Britain 2030: High-tech manufacturing set to become a quiet British success story
When it was first announced that this year’s G7 summit would be held in Cornwall, the decision was met with some raised eyebrows.
But for a government which has made the combination of “levelling-up” the UK’s regional inequalities and tackling climate change its foremost priorities, it made perfect sense.
In the last few years a raft of new mining companies have launched in England’s westernmost county, flush with bold statements of returning Cornwall to its one-time status as a literal treasure trove on the surge of interest in minerals such as lithium, key to technologies like batteries for electric cars.
Cornwall’s renaissance is just part of a vision that has emerged of the UK as a hub for high-tech modern manufacturing, where for example minerals are dug up in the south-west, turned into batteries in the northeast (hyperlink) and fed directly into the country’s existing automotive supply chain.
After years of overreliance on the massive services industry, there is more and more interest in rejuvenating the manufacturing sector – a challenge that has become still more pressing in the aftermath of Covid-19.
In recent weeks, fresh commitments by car giants Nissan and Stellantis to expand operations in this country, coupled with BEIS’ new innovation strategy, have accelerated this process.
Much of the momentum behind the push derives from the government’s plans to hit net zero by 2050, and the sheer scale of the changes that need to be made to hit that target. But these world-leading ambitions also present some massive challenges, as MakeUK policy director Verity Davidge says:
“Because of the shift to new technologies, we are seeing a very evident skills gap in those skilled trades and technician level roles, the jobs that manufacturers always say they struggle to fill.
“One of the challenges, as well as making sure firms have the access to finance, is making sure that our education and training system can keep pace”, she told City A.M..
Mark Pawsey, MP for Rugby in England’s manufacturing heartland, and one of the chairs of the parliamentary manufacturing APPG, concurs.
“What I hear from more and more businesses is that skills are the main issue”, he said. “I’ve certainly been into one or two traditional factories and seen a grey-haired workforce, so we need to bring new people through with the right skills for the challenge”.
At the moment, adds Davidge, the government’s plans for upskilling the workforce are too focused on the short-term outlook.
Read more: UK Manufacturing PMIs: Staff and parts shortages sees recovery begin to slow
But skills shortages are far from the only issue that could derail the manufacturing sector over the coming decade, as the last year has made abundantly clear.
For many firms, the combination of Covid-19 and new customs arrangements related to the UK’s departure from the EU – along with freak events such as the blocking of the Suez Canal – has shown just how vulnerable global supply chains can be.
At the start of the year, Davidge said that 60 per cent of MakeUK’s members were encountering supply chain issues, and this has prompted a change in direction for many firms, as Ben Morgan, research director at Sheffield’s Advanced Manufacturing Research Centre explains.
“I think Covid-19 has taught us that we need a more resilient economy, and resilient supply chains are a vital part of that. The last 18 months has taught us some pretty tough lessons in terms of supply chains stretching and breaking.”
However, he added that the process would be a gradual evolution, rather a rapid “onshoring” of supply chains as a knee-jerk reaction to the pandemic, although Davidge did say that about a quarter of MakeUK members were already looking at how to move supply chains back to the UK.
The issue is particularly acute in the car manufacturing industry as it seeks to quit the internal combustion engine over the next decade. At the moment, China is the world’s dominant producer of batteries for electric cars, but reliance on the eastern powerhouse will be problematic, says Faraday Institution chief economist Stephen Gifford.
In addition to geopolitical concerns, by 2026 UK cars which do not source 45 per cent of their components from the EU or UK will face tariffs when being sold into Europe, which remains the destination for more than half of all Britain’s car exports.
But difficulties remain, adds Gifford. “The problem is that the sector is growing so fast that it’s going to be difficult for the mining industry to forecast the upturn in demand, so if demand exceeds supply we could get bottlenecks and price spikes.”
Ministers seem to have accepted that sorting issues such as these will need more than just lip service, as the recent investments into Nissan and Stellantis have shown.
For some, the UK’s new state aid rules may trigger shudders at the memory of disastrous attempts in the 1970s to “pick winners”, but Davidge says that it is just one in a number of steps ministers can take to encourage investment.
She says that ministers should look to extend the annual investment allowance – a tax relief scheme for British businesses that is designated for the purchase of business equipment – for a period of five to 10 years, which would allow firms to align it with their own investment plans.
In addition, Davidge says that the research and development tax relief – which about 90 per cent of MakeUK’s members use – should be reformed to widen the scope with which companies can use it.
“If we want to be a high-tech manufacturing hub in the future, these are the sort of long-term policies the government needs to think about”, she finished.
At the same time, argues Pawsey, the government needs to take responsibility for opening up new export markets for UK firms to take advantage of in the coming years.
Pawsey, who voted Remain in the Brexit referendum, said that being able to go out and strike trade deals independently was a benefit of leaving the EU.
“I do feel that our sales effort was a little bit hidden within the EU so we left others to go out and do trade deals, and were happy to hide behind the EU. But now we have got to go out and trade on our own”, he says.
However, he adds, the effort to find new buyers for UK plc should not come at the cost of our closest trading partner.
“I’m disappointed that our levels of trade with Europe have fallen back and I think we need to do as much as we possibly can to rebuild them, and then go out and find new partners in addition.”
It is clear that much is still to be done if the government’s vision is to become a reality, but Morgan is in no doubt that the potential is there.
“The manufacturing sector has simply been forgotten for too long. Now it’s up to the government to step up, show some clear intent and put some money back into our industries.”
Read more: Lithium firm makes ‘globally significant’ find in Cornwall