personal Protective Equipment (PPE) and ventilators in particular – much of which are traditionally manufactured in other countries – have strengthened the case for increasing sovereign manufacturing capability in the UK.

While this is the case, the sector was hit hard by COVID-19 and has endured extremely tough trading conditions throughout the pandemic; indeed the CBI’s latest Industrial Trends Survey shows that activity remains poor as firms continue to battle against headwinds from a resurgence of the virus. Many firms have unfortunately been forced to make redundancies this year, with the impact of Covid-19 being cited as a key factor.

2. The pandemic is having an impact on how manufacturers do business

Lee Collinson from Barclays shared some insights on some trends they have seen in the sector since the onset of the pandemic. COVID-19 has seen more manufacturers either look to increase their Direct to Consumer (DTC) sales channels or move to this channel for the first time. Their 2019 report showed 73% of all manufacturers already had DTC as part of their sales mix, but the use of this channel has been increasing.

The experience of the pandemic has also led more manufacturers to think about how they can operate more effectively and strengthen their resilience. Firms are reviewing their supply chains and considering how they can avoid being over-reliant on a small number of suppliers or geographical regions. Firms are also using social distancing rules in factories to identify ways of strengthening their sustainability credentials.

3. The government is keen to work with the sector and support growth

Minister Zahawi outlined some of the measures the government is taking to support the growth of the sector and improve productivity. For example, he mentioned the government’s recent investment of £147m in the Manufacturing Made Smarter Challenge to enable more SMEs to adopt new technology and innovation, and the increase in R&D investment. The minister went on to explain how the government is working to refresh the Industrial Strategy with an emphasis on clean growth.

Members also challenged Mr. Zahawi on what was being done to reduce high energy costs for manufacturers and make it easier for them to decarbonise and support the UK’s net zero target. The Energy White Paper due for publication this Autumn could include some provisions to support manufacturers in this area. The minister added that the government wants to see delivery on net zero in this decade and that – particularly given the role of Small Modular Reactors (SMR) and renewables – manufacturers are an important part of meeting the target.

Several delegates raised concerns about the end of the Job Retention Scheme (JRS); the event took place before the Chancellor’s statement on the Winter Economic Plan, which was strongly supported by the CBI. The Minister was clear that this could not continue indefinitely or be targeted at specific sectors without causing distortions – but emphasised that the government recognised the pressures facing firms and that it was listening and keen to hear from businesses on how they are safeguarding skills.

The minister also sought to reassure delegates that the UK’s global competitiveness is a key factor influencing the UK’s policies to tackle COVID-19, adding that he is constantly asking his own officials to brief him on how other countries are managing issues. He pointed to the JRS as one area where the UK’s measures to support jobs and businesses went further than other countries – Germany’s scheme covered 70% of wages: lower than the UK’s 80%. He added that the UK’s Eat Out to Help Out scheme had been a huge boost to business throughout the summer.

4. A negotiated Brexit is essential

CBI surveys have showed that many businesses are just not able to prepare for Brexit in the midst of a pandemic, and many delegates at the event made this clear through their questions to the minister.

The minister stated that a negotiated Brexit deal remains the government’s priority and is still possible. He was also keen to highlight progress in other aspects of the UK’s international trade policy, explaining how manufacturing will be a key beneficiary of the recently announced trade deal with Japan.

Get involved…

The CBI is keen to get under the skin of what building ‘back better’ looks like for the manufacturing sector. We are planning to set up a small working group tasked with developing some ideas and recommendations that will shape CBI thinking and potentially be put to government. The group is open to any CBI member with an interest in the future of UK manufacturing, but numbers will need to be restricted to enable a free-flowing discussion.

If you are interested in getting involved with the working group then please get in touch.