Better supply chains could boost manufacturing economy by £30bn

A report, based on research by management consultants AT Kearney and published by the CBI, reveals how an underinvestment in R&D, coupled with a skills crisis and weak industries is costing the manufacturing industry billions of pounds in lost profits every year.

The CBI would like to see the government tackle this by strengthening supply chains and focusing on innovation, which will lead to better-quality products and better customer service.

Among the measures the business group is calling for are:

  • Setting a long-term target for public and private sector spending on R&D to rise to 3 per cent of GDP
  • Widening the R&D tax credit to support the later stages of the commercialisation and manufacture of innovative British products
  • Doubling spending on the UK’s innovation agency, Innovate UK, over the course of the next parliament
  • Financially incentivising science, technology, engineering and mathematics (STEM) degrees, and ensuring more graduates take up jobs in these sectors
  • Creating a national materials strategy, as part of our industrial strategy, to protect and enhance critical supply chain sub-sectors.
“The molten metals of manufacturing have long coursed through the veins of our economy. Optimism within industry is now rising at a strong rate, and investment intentions are on the up. But it’s time for some fresh thinking, says Katja Hall, CBI deputy director-general.

“We need to see a bold strategy that breathes new life into our supply chains, and makes the UK the destination of choice for manufacturing high value products.”

This could provide a £30bn boost to the economy, and create half a million extra jobs, according to Hall. 

She points to Britain’s neighbours, such as France, where R&D investment is 40 per cent higher than in the UK.

“We need policies which focus on creating long-term value – from increasing R&D spending to establishing a UK-wide materials strategy – to enable industry to play to its strengths and compete effectively on the world stage,” she adds. “This renaissance in British manufacturing will make it a byword for innovation and quality.”

As supply chains bear the brunt of skills shortages, the CBI is calling for action to:

  • Double the number of STEM graduates, and triple STEM apprentices
  • Ramp up female participation in manufacturing, with Davies-style targets
  • Reform the immigration system by raising the Tier 2 skilled visa cap
  • Better align skills funding with the UK’s industrial strategy.
  • Moving from being “open for business” to “hungry for business”
“As the challenges of global supply chains become better understood, companies are beginning to look beyond the headline cost to the true value. Winning will be through supply chains that drive revenue, not just striving to be the lowest cost,” says Charles Davis, strategic operations partner at AT Kearney.

“Other countries and regions in Western Europe are looking at similar trends as they seek to reinvigorate their industrial bases. As the UK is starting from behind the OECD average for R&D spending, we need to move fast if we are to win.”

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