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Improving the world through engineering
ENGINEERED
IN BRITAIN
MANUFACTURING
A SUCCESSFUL
ECONOMY?
THE RESULTS OF THE
2014 ENGINEERED
IN BRITAIN SURVEY
REFLECT MUCH OF THE
CONFIDENCE BEING
REPORTED IN THE MEDIA
IN RECENT MONTHS.
This is the fourth year of the Institution’s
Engineered in Britain campaign, which aims
to promote the value of engineering and
manufacturing to the health and wealth of the
UK’s economy.
This report builds on the results of previous
surveys, and aims to ascertain the perceptions of
Manufacturers and the Public towards the value,
role and input of Government in the growth of this
valuable economic sector.
This report has been produced in the context
of the Institution’s strategic themes of energy,
environment, education, manufacturing,
transport and its vision of ‘Improving the world
through engineering’.
Published May 2014.
Design: teamkaroshi.com
Image credits: cover: © Vincenzo Lombardo/Getty Images;
page 2: © Peter Luckhurst; page 4: © Nissan;
page 6: © btrenkel/ iStockphoto; page 16: © Tom Luddington;
page 24: © rramirez125/iStockphoto.
02
FOREWORD
17
SKILLS AND
EDUCATION
05
EXECUTIVE
SUMMARY
07
POLITICAL
25
GLOBALISATION AND
COMMERCIALISATION
37
REFERENCES
CONTENTS
What a difference a year makes. When the
Institution published its 2013 Engineered in
Britain survey, many were questioning the future
prospects of the UK economy and its ability to
move forward and grow. The Office for Budget
Responsibility had revised the 2013 economic
forecast downwards by 50%, and the IMF’s half-
yearly assessment was asking Government to
consider reining back on its austerity plan.
Today, the nation’s economic forecast looks very
different. The economy is demonstrating strong
growth in many sectors (2013 GDP reaching
1.8%, with forecasts for 2014 now being 2.7%),
unemployment is slowly coming down (200,000
drop in 2013) and inflation remains under
control. UK manufacturing has also recorded a
1.3% growth in the first quarter of 2014, with
companies currently adding 10,000 new jobs
each month.
However, we cannot become complacent about
the current good fortunes of the UK. There are still
many situations which could stall the recovery,
most notably the economic uncertainty in Europe,
the United States and China.
The results of the 2014 Engineered in Britain
survey reflect much of the confidence being
reported in the media over recent months.
Both the Public and Manufacturer polls have
become more positive about the future of
our manufacturing capability, and the efforts
undertaken by Government to ensure a sustained
future for this vital sector.
For the Institution and its members, this is an
encouraging position. However, our continuing
long-term concern is the lack of new engineers
and technicians entering the profession. Quite
simply, the UK needs to double the amount of
people entering the profession each year for
the next decade just to keep up with projected
demand from industry. If the UK lacks the
engineering talent, companies will have little
choice but to recruit overseas or, more worryingly,
move their facilities to nations which do have an
adequate supply of engineers and technicians.
Another concern for the Institution is the low-
level adoption of new materials and technologies
by UK manufacturing. The advancements by the
UK’s academic research into new composites and
nanotechnologies have not been translated in
any significant way to the nation’s manufacturing
sector. By contrast, countries such as China, South
Korea and the United States are investing billions
of dollars in exploiting these new technologies. It
is our belief that Government needs to work with
industry and encourage the exploitation of these
new materials and technologies to ensure the
UK can capture a large proportion of these future
markets before it is too late.
The following Engineered in Britain survey is
based on two sets of research conducted in
April 2014. The first survey was conducted by
MSS Research and gathered the views of 1,000
senior professional engineers working in the
UK’s manufacturing sector. The second survey
was conducted by ICM Research and focused
on the views of 1,000 members of the general
population on issues surrounding the UK’s
manufacturing sector.
Finally, in 2014 the Institution has partnered
with BDO LLP in producing this report. This
partnership allows us to report the results with
a broader perspective, allowing some economic
analysis and insight from one of the country’s
leading accounting firms.
FOREWORD
Patrick Kniveton BSc (Hons)
MBA CEng FIMechE FIET
President, Institution of
Mechanical Engineers
02 Engineered in Britain: Manufacturing a Successful Economy?
BDO FOREWORD
This year’s ‘Engineered in Britain’ survey is
extremely encouraging for the UK manufacturing
sector and suggests that the Government’s drive
to support manufacturing is beginning to have
some effect.
The survey shows that 48% of manufacturers
and 33% of the public believe the Government is
committed to creating a more balanced economy
by growing UK manufacturing. Sentiment, whilst
still below 50%, is becoming more positive by the
year – particularly amongst manufacturers. Whilst
an increasing baseline is obviously positive, the
fact that over 50% of manufacturers are still not
convinced of the Government’s commitment
to manufacturing is a concern but also an
opportunity for further improvement.
Increasing exports is one of the policies central to
the Government’s manufacturing policy. But only
a fifth of manufacturers (21%) believe that George
Osborne’s target of doubling UK exports by 2020
is realistic. The November 2013 CBI/BDO study
Go Your Own Way revealed that 69% of SME
exporters were unaware of UK Trade & Industry
and two thirds had not heard of UK Export
Finance. If these are the figures for companies
which are already exporting, then there is clearly
a significant lack of awareness amongst UK
businesses about help available to them.
With 89% of respondents believing the UK is
currently not producing enough engineers to
sustain the sector, it is perhaps the lack of talent
available which is the true inhibitor to the growth
of UK manufacturing. Whilst businesses can do
some of the leg work to help train apprentices
into skilled engineers, there needs to be a
concerted drive to encourage school age children
to study STEM subjects through to further and
higher education.
Labour costs remain one of the primary
reasons for companies to choose to offshore
manufacturing. In the 2014 survey, of those
manufacturers that are offshoring, 73% said
that this was to save on labour costs. However,
many companies are now choosing to re-shore
their previously offshored operations. 59% of
respondents in this year’s survey were re-shoring
as they believed UK skills were better than those
on foreign shores, further emphasising the need to
nurture future engineering talent. The reason why
companies’ offshored operation in the first place
was to help them succeed within a competitive
business environment. The onus therefore remains
on the Government to ensure that policy supports
the most competitive business environment
possible within our country.
The desire to innovate is clearly at the heart of
the majority of manufacturers’ strategies: 54%
of manufacturers believed that further reform
of R&D tax benefits was the single biggest
improvement the Government could make to
encourage more innovation and development.
As with the promotion of exporting, simply
promoting the current benefits of R&D tax credits
to manufacturers may be enough: just 4% of SME
businesses filed claims for R&D tax credits in
2012 according to the HMRC suggesting many
manufacturers are still missing out.
The survey shows that manufacturers and the
public are broadly confident about the future
for UK manufacturing and that the structures
and support being provided by the Government
are welcomed and having a positive effect.
We would very much like to see a long term
cross party strategic framework established
for manufacturing – but the survey shows that
the Government has taken many of the right
first steps in re-balancing the economy back
towards manufacturing.
BDO is delighted to partner with the Institution
in producing this report which we hope will be
a valuable addition to the perspective that UK
Manufacturing is back and confident of its future.
Tom Lawton
Head of Manufacturing,
BDO LLP
03www.imeche.org/engineeredinbritain
41% OF THE
MANUFACTURERS
POLLED INDICATED
SUPPORT FOR CURRENT
MANUFACTURING POLICY,
UP FROM 26% IN 2013.
04 Engineered in Britain: Manufacturing a Successful Economy?
The 2014 Engineered in Britain survey
examines the health of UK manufacturing from
three perspectives:
•	 Political: how are the actions and attitudes
of Government impacting on the state of the
nation’s manufacturing sector?
•	 Skills: do we have the right people with
the skills needed to develop the UK’s
manufacturing sector today, and in the future?
•	 Globalisation and commercialisation: where
does the UK’s manufacturing sector stand
against other nations?
The report compiles information from two surveys.
The first is 1,000 senior engineers working in
UK manufacturing (Manufacturers). The second
explores the views of 1,000 members of the
public (Public), and their attitudes towards the
nation’s manufacturing sector. Where possible,
the report reflects on historical data gathered from
previous surveys.
Political
The overall 2014 Engineered in Britain results
reflect the current positive mood in the UK
towards our economic situation. Both Public and
Manufacturer polls recorded a growing belief that
Government was committed to a more balanced
economy compared to results over the last four
years. Furthermore, 41% of the Manufacturers
polled indicated support for current manufacturing
policy (up from 26% in 2013). Of the main political
parties, Conservative manufacturing policy was
the clear favourite with Manufacturers.
On individual policy areas, support for transport,
environment and energy policy have all declined
since the 2013 report, possibly reflecting some
of the well-publicised issues that the current
administration has experienced in these areas,
for example the ongoing HS2 debate, flooding and
electricity pricing.
On the Chancellor’s well-publicised aim to double
UK exports to £1tn by 2020, 64% of Manufacturers
felt the target was unrealistic.
EXECUTIVE
SUMMARY
Skills
Although over one third of Manufacturers polled
indicated that their companies were currently
recruiting engineers and technicians, an
overwhelming majority (89%) did not believe the
UK was producing enough engineers to sustain
the country’s future economic growth. This view
reflects well-publicised concerns from many
organisations about a looming shortage of science,
technology, engineering and maths (STEM)
professionals in the UK over the coming decades.
Of continuing concern in both polls is the poor
state of careers advice provided to the next
generation, with only 19% of the Public and 13%
of Manufacturers believing Government was
doing enough to provide adequate STEM advice
to students.
On recruitment of engineers and technicians, 35%
of Manufacturers polled felt science and maths
skills were lacking in new recruits, with 32% also
noting a poor work ethic in many.
Globalisation and Commercialisation
Results of the 2014 report continue to indicate a
greater number of companies offshoring activity
(17%), compared to those choosing to reshore
(11%). Justification for this trend indicates cost as
the main driver to offshore, with a reduction in
manufacturing unit costs (71%) and labour costs
(73%) two commonly cited reasons. However,
the decision to reshore was more often based on
quality of production, with 72% citing quality of
manufacturing and 59% indicating better skills in
the workforce as the reasons to reshore.
Looking towards the future, 85% of Manufacturers
polled believed the composite materials sector
would see strong growth in the next decade, with
biomedical industries (79%) and construction
(73%) close behind.
With two national debates, on Scottish
independence and the UK’s position within the
European Union, currently under way, both
groups were asked if they felt the uncertainty
created by these referendums was having any
effect on UK manufacturing. On Scotland, 44%
of Manufacturers and 27% of the Public believed
it was having a negative effect on the sector.
Similarly, 52% of Manufacturers and 44% of the
Public believed the uncertainty surrounding EU
membership was having a negative impact on
the sector.
05www.imeche.org/engineeredinbritain
61% OF MANUFACTURERS
WERE NOW MORE
POSITIVE ABOUT THE
FUTURE OF THE SECTOR
COMPARED TO 28%
IN 2011.
06 Engineered in Britain: Manufacturing a Successful Economy?
Since the financial meltdown of 2008, all the
main political parties have stated the need for
the UK to increase its manufacturing capability
and export more goods[1]
. Indeed, it has become
almost routine for senior politicians to visit
manufacturing facilities in order to be seen as
protectors and promoters of this vital sector.
Government’s visible and vocal support for
manufacturing has been reflected in the results
of the 2014 EIB surveys, with both the Public and
Manufacturers reporting a growing belief that
Government is committed to a more balanced
economy (Q1). More significantly, not only did 48%
of the Manufacturers agree with this statement
(37% in 2013), but 41% (26% in 2013) believe
current Government policies are also helping the
sector (Q2).
The Conservative Party will also be satisfied to
note that of all the mainstream political parties,
40% of the Manufacturers stated that their
policies were best for the sector (Q6), well ahead
of the 5% support for the Labour Party and 3%
support for the Liberal Democrats.
Additional positive reaction to Government policy
is seen in Q5a, where 61% of the Manufacturers
were now more positive about the future of the
manufacturing sector compared to only 28% in
2011. Although the Public poll (Q5b) was less
enthusiastic about the future of manufacturing
(15% more confident, with 50% believing it
remains the same), there was a significant drop in
people expressing ‘less confidence’ for the future
of the sector (down from 45% in 2013 to 22%
in 2014).
However, 76% of Manufacturers and 50% of the
Public still believe that, overall, Government
is more committed to the financial sector (Q3).
With the public’s continuing criticism of the
banking sector, the challenge for all political
parties is to balance their support more equally
between the financial and manufacturing sectors,
both of which are essential for the UK’s future
economic wellbeing.
Question 4 asked the Public and Manufacturer
groups for their views on a range of Government
policy areas. The results reflect strongly the
current mood of the nation, with a range of
positive results on a number of economic
factors. Most notable was the upward swing for
Government on its management of the economy,
up from 19% to 34% (Public), and from 31% to
58% (Manufacturers).
However, in areas such as transport, energy
and environment, three policy areas where
Government has had several high-profile issues
in recent months (HS2, electricity pricing and
flooding being examples), all have seen a decline
in support. For all three of these areas, the
Institution has publicly advocated the need for
long-term, cross-party planning to be agreed and
implemented, instead of the current short-term
political decision-making. In areas such as climate
adaptation or infrastructure development, the UK
economy needs future proofing and confidence
that projects will happen, and not to be blocked
by political concerns over the results of the
next election.
Finally, in 2012 the Chancellor, Rt Hon George
Osborne, announced his target to double UK
exports to £1tn by 2020[2]
. When polled on
this target, 64% of Manufacturers felt this
was unrealistic (Q7), as few incentives or
initiatives had been introduced to make this
target achievable.
POLITICAL
07www.imeche.org/engineeredinbritain
2011 201420132012
35
31
37
48
49
26
24
33
Q1 	 The Government is committed to creating a more
balanced economy by growing UK manufacturing?
■	Manufacturers
■	Public
08 Engineered in Britain: Manufacturing a Successful Economy?
2011 201420132012
26
41
24
20
19
34
23
19
Q2 	 The Government’s policies are
helping UK manufacturers?
■	Manufacturers
■	Public
09www.imeche.org/engineeredinbritain
201420132012
80
86
76
50
51
56
Q3 	 The Government is more committed to the financial
sector than to the manufacturing sector?
■	Manufacturers
■	Public
10 Engineered in Britain: Manufacturing a Successful Economy?
Education and Skills The Economy
Manufacturing Policy Environmental Policy
Energy Policy Transport Policy
Taxation Regulation
2011 2012 2013 2014 2011 2012 2013 2014
2011 2012 2013 2014 2011 2012 2013 2014
2011 2012 2013 2014 2011 2012 2013 2014
2011 2012 2013 20142011 2012 2013 2014
13
20
39
31
21
25
34
25
12
17
26
25
16
19
21
19
40
23
18
21
3235
29
21
17
19
22
32
21
1817
21
24 26
18
15
18
23
18
14
29
34
26
18
21
27
32 34
31
58
34
19
2731
14
30
19
18
Q4 	 How well is the Government performing in
each of the following policy areas?
■	Manufacturers
■	Public
11www.imeche.org/engineeredinbritain
Same
25
36
38
42
Don't Know
1
1
2
2
Less
13
35
23
18
More
61
28
37
382011
2012
2013
2014
Q5a 	 Have you become more or less confident about the future
	 of manufacturing since the Government came to power?
Manufacturers only
12 Engineered in Britain: Manufacturing a Successful Economy?
Don't Know
6
11
13
Less
43
45
22
Same
41
34
50
More
10
11
15
2012
2013
2014
Q5b 	 Have you become more or less confident about the future
	 of manufacturing since the Government came to power?
Public only
13www.imeche.org/engineeredinbritain
40
5
3
3
28
21
Conservative
Labour
Liberal Democrats
Other
None
Don’t know
Q6 	 Which political party do you feel has the best
policies to support UK manufacturing?
Manufacturers only
14 Engineered in Britain: Manufacturing a Successful Economy?
Unrealistic
Neither realistic
or unrealistic
Don’t know
Realistic
64
11
4
21
Q7 	 How realistic is George Osborne’s target
of doubling UK exports by 2020?
Manufacturers only
15www.imeche.org/engineeredinbritain
89% OF MANUFACTURERS
DID NOT THINK THE UK
WAS PRODUCING ENOUGH
ENGINEERS TO SUSTAIN
THE NATION’S FUTURE
ECONOMIC GROWTH.
16 Engineered in Britain: Manufacturing a Successful Economy?
SKILLS AND
EDUCATION
It is estimated that the UK needs to double the
number of engineers entering the profession
each year between now and 2020 to meet
expected economic demand and counter the
increasing number of engineers retiring from the
profession[3]
. To achieve this, the UK will need to
increase its annual engineering graduate output
every year from current levels of just 46,000 to
87,000, while the number of qualified apprentices
needs to increase from 27,000 to 69,000 over the
same period[3]
.
Although efforts to increase entrants into the
Science, Technology, Engineering and Maths
(STEM) professions by Government and industry
have improved in recent years, especially in the
provision of apprenticeship positions[4]
, concerns
remain about the lack of co-ordinated action
between all parties, at all levels, to address
this problem. This concern is highlighted in
Q12, where an overwhelming majority (89%)
of Manufacturers did not think the UK was
producing enough engineers to sustain the
nation’s future economic growth.
A key area of concern for the Institution of
Mechanical Engineers on why we are not
increasing the future pipeline of engineers and
technicians, is the lack of high-quality careers
advice in schools[5]
. This concern is reflected by
both polls in Q8, where only 13% of Manufacturers
and 19% of the Public felt Government was
doing enough to provide adequate STEM advice
at schools.
In most areas of the country, there are insufficient
connections between schools and local industry
to educate and inform students of the different job
opportunities available to people who decide to
study STEM subjects. Indeed, the commitment for
schools to provide comprehensive careers advice
has been reduced since the 2011 Education Act[6]
.
Without a guaranteed future pipeline of skilled
engineers and technicians, the manufacturing
sector will need to either import the required
talent, or export their facilities to nations where
engineers are in supply.
The Institution believes strongly that the drive
to cut costs within the education budget is
building a future skills crisis. It is important that
schools and local industry collaborate to inform
students of the opportunities available, and the
qualifications and skills required to enter STEM
professions. Some excellent examples (MBDA and
JCB) of education/industry collaboration do exist.
This should be replicated nationwide.
Focusing on the manufacturing sector itself,
Q9 sought to establish if manufacturers were
currently recruiting apprentices or engineers,
with over 38% and 37% respectively responding
positively. Asking the Manufacturers what
incentives would encourage them to employ more
apprentices or engineers (Q10), the results were
fairly spread across the options provided. Only
a reduction in the minimum wage (5%) garnered
little support. A reduction in Corporation Tax
(54%) was the most popular option.
However, the Institution was concerned to find
that 35% of Manufacturers felt that the maths
and science skills of new recruits were lacking,
and 32% felt recruits had a poor work ethic
(Q11). Although the economy is currently on a
growth trajectory, unemployment of under-25s
still remains above 900,000[7]
. It is, therefore,
disappointing that some of those polled felt that a
commitment to work was lacking in new recruits.
17www.imeche.org/engineeredinbritain
No
Yes
2014
2013
65
73
13
13
Q8a 	 Do you think the Government is doing enough with careers advice
	 to promote science, engineering and manufacturing in schools?
Manufacturers only
18 Engineered in Britain: Manufacturing a Successful Economy?
No
Yes
2014
2013
13
55
34
19
Public only
Q8a 	 Do you think the Government is doing enough with careers advice
	 to promote science, engineering and manufacturing in schools?
19www.imeche.org/engineeredinbritain
Yes
No
Don’t know
37
28
35
Yes
No
Don’t know
34
28
38
Q9a	 Is your company currently
recruiting engineering apprentices?
Q9b	 Is your company currently recruiting
Chartered or Incorporated engineers?
Manufacturers only
Manufacturers only
20 Engineered in Britain: Manufacturing a Successful Economy?
2011 2012 2013 2014
14 12 9
5
Reduction in the minimum wage
Training levy fund
2011 2012 2013 2014
50
55
63
53
National Insurance breaks
2011 2012 2013 2014
58
64
56
50
£3,000 for any person who
completes their apprenticeship
2011 2012 2013 2014
53
5858
63
Reduction in Corporation Tax
2011 2012 2013 2014
53
61 60
54
Q10	 Which of the following incentives from Government
do you think would encourage your company to
	 take on more apprentices or engineers?
Manufacturers only
21www.imeche.org/engineeredinbritain
Work ethic
Good maths and science
Design skills
Communication skills
Leadership
Practical skills
Management skills
65
71
53
57
44
53
43
42
38
45
35
36
32
38
2013
2014
Q11	 In your experience, do you find that apprentices, graduates
and new recruits lack any of the following skills?
Manufacturers only
22 Engineered in Britain: Manufacturing a Successful Economy?
89
04
07
Don’t know
No
Yes
Q12	 Do you think the UK is producing enough engineers
to sustain the UK’s future economic growth?
Manufacturers only
23www.imeche.org/engineeredinbritain
64% OF MANUFACTURERS
FELT THE CHANCELLOR’S
TARGET TO DOUBLE
EXPORTS BY 2020 WAS
UNREALISTIC.
24 Engineered in Britain: Manufacturing a Successful Economy?
GLOBALISATION AND
COMMERCIALISATION
Manufacturing contributes £6.7tr to the global
economy with the UK one of the world’s top ten
manufacturers. The sector makes up 10% of UK
GVA, 54% of UK exports and directly employs
2.5 million people. Despite the sector’s decline
since the 1970s, when manufacturing contributed
25% of UK GDP, we rank second globally in
aerospace, our automotive industry exported a
record-breaking 84% of its production in 2011, and
the chemical and pharmaceutical industries add
£20m per day to the nation’s balance of trade[8]
.
Future scoping, Manufacturers were asked
which industries or sectors they believed would
see the highest growth in the next ten years
(Q16). Although aerospace and automotive both
ranked highly, it was composite materials (85%),
biomedical industries (79%) and construction
(73%) which took top spots.
The results reflect previous work by the Institution
on sectors where the UK economy could establish
substantial global market share, if industry and
Government worked better together to exploit the
national expertise and opportunity. For instance,
in biomedical industries (a global market of
$325bn in 2011), the UK ranks second only to the
United States in value and innovation. Indeed, this
is the fastest growing sector in the life sciences,
with sales predicted to outgrow pharmaceuticals
within the next ten years.
Equally, the UK is a pioneering nation in the
development of composite and nanotechnologies.
However, although the UK advances materials
research (graphene as an example), our application
from lab to industry and commercial use is falling
behind other nations. As an example, Samsung in
South Korea alone has applied for as many patents
for graphene as the rest of the world combined,
excluding USA and China, and over eight times
more than the whole UK manufacturing sector.
Offshoring vs Reshoring
Over the last two years, there has been a small
but growing trend of companies choosing to
reshore their manufacturing capability back to the
UK. Although this is a positive step, 17% of the
Manufacturers stated that their companies were
still offshoring capacity, albeit down from 29% in
2013 (Q13). The main reasons stated for offshoring
(Q14a) were manufacturing unit costs (71%),
labour costs (73%) and to gain access to certain
markets (73%).
However, of the Manufacturers who stated their
companies were reshoring (11% – Q13), 72% cited
quality of manufacturing, 59% better skills in the
UK and 47% maintaining unit costs. The results
reflect research conducted by the Manufacturing
Advisory Service in 2013[9]
, which showed that the
initial cost benefits in staffing and manufacturing
are often not sustained, due to the poorer levels of
engineering skills overseas, and therefore quality
of the finished product.
As stated in the Government section of the
report (Q7), the Chancellor has set a target to
double exports by 2020. When asked what single
Government measure or initiative could help their
companies export more (Q18), tax relief (17%),
UK finance to help exporting (17%) and more
relationship building with other nations (12%)
were the most popular answers.
Scotland and Europe
Finally, the UK is currently undertaking two
debates on its future. The first and most
immediate is the Scottish independence
referendum in September 2014. When asked
if uncertainly surrounding the referendum
was having a positive or negative effect on UK
manufacturing (Q22), 44% of Manufacturers
and 27% of the Public polled a negative view.
Similarly, the ongoing debate on membership of
the EU (Q21) polled a 52% negative impact with
Manufacturers, a view shared by 44% of the
Public polled.
25www.imeche.org/engineeredinbritain
2014
2013
Offshoring
Reshoring
Don’t know
N/A
11
2
76
17
28
209
51
Q13	 Is your company reshoring or offshoring
its manufacturing capability?
Manufacturers only
26 Engineered in Britain: Manufacturing a Successful Economy?
33
27
21
21
73
18
16
14
20
11
10
10
73
5
71
6
71
49
28
33
Manufacturing in the region we sell
Access to certain markets
Intellectual property rights
Quality of manufacturing
Life maintenance costs
Labour costs
Energy costs
Exchange rates
Shipping costs
Maintaining unit costs
2013
2014
Q14a	 If offshoring, what is
	 the reason for this?
Manufacturers only
27www.imeche.org/engineeredinbritain
59
7
UK skills better
23
15
Life maintenance costs
16
15
Energy costs
39
18
Exchange rates
40
28
Shipping costs
48
30
Maintaining unit costs
47
32
Intellectual property rights
72
52
Quality of manufacturing
2013
2014
Q14b	If reshoring, what is
	the reason for this?
Manufacturers only
28 Engineered in Britain: Manufacturing a Successful Economy?
69
11
13
07
Don’t Know
Neither
Helping
Damaging
Q15	 Is overseas investment into the UK’s manufacturing sector
helping or damaging British manufacturing companies?
Manufacturers only
29www.imeche.org/engineeredinbritain
Composite materials
85
Biomedical
79
Construction
73
Aerospace
69
Electronics
67
Automotive
62
Plastics
42
Food and drink
39
Chemical
36
Defence
25
Steel
20
Textile
15
Q16	 Which of the following UK manufacturing sectors do you
believe will see the highest growth in the next 10 years?
Manufacturers only
30 Engineered in Britain: Manufacturing a Successful Economy?
Don’t know
None of these
RD tax benefits
Higher Capital Allowances
Simpler funding options
Better access to High Value
Manufacturing Catapult Centre
23
5
4
6
54
8
Q17	 What single improvement to Government initiatives
would encourage more innovation and development?
Manufacturers only
31www.imeche.org/engineeredinbritain
Don’t know
Tax relief
Guidance on best business
practice in other countries
None of these
More relationship building
with other nations – UKTI
UK finance for exports
Peer-to-peer workshops
so manufacturers can
learn from each other
17
17
12
8
5
18
24
Q18	 What single Government measure would help or
encourage your company to export more?
Manufacturers only
32 Engineered in Britain: Manufacturing a Successful Economy?
2014
50 Europe
36 North America
33 Asia (excl India  China)
31 China
28 India
24 Oceania
23 South America
22 Africa
2013
76
66
64
55
56
56
53
50
50
36
23
22
28
33
31
24
Q19	 Which of the following are your company’s
current overseas trading markets?
Manufacturers only
33www.imeche.org/engineeredinbritain
56 47
35
25
22
32
30
31
25
2014
56 UK
47 Europe
35 North America
32 Asia (excl India  China)
31 China
30 India
25 Oceania
25 South America
22 Africa
Q20	 Which of the following do you envisage will be your
company’s main trading markets in 2020?
Manufacturers only
34 Engineered in Britain: Manufacturing a Successful Economy?
Negative
Positive
No effect
Don’t know
09
20
07
32
27
08
53
44
2014
2013
Don’t know
Negative
Positive
No effect
05
04
24
11
61
36
07
52
2014
2013
Q21	 Do you think the uncertainty surrounding
the UK’s future in the EU is having a positive
	 or negative effect on UK manufacturing?
■	Manufacturers
■	Public
35www.imeche.org/engineeredinbritain 35www.imeche.org/engineeredinbritain
Negative
Positive
No effect
Don’t know
07
28
38
27
Negative
Positive
No effect
Don’t know
02
47
07
44
Q22	 Do you think the uncertainty surrounding the
Scottish independence vote is having a positive
	 or negative effect on UK manufacturing?
■	Manufacturers
■	Public
36 Engineered in Britain: Manufacturing a Successful Economy?
REFERENCES
1	
PM speech on exporting and growth, 10/11/11
www.gov.uk/government/speeches/prime-ministers-speech-
on-exporting-and-growth
2	
Can British business double exports by 2020?, 1/5/14
www.telegraph.co.uk/finance/economics/10439497/
Can-British-business-double-exports-by-2020.html
3	
Double the number of engineering graduates and
apprentices, 3/12/13
www.engineeringuk.com/View/?con_id=360
4	
UK apprenticeships rise above half million mark as
engineering positions jump, 1/2/13
www.growthbusiness.co.uk/news-and-market-deals/
business-news/2164536/uk-apprenticeships-rise-above-half-
million-mark-as-engineering-positions-jump.thtml#sthash.
FVpzks7E.dpuf
5	
Joined-up action will close the skills gap, 28/11/13
www.imeche.org/news/institution/joined-up-action-will-
close-the-skills-gap
6	
Most schools ‘have reduced careers advice’, 23/11/12
www.bbc.co.uk/news/education-20452398
7	
UK unemployment falls by 125,000 to 2.34 million, 19/2/14
www.bbc.co.uk/news/business-26255696
8	
High value manufacturing, 11/4/14,
www.innovateuk.org/high-value-manufacturing
9	
One in six UK manufacturers reverse offshoring
in growing trend, 25/11/13
www.ft.com/cms/s/0/7e736f90-539e-11e3-9250-
00144feabdc0.html#axzz30SgH4zMh
www.imeche.org/engineeredinbritain
Institution of
Mechanical Engineers
1 Birdcage Walk
Westminster
London SW1H 9JJ
T	+44 (0)20 7304 6862
enquiries@imeche.org
www.imeche.org
BDO LLP
55 Baker Street
London W1U 7EU
T +44 (0)20 7486 5888
www.bdo.co.uk

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EIB 2014

  • 1. Improving the world through engineering ENGINEERED IN BRITAIN MANUFACTURING A SUCCESSFUL ECONOMY?
  • 2. THE RESULTS OF THE 2014 ENGINEERED IN BRITAIN SURVEY REFLECT MUCH OF THE CONFIDENCE BEING REPORTED IN THE MEDIA IN RECENT MONTHS. This is the fourth year of the Institution’s Engineered in Britain campaign, which aims to promote the value of engineering and manufacturing to the health and wealth of the UK’s economy. This report builds on the results of previous surveys, and aims to ascertain the perceptions of Manufacturers and the Public towards the value, role and input of Government in the growth of this valuable economic sector. This report has been produced in the context of the Institution’s strategic themes of energy, environment, education, manufacturing, transport and its vision of ‘Improving the world through engineering’. Published May 2014. Design: teamkaroshi.com Image credits: cover: © Vincenzo Lombardo/Getty Images; page 2: © Peter Luckhurst; page 4: © Nissan; page 6: © btrenkel/ iStockphoto; page 16: © Tom Luddington; page 24: © rramirez125/iStockphoto.
  • 4. What a difference a year makes. When the Institution published its 2013 Engineered in Britain survey, many were questioning the future prospects of the UK economy and its ability to move forward and grow. The Office for Budget Responsibility had revised the 2013 economic forecast downwards by 50%, and the IMF’s half- yearly assessment was asking Government to consider reining back on its austerity plan. Today, the nation’s economic forecast looks very different. The economy is demonstrating strong growth in many sectors (2013 GDP reaching 1.8%, with forecasts for 2014 now being 2.7%), unemployment is slowly coming down (200,000 drop in 2013) and inflation remains under control. UK manufacturing has also recorded a 1.3% growth in the first quarter of 2014, with companies currently adding 10,000 new jobs each month. However, we cannot become complacent about the current good fortunes of the UK. There are still many situations which could stall the recovery, most notably the economic uncertainty in Europe, the United States and China. The results of the 2014 Engineered in Britain survey reflect much of the confidence being reported in the media over recent months. Both the Public and Manufacturer polls have become more positive about the future of our manufacturing capability, and the efforts undertaken by Government to ensure a sustained future for this vital sector. For the Institution and its members, this is an encouraging position. However, our continuing long-term concern is the lack of new engineers and technicians entering the profession. Quite simply, the UK needs to double the amount of people entering the profession each year for the next decade just to keep up with projected demand from industry. If the UK lacks the engineering talent, companies will have little choice but to recruit overseas or, more worryingly, move their facilities to nations which do have an adequate supply of engineers and technicians. Another concern for the Institution is the low- level adoption of new materials and technologies by UK manufacturing. The advancements by the UK’s academic research into new composites and nanotechnologies have not been translated in any significant way to the nation’s manufacturing sector. By contrast, countries such as China, South Korea and the United States are investing billions of dollars in exploiting these new technologies. It is our belief that Government needs to work with industry and encourage the exploitation of these new materials and technologies to ensure the UK can capture a large proportion of these future markets before it is too late. The following Engineered in Britain survey is based on two sets of research conducted in April 2014. The first survey was conducted by MSS Research and gathered the views of 1,000 senior professional engineers working in the UK’s manufacturing sector. The second survey was conducted by ICM Research and focused on the views of 1,000 members of the general population on issues surrounding the UK’s manufacturing sector. Finally, in 2014 the Institution has partnered with BDO LLP in producing this report. This partnership allows us to report the results with a broader perspective, allowing some economic analysis and insight from one of the country’s leading accounting firms. FOREWORD Patrick Kniveton BSc (Hons) MBA CEng FIMechE FIET President, Institution of Mechanical Engineers 02 Engineered in Britain: Manufacturing a Successful Economy?
  • 5. BDO FOREWORD This year’s ‘Engineered in Britain’ survey is extremely encouraging for the UK manufacturing sector and suggests that the Government’s drive to support manufacturing is beginning to have some effect. The survey shows that 48% of manufacturers and 33% of the public believe the Government is committed to creating a more balanced economy by growing UK manufacturing. Sentiment, whilst still below 50%, is becoming more positive by the year – particularly amongst manufacturers. Whilst an increasing baseline is obviously positive, the fact that over 50% of manufacturers are still not convinced of the Government’s commitment to manufacturing is a concern but also an opportunity for further improvement. Increasing exports is one of the policies central to the Government’s manufacturing policy. But only a fifth of manufacturers (21%) believe that George Osborne’s target of doubling UK exports by 2020 is realistic. The November 2013 CBI/BDO study Go Your Own Way revealed that 69% of SME exporters were unaware of UK Trade & Industry and two thirds had not heard of UK Export Finance. If these are the figures for companies which are already exporting, then there is clearly a significant lack of awareness amongst UK businesses about help available to them. With 89% of respondents believing the UK is currently not producing enough engineers to sustain the sector, it is perhaps the lack of talent available which is the true inhibitor to the growth of UK manufacturing. Whilst businesses can do some of the leg work to help train apprentices into skilled engineers, there needs to be a concerted drive to encourage school age children to study STEM subjects through to further and higher education. Labour costs remain one of the primary reasons for companies to choose to offshore manufacturing. In the 2014 survey, of those manufacturers that are offshoring, 73% said that this was to save on labour costs. However, many companies are now choosing to re-shore their previously offshored operations. 59% of respondents in this year’s survey were re-shoring as they believed UK skills were better than those on foreign shores, further emphasising the need to nurture future engineering talent. The reason why companies’ offshored operation in the first place was to help them succeed within a competitive business environment. The onus therefore remains on the Government to ensure that policy supports the most competitive business environment possible within our country. The desire to innovate is clearly at the heart of the majority of manufacturers’ strategies: 54% of manufacturers believed that further reform of R&D tax benefits was the single biggest improvement the Government could make to encourage more innovation and development. As with the promotion of exporting, simply promoting the current benefits of R&D tax credits to manufacturers may be enough: just 4% of SME businesses filed claims for R&D tax credits in 2012 according to the HMRC suggesting many manufacturers are still missing out. The survey shows that manufacturers and the public are broadly confident about the future for UK manufacturing and that the structures and support being provided by the Government are welcomed and having a positive effect. We would very much like to see a long term cross party strategic framework established for manufacturing – but the survey shows that the Government has taken many of the right first steps in re-balancing the economy back towards manufacturing. BDO is delighted to partner with the Institution in producing this report which we hope will be a valuable addition to the perspective that UK Manufacturing is back and confident of its future. Tom Lawton Head of Manufacturing, BDO LLP 03www.imeche.org/engineeredinbritain
  • 6. 41% OF THE MANUFACTURERS POLLED INDICATED SUPPORT FOR CURRENT MANUFACTURING POLICY, UP FROM 26% IN 2013. 04 Engineered in Britain: Manufacturing a Successful Economy?
  • 7. The 2014 Engineered in Britain survey examines the health of UK manufacturing from three perspectives: • Political: how are the actions and attitudes of Government impacting on the state of the nation’s manufacturing sector? • Skills: do we have the right people with the skills needed to develop the UK’s manufacturing sector today, and in the future? • Globalisation and commercialisation: where does the UK’s manufacturing sector stand against other nations? The report compiles information from two surveys. The first is 1,000 senior engineers working in UK manufacturing (Manufacturers). The second explores the views of 1,000 members of the public (Public), and their attitudes towards the nation’s manufacturing sector. Where possible, the report reflects on historical data gathered from previous surveys. Political The overall 2014 Engineered in Britain results reflect the current positive mood in the UK towards our economic situation. Both Public and Manufacturer polls recorded a growing belief that Government was committed to a more balanced economy compared to results over the last four years. Furthermore, 41% of the Manufacturers polled indicated support for current manufacturing policy (up from 26% in 2013). Of the main political parties, Conservative manufacturing policy was the clear favourite with Manufacturers. On individual policy areas, support for transport, environment and energy policy have all declined since the 2013 report, possibly reflecting some of the well-publicised issues that the current administration has experienced in these areas, for example the ongoing HS2 debate, flooding and electricity pricing. On the Chancellor’s well-publicised aim to double UK exports to £1tn by 2020, 64% of Manufacturers felt the target was unrealistic. EXECUTIVE SUMMARY Skills Although over one third of Manufacturers polled indicated that their companies were currently recruiting engineers and technicians, an overwhelming majority (89%) did not believe the UK was producing enough engineers to sustain the country’s future economic growth. This view reflects well-publicised concerns from many organisations about a looming shortage of science, technology, engineering and maths (STEM) professionals in the UK over the coming decades. Of continuing concern in both polls is the poor state of careers advice provided to the next generation, with only 19% of the Public and 13% of Manufacturers believing Government was doing enough to provide adequate STEM advice to students. On recruitment of engineers and technicians, 35% of Manufacturers polled felt science and maths skills were lacking in new recruits, with 32% also noting a poor work ethic in many. Globalisation and Commercialisation Results of the 2014 report continue to indicate a greater number of companies offshoring activity (17%), compared to those choosing to reshore (11%). Justification for this trend indicates cost as the main driver to offshore, with a reduction in manufacturing unit costs (71%) and labour costs (73%) two commonly cited reasons. However, the decision to reshore was more often based on quality of production, with 72% citing quality of manufacturing and 59% indicating better skills in the workforce as the reasons to reshore. Looking towards the future, 85% of Manufacturers polled believed the composite materials sector would see strong growth in the next decade, with biomedical industries (79%) and construction (73%) close behind. With two national debates, on Scottish independence and the UK’s position within the European Union, currently under way, both groups were asked if they felt the uncertainty created by these referendums was having any effect on UK manufacturing. On Scotland, 44% of Manufacturers and 27% of the Public believed it was having a negative effect on the sector. Similarly, 52% of Manufacturers and 44% of the Public believed the uncertainty surrounding EU membership was having a negative impact on the sector. 05www.imeche.org/engineeredinbritain
  • 8. 61% OF MANUFACTURERS WERE NOW MORE POSITIVE ABOUT THE FUTURE OF THE SECTOR COMPARED TO 28% IN 2011. 06 Engineered in Britain: Manufacturing a Successful Economy?
  • 9. Since the financial meltdown of 2008, all the main political parties have stated the need for the UK to increase its manufacturing capability and export more goods[1] . Indeed, it has become almost routine for senior politicians to visit manufacturing facilities in order to be seen as protectors and promoters of this vital sector. Government’s visible and vocal support for manufacturing has been reflected in the results of the 2014 EIB surveys, with both the Public and Manufacturers reporting a growing belief that Government is committed to a more balanced economy (Q1). More significantly, not only did 48% of the Manufacturers agree with this statement (37% in 2013), but 41% (26% in 2013) believe current Government policies are also helping the sector (Q2). The Conservative Party will also be satisfied to note that of all the mainstream political parties, 40% of the Manufacturers stated that their policies were best for the sector (Q6), well ahead of the 5% support for the Labour Party and 3% support for the Liberal Democrats. Additional positive reaction to Government policy is seen in Q5a, where 61% of the Manufacturers were now more positive about the future of the manufacturing sector compared to only 28% in 2011. Although the Public poll (Q5b) was less enthusiastic about the future of manufacturing (15% more confident, with 50% believing it remains the same), there was a significant drop in people expressing ‘less confidence’ for the future of the sector (down from 45% in 2013 to 22% in 2014). However, 76% of Manufacturers and 50% of the Public still believe that, overall, Government is more committed to the financial sector (Q3). With the public’s continuing criticism of the banking sector, the challenge for all political parties is to balance their support more equally between the financial and manufacturing sectors, both of which are essential for the UK’s future economic wellbeing. Question 4 asked the Public and Manufacturer groups for their views on a range of Government policy areas. The results reflect strongly the current mood of the nation, with a range of positive results on a number of economic factors. Most notable was the upward swing for Government on its management of the economy, up from 19% to 34% (Public), and from 31% to 58% (Manufacturers). However, in areas such as transport, energy and environment, three policy areas where Government has had several high-profile issues in recent months (HS2, electricity pricing and flooding being examples), all have seen a decline in support. For all three of these areas, the Institution has publicly advocated the need for long-term, cross-party planning to be agreed and implemented, instead of the current short-term political decision-making. In areas such as climate adaptation or infrastructure development, the UK economy needs future proofing and confidence that projects will happen, and not to be blocked by political concerns over the results of the next election. Finally, in 2012 the Chancellor, Rt Hon George Osborne, announced his target to double UK exports to £1tn by 2020[2] . When polled on this target, 64% of Manufacturers felt this was unrealistic (Q7), as few incentives or initiatives had been introduced to make this target achievable. POLITICAL 07www.imeche.org/engineeredinbritain
  • 10. 2011 201420132012 35 31 37 48 49 26 24 33 Q1 The Government is committed to creating a more balanced economy by growing UK manufacturing? ■ Manufacturers ■ Public 08 Engineered in Britain: Manufacturing a Successful Economy?
  • 11. 2011 201420132012 26 41 24 20 19 34 23 19 Q2 The Government’s policies are helping UK manufacturers? ■ Manufacturers ■ Public 09www.imeche.org/engineeredinbritain
  • 12. 201420132012 80 86 76 50 51 56 Q3 The Government is more committed to the financial sector than to the manufacturing sector? ■ Manufacturers ■ Public 10 Engineered in Britain: Manufacturing a Successful Economy?
  • 13. Education and Skills The Economy Manufacturing Policy Environmental Policy Energy Policy Transport Policy Taxation Regulation 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 20142011 2012 2013 2014 13 20 39 31 21 25 34 25 12 17 26 25 16 19 21 19 40 23 18 21 3235 29 21 17 19 22 32 21 1817 21 24 26 18 15 18 23 18 14 29 34 26 18 21 27 32 34 31 58 34 19 2731 14 30 19 18 Q4 How well is the Government performing in each of the following policy areas? ■ Manufacturers ■ Public 11www.imeche.org/engineeredinbritain
  • 14. Same 25 36 38 42 Don't Know 1 1 2 2 Less 13 35 23 18 More 61 28 37 382011 2012 2013 2014 Q5a Have you become more or less confident about the future of manufacturing since the Government came to power? Manufacturers only 12 Engineered in Britain: Manufacturing a Successful Economy?
  • 15. Don't Know 6 11 13 Less 43 45 22 Same 41 34 50 More 10 11 15 2012 2013 2014 Q5b Have you become more or less confident about the future of manufacturing since the Government came to power? Public only 13www.imeche.org/engineeredinbritain
  • 16. 40 5 3 3 28 21 Conservative Labour Liberal Democrats Other None Don’t know Q6 Which political party do you feel has the best policies to support UK manufacturing? Manufacturers only 14 Engineered in Britain: Manufacturing a Successful Economy?
  • 17. Unrealistic Neither realistic or unrealistic Don’t know Realistic 64 11 4 21 Q7 How realistic is George Osborne’s target of doubling UK exports by 2020? Manufacturers only 15www.imeche.org/engineeredinbritain
  • 18. 89% OF MANUFACTURERS DID NOT THINK THE UK WAS PRODUCING ENOUGH ENGINEERS TO SUSTAIN THE NATION’S FUTURE ECONOMIC GROWTH. 16 Engineered in Britain: Manufacturing a Successful Economy?
  • 19. SKILLS AND EDUCATION It is estimated that the UK needs to double the number of engineers entering the profession each year between now and 2020 to meet expected economic demand and counter the increasing number of engineers retiring from the profession[3] . To achieve this, the UK will need to increase its annual engineering graduate output every year from current levels of just 46,000 to 87,000, while the number of qualified apprentices needs to increase from 27,000 to 69,000 over the same period[3] . Although efforts to increase entrants into the Science, Technology, Engineering and Maths (STEM) professions by Government and industry have improved in recent years, especially in the provision of apprenticeship positions[4] , concerns remain about the lack of co-ordinated action between all parties, at all levels, to address this problem. This concern is highlighted in Q12, where an overwhelming majority (89%) of Manufacturers did not think the UK was producing enough engineers to sustain the nation’s future economic growth. A key area of concern for the Institution of Mechanical Engineers on why we are not increasing the future pipeline of engineers and technicians, is the lack of high-quality careers advice in schools[5] . This concern is reflected by both polls in Q8, where only 13% of Manufacturers and 19% of the Public felt Government was doing enough to provide adequate STEM advice at schools. In most areas of the country, there are insufficient connections between schools and local industry to educate and inform students of the different job opportunities available to people who decide to study STEM subjects. Indeed, the commitment for schools to provide comprehensive careers advice has been reduced since the 2011 Education Act[6] . Without a guaranteed future pipeline of skilled engineers and technicians, the manufacturing sector will need to either import the required talent, or export their facilities to nations where engineers are in supply. The Institution believes strongly that the drive to cut costs within the education budget is building a future skills crisis. It is important that schools and local industry collaborate to inform students of the opportunities available, and the qualifications and skills required to enter STEM professions. Some excellent examples (MBDA and JCB) of education/industry collaboration do exist. This should be replicated nationwide. Focusing on the manufacturing sector itself, Q9 sought to establish if manufacturers were currently recruiting apprentices or engineers, with over 38% and 37% respectively responding positively. Asking the Manufacturers what incentives would encourage them to employ more apprentices or engineers (Q10), the results were fairly spread across the options provided. Only a reduction in the minimum wage (5%) garnered little support. A reduction in Corporation Tax (54%) was the most popular option. However, the Institution was concerned to find that 35% of Manufacturers felt that the maths and science skills of new recruits were lacking, and 32% felt recruits had a poor work ethic (Q11). Although the economy is currently on a growth trajectory, unemployment of under-25s still remains above 900,000[7] . It is, therefore, disappointing that some of those polled felt that a commitment to work was lacking in new recruits. 17www.imeche.org/engineeredinbritain
  • 20. No Yes 2014 2013 65 73 13 13 Q8a Do you think the Government is doing enough with careers advice to promote science, engineering and manufacturing in schools? Manufacturers only 18 Engineered in Britain: Manufacturing a Successful Economy?
  • 21. No Yes 2014 2013 13 55 34 19 Public only Q8a Do you think the Government is doing enough with careers advice to promote science, engineering and manufacturing in schools? 19www.imeche.org/engineeredinbritain
  • 22. Yes No Don’t know 37 28 35 Yes No Don’t know 34 28 38 Q9a Is your company currently recruiting engineering apprentices? Q9b Is your company currently recruiting Chartered or Incorporated engineers? Manufacturers only Manufacturers only 20 Engineered in Britain: Manufacturing a Successful Economy?
  • 23. 2011 2012 2013 2014 14 12 9 5 Reduction in the minimum wage Training levy fund 2011 2012 2013 2014 50 55 63 53 National Insurance breaks 2011 2012 2013 2014 58 64 56 50 £3,000 for any person who completes their apprenticeship 2011 2012 2013 2014 53 5858 63 Reduction in Corporation Tax 2011 2012 2013 2014 53 61 60 54 Q10 Which of the following incentives from Government do you think would encourage your company to take on more apprentices or engineers? Manufacturers only 21www.imeche.org/engineeredinbritain
  • 24. Work ethic Good maths and science Design skills Communication skills Leadership Practical skills Management skills 65 71 53 57 44 53 43 42 38 45 35 36 32 38 2013 2014 Q11 In your experience, do you find that apprentices, graduates and new recruits lack any of the following skills? Manufacturers only 22 Engineered in Britain: Manufacturing a Successful Economy?
  • 25. 89 04 07 Don’t know No Yes Q12 Do you think the UK is producing enough engineers to sustain the UK’s future economic growth? Manufacturers only 23www.imeche.org/engineeredinbritain
  • 26. 64% OF MANUFACTURERS FELT THE CHANCELLOR’S TARGET TO DOUBLE EXPORTS BY 2020 WAS UNREALISTIC. 24 Engineered in Britain: Manufacturing a Successful Economy?
  • 27. GLOBALISATION AND COMMERCIALISATION Manufacturing contributes £6.7tr to the global economy with the UK one of the world’s top ten manufacturers. The sector makes up 10% of UK GVA, 54% of UK exports and directly employs 2.5 million people. Despite the sector’s decline since the 1970s, when manufacturing contributed 25% of UK GDP, we rank second globally in aerospace, our automotive industry exported a record-breaking 84% of its production in 2011, and the chemical and pharmaceutical industries add £20m per day to the nation’s balance of trade[8] . Future scoping, Manufacturers were asked which industries or sectors they believed would see the highest growth in the next ten years (Q16). Although aerospace and automotive both ranked highly, it was composite materials (85%), biomedical industries (79%) and construction (73%) which took top spots. The results reflect previous work by the Institution on sectors where the UK economy could establish substantial global market share, if industry and Government worked better together to exploit the national expertise and opportunity. For instance, in biomedical industries (a global market of $325bn in 2011), the UK ranks second only to the United States in value and innovation. Indeed, this is the fastest growing sector in the life sciences, with sales predicted to outgrow pharmaceuticals within the next ten years. Equally, the UK is a pioneering nation in the development of composite and nanotechnologies. However, although the UK advances materials research (graphene as an example), our application from lab to industry and commercial use is falling behind other nations. As an example, Samsung in South Korea alone has applied for as many patents for graphene as the rest of the world combined, excluding USA and China, and over eight times more than the whole UK manufacturing sector. Offshoring vs Reshoring Over the last two years, there has been a small but growing trend of companies choosing to reshore their manufacturing capability back to the UK. Although this is a positive step, 17% of the Manufacturers stated that their companies were still offshoring capacity, albeit down from 29% in 2013 (Q13). The main reasons stated for offshoring (Q14a) were manufacturing unit costs (71%), labour costs (73%) and to gain access to certain markets (73%). However, of the Manufacturers who stated their companies were reshoring (11% – Q13), 72% cited quality of manufacturing, 59% better skills in the UK and 47% maintaining unit costs. The results reflect research conducted by the Manufacturing Advisory Service in 2013[9] , which showed that the initial cost benefits in staffing and manufacturing are often not sustained, due to the poorer levels of engineering skills overseas, and therefore quality of the finished product. As stated in the Government section of the report (Q7), the Chancellor has set a target to double exports by 2020. When asked what single Government measure or initiative could help their companies export more (Q18), tax relief (17%), UK finance to help exporting (17%) and more relationship building with other nations (12%) were the most popular answers. Scotland and Europe Finally, the UK is currently undertaking two debates on its future. The first and most immediate is the Scottish independence referendum in September 2014. When asked if uncertainly surrounding the referendum was having a positive or negative effect on UK manufacturing (Q22), 44% of Manufacturers and 27% of the Public polled a negative view. Similarly, the ongoing debate on membership of the EU (Q21) polled a 52% negative impact with Manufacturers, a view shared by 44% of the Public polled. 25www.imeche.org/engineeredinbritain
  • 28. 2014 2013 Offshoring Reshoring Don’t know N/A 11 2 76 17 28 209 51 Q13 Is your company reshoring or offshoring its manufacturing capability? Manufacturers only 26 Engineered in Britain: Manufacturing a Successful Economy?
  • 29. 33 27 21 21 73 18 16 14 20 11 10 10 73 5 71 6 71 49 28 33 Manufacturing in the region we sell Access to certain markets Intellectual property rights Quality of manufacturing Life maintenance costs Labour costs Energy costs Exchange rates Shipping costs Maintaining unit costs 2013 2014 Q14a If offshoring, what is the reason for this? Manufacturers only 27www.imeche.org/engineeredinbritain
  • 30. 59 7 UK skills better 23 15 Life maintenance costs 16 15 Energy costs 39 18 Exchange rates 40 28 Shipping costs 48 30 Maintaining unit costs 47 32 Intellectual property rights 72 52 Quality of manufacturing 2013 2014 Q14b If reshoring, what is the reason for this? Manufacturers only 28 Engineered in Britain: Manufacturing a Successful Economy?
  • 31. 69 11 13 07 Don’t Know Neither Helping Damaging Q15 Is overseas investment into the UK’s manufacturing sector helping or damaging British manufacturing companies? Manufacturers only 29www.imeche.org/engineeredinbritain
  • 32. Composite materials 85 Biomedical 79 Construction 73 Aerospace 69 Electronics 67 Automotive 62 Plastics 42 Food and drink 39 Chemical 36 Defence 25 Steel 20 Textile 15 Q16 Which of the following UK manufacturing sectors do you believe will see the highest growth in the next 10 years? Manufacturers only 30 Engineered in Britain: Manufacturing a Successful Economy?
  • 33. Don’t know None of these RD tax benefits Higher Capital Allowances Simpler funding options Better access to High Value Manufacturing Catapult Centre 23 5 4 6 54 8 Q17 What single improvement to Government initiatives would encourage more innovation and development? Manufacturers only 31www.imeche.org/engineeredinbritain
  • 34. Don’t know Tax relief Guidance on best business practice in other countries None of these More relationship building with other nations – UKTI UK finance for exports Peer-to-peer workshops so manufacturers can learn from each other 17 17 12 8 5 18 24 Q18 What single Government measure would help or encourage your company to export more? Manufacturers only 32 Engineered in Britain: Manufacturing a Successful Economy?
  • 35. 2014 50 Europe 36 North America 33 Asia (excl India China) 31 China 28 India 24 Oceania 23 South America 22 Africa 2013 76 66 64 55 56 56 53 50 50 36 23 22 28 33 31 24 Q19 Which of the following are your company’s current overseas trading markets? Manufacturers only 33www.imeche.org/engineeredinbritain
  • 36. 56 47 35 25 22 32 30 31 25 2014 56 UK 47 Europe 35 North America 32 Asia (excl India China) 31 China 30 India 25 Oceania 25 South America 22 Africa Q20 Which of the following do you envisage will be your company’s main trading markets in 2020? Manufacturers only 34 Engineered in Britain: Manufacturing a Successful Economy?
  • 37. Negative Positive No effect Don’t know 09 20 07 32 27 08 53 44 2014 2013 Don’t know Negative Positive No effect 05 04 24 11 61 36 07 52 2014 2013 Q21 Do you think the uncertainty surrounding the UK’s future in the EU is having a positive or negative effect on UK manufacturing? ■ Manufacturers ■ Public 35www.imeche.org/engineeredinbritain 35www.imeche.org/engineeredinbritain
  • 38. Negative Positive No effect Don’t know 07 28 38 27 Negative Positive No effect Don’t know 02 47 07 44 Q22 Do you think the uncertainty surrounding the Scottish independence vote is having a positive or negative effect on UK manufacturing? ■ Manufacturers ■ Public 36 Engineered in Britain: Manufacturing a Successful Economy?
  • 39. REFERENCES 1 PM speech on exporting and growth, 10/11/11 www.gov.uk/government/speeches/prime-ministers-speech- on-exporting-and-growth 2 Can British business double exports by 2020?, 1/5/14 www.telegraph.co.uk/finance/economics/10439497/ Can-British-business-double-exports-by-2020.html 3 Double the number of engineering graduates and apprentices, 3/12/13 www.engineeringuk.com/View/?con_id=360 4 UK apprenticeships rise above half million mark as engineering positions jump, 1/2/13 www.growthbusiness.co.uk/news-and-market-deals/ business-news/2164536/uk-apprenticeships-rise-above-half- million-mark-as-engineering-positions-jump.thtml#sthash. FVpzks7E.dpuf 5 Joined-up action will close the skills gap, 28/11/13 www.imeche.org/news/institution/joined-up-action-will- close-the-skills-gap 6 Most schools ‘have reduced careers advice’, 23/11/12 www.bbc.co.uk/news/education-20452398 7 UK unemployment falls by 125,000 to 2.34 million, 19/2/14 www.bbc.co.uk/news/business-26255696 8 High value manufacturing, 11/4/14, www.innovateuk.org/high-value-manufacturing 9 One in six UK manufacturers reverse offshoring in growing trend, 25/11/13 www.ft.com/cms/s/0/7e736f90-539e-11e3-9250- 00144feabdc0.html#axzz30SgH4zMh www.imeche.org/engineeredinbritain
  • 40. Institution of Mechanical Engineers 1 Birdcage Walk Westminster London SW1H 9JJ T +44 (0)20 7304 6862 enquiries@imeche.org www.imeche.org BDO LLP 55 Baker Street London W1U 7EU T +44 (0)20 7486 5888 www.bdo.co.uk