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Thames Valley: Manufacturers want government to support investment

By Dan Teuton
23 February 2017

Help from Government to invest in new technologies and a better educated workforce top the wish list for manufacturing executives in London and the South East, according to a report from KPMG.

Over three quarters (77%) of the 109 manufacturers surveyed in the region by KPMG, which included manufacturers in the Thames Valley, said financial support from the Government was needed to help them increase investment in emerging technologies, including artificial intelligence, advanced robotics and augmented reality.

Stronger links between research institutions and the private sector and access to a better educated workforce both came a close second, with 68% of respondents stating that an improvement in the availability of skilled talent could help them increase productivity in their organisations.

Huw Brown, partner at KPMG in Reading, said: “More than three quarters of the manufacturing executives surveyed in the region named financial support from the Government as a top priority to help them boost their competitiveness and investment in R&D and prepare for the digitalisation of manufacturing. In fact some 53% of manufacturers in the region expect the amount of R&D their organisations conducts in the UK to increase over the next three years. 

"Clearly there’s an appetite to embrace emerging technologies, as highlighted in the recent industrial strategy green paper. Through this kind of funding, the UK has an opportunity to position itself as a globally attractive and competitive base for advanced manufacturing. 

“This must go hand-in-hand with a coordinated approach to train up the next generation of the workforce and deliver the skills required. With the gap between supply and demand of STEM talent in manufacturing set to widen, government, industry and educators will need to act quickly to ensure the manufacturing sector is equipped with the right skills for digitalisation. Digital scientists, digital engineers, digital architects, cyber security engineers – none of these existed 20 years ago. Having access to the right skills and investment will be crucial to ensure Britain’s manufacturing sector unlocks its full potential and remains fit to compete on the international stage.”

When asked which UK region the 205 respondents would rate as the most attractive for their business as a new investment destination London was ranked top with a fifth of respondents, with the South East coming in a close second with 18% of respondents.

Brexit may change the international trade landscape, however, the report also revealed that almost half (43 per cent) of outward investors in the region are undeterred  by the uncertainty it has created and don’t believe that it will make it harder to recruit. Less than a third (30 per cent) of respondents in London and the South East are considering relocating some of their operations out of the UK as a result of the uncertainty, while 58 per cent have no plans to move.

Karen Briggs, head of Brexit at KPMG, commented: “When our survey was carried out in January, two thirds of respondents expected the uncertainty around Brexit. However Britain’s makers are an especially resolute group. Although some are concerned about exchange rates, labour pressures and higher indirect taxation, they are also taking a range of practical measures to prepare.  These include partial relocation, supply chain management, increased business development, and new sources of financing.  UK manufacturers realise that Brexit will demand a burst of innovation from both the private and public sectors if the UK is really going to reach new global markets and deliver on its potential.”

If faced with rising costs, the majority of respondents in the region (60%) planned to make up for these by either saving costs elsewhere, or by absorbing them, while 40% expected to pass these on to the customer.

Surprisingly, regional development featured second to last on the list of priority areas that respondents would like the Government to focus on, with 63% deeming the current approach disjointed and unclear.

Andrew Morgan, senior partner at KPMG in Reading, commented: "A clear balance needs to be struck between the focus on reinvigorating regions that have low productivity, and the preference for companies to base themselves in locations where manufacturers and supply chains already exist."