Opinion

Manufacturing crisis: Watch out for the skills gap

5 min read

10 August 2012

ElringKlinger GB's managing director Ian Malcolm responds to the recent figures released on the British manufacturing industry.

Recent figures released paint a confusing picture of the current state of the British manufacturing industry. There are opportunities for the industry as a whole to grow, certainly, but we need to harness a focussed and joined up approach.

Whilst the CBI survey reported a fall in the UK’s manufacturing output, levels at ElringKlinger GB have seen a drop by around ten per cent. This is from a position that was higher than the levels in 2008. Our output has been rising consistently since 2009 and therefore some balancing has always been expected.

If the decline in export orders is reflected by value rather than volume, then the slip in the currency markets – particularly the strengthening of Sterling against the Euro – will impact this considerably; we are looking at an eight per cent swing in the Euro rate in the last 12 months.

The CBI survey also reported a fall of investment for the coming year and investment intentions for plant and machinery being at their lowest in three years – this is certainly not the case at ElringKlinger GB. Our investment plans show a 300 per cent increase against the previous five years and we are looking to invest £6m to introduce three new auto-assembly lines and two new presses to cope with demand for our new product ranges.

Cost cutting has been necessary in the manufacturing sector in order to compete with Eastern Europe and the Far East; however, these economies are now beginning to catch up. 

Businesses in the UK are seeing the benefit of reducing the supply chain and locally sourcing product and we are passing that on in our procurement strategy to support our local supply chain wherever possible. Cost cutting does not mean reducing size, it means taking out waste and making a business leaner and more sustainable in the long term – something that should be remembered in the public sector. Whilst we have reduced cost over the past four years we have continued to grow and have significant expansion plans for the next five years.

Funding is indeed much more difficult to obtain now but more so from the point of view of how long it takes for banks to respond to funding requests. We are fortunate to have group support at ElringKlinger GB, but if banks continue to block growth and investment, it is likely we will see more businesses turning to each other for lending, cutting out the middle man – i.e. the banks.

If the government continues to push British manufacturing as our way out of the current recession, then policies and funding need to be introduced to entice younger people into the industry. 

The skills gap which the industry is currently facing is a growing concern – graduates can’t get jobs, but manufacturers are struggling to attract the qualified staff they need. Business leaders need to spend their cash reserves to realise growth and invest in nurturing talent – we intend to create over 60 jobs over the next few years and are kicking this recruitment drive off with the creation of a number of ‘year in industry’ placements and new apprenticeships.

Whilst the current economic downturn may have depleted confidence levels and hold businesses back from investing, it is critical that leaders take a leap of faith. Manufacturing has evolved dramatically over the years and the emergence of new technologies means it’s an exciting time for the industry – at ElringKlinger GB we are looking at everything from clean energies to STEM ambassadors within our workforce to ensure our future is clearly and sustainably mapped out.

Does the answer to the current economic downturn lie in manufacturing? With regards to the North East of England, it could be said it’s the most vibrant sector of the region’s economy and one which we are looking to build on here at ElringKlinger GB.

Ian Malcolm is managing director at ElringKlinger GB.