Britain is on the cusp of a global, technology-driven fourth industrial revolution, with eight in ten manufacturers saying it will become a business reality by 2025. In the global battle for dominance, the expectation is that innovative firms will be able to take the lead and help position Britain as the manufacturing and technology hub of Europe.
This will bring clear benefits to the sector and the wider UK economy. The rapid advance in technology will play to Britain’s strength as a high-value manufacturer, with suppliers able to produce more bespoke products and deliver more rapid and cheaper prototyping. It will increase the importance and value of manufacturing within the UK, enable more production to be “re-shored” or brought back from overseas, and lead to increased demand for highly skilled workers.
It opens up a wealth of opportunity for the UK – but here’s the rub: Britain’s ability to take advantage and be a frontrunner in Industry 4.0 is not a foregone conclusion. Quite the opposite, in fact – six out of ten manufacturers tell us that there’s a very real danger of the UK being left behind.
Manufacturers can see a number of hurdles to overcome if we are to remain in the race.
Not least of these is managing the impact that Industry 4.0 will have on the supply and demand for skills. While increased demand for highly skilled workers will be great news in terms of job opportunities, pay and the potential boost to the UK economy, for manufacturers it is a double-edged sword. This is because our sector is already struggling to attract enough skilled workers, and the situation as our demands – and those of rival sectors and competitor economies – skyrocket is only going to get worse unless urgent action is taken now.
The UK’s ability to be a power player in the digital industrial revolution hinges on the government working with industry to get to grips with the skills crunch affecting our sector. Over the next three years alone, industry bosses expect a significant increase in the demand for skills. At the same time, almost three-quarters of them are worried about how this demand is going to be met, with the supply of skilled workers in some areas already drying up.
This concern is built on experience. Almost three-quarters of manufacturers have found it difficult to recruit skilled workers in the past three years. They are challenged by both the quantity and quality of candidates, with firms regularly forced to contend with a lack of technical skills, an insufficient number of applicants and a lack of relevant experience – a perfect storm.
At the same time, government statistics show that the number of “hard-to-fill” vacancies in manufacturing remains stubbornly high at 35 per cent – unchanged from 2013 and worse than in 2011, when it was at 30 per cent.
This situation is set to deteriorate even further, as manufacturers expect a significant increase in their own demand for skilled workers over the next three years. Almost six in ten expect to need more people management, leadership and production-related technical skills (59 per cent in each case) over the next three years alone.
They predict similar increases in demand for craft and technician (53 per cent), sales and marketing (52 per cent) and IT and software skills (47 per cent) over the same timeframe. These spikes in demand reflect how manufacturers will want to make strategic hires to drive forward their productivity and growth plans. Unfortunately, however, this will place even greater pressure on an already diminished skills pool, leaving almost three-quarters of manufacturers concerned about accessing the skills their businesses will need.
Firms are already attempting to overcome their skills challenges by offering a range of incentives to attract and retain highly skilled employees. These include competitive salaries, training, opportunities to work in other areas of the business and flexible working. Apprenticeships are also going to play a critically important role in helping firms to close the skills divide over the longer term.
If manufacturers had not been taking these steps we would arguably already be over the cliff edge, not just approaching it. But it’s also increasingly clear that, despite the best efforts of the UK’s manufacturers, our sector cannot resolve this issue on its own.
Far from getting to grips with the issue, the government has largely left manufacturers to try to soften the impact of the skills crunch on their own. At the same time recent policy changes, such as the National Living Wage, the apprenticeship levy and the proposed immigration skills charge, have added to our sector’s burden and done little to support employers.
Worryingly, despite multiple warnings about the UK’s yawning skills gap, the dial hasn’t moved since 2012. Manufacturers continue to struggle to find the right people with the right skills, and undoubtedly this has led to lost opportunities for employers, would-be employees and the UK economy.
We are today just about treading water and the struggle is only going to get harder without a step-change. The demand for skills is going to soar in response to manufacturers’ ambitions around Industry 4.0. Getting the right quantity and quality in place will be critical, which is why manufacturers are urging the government to take firm action now.
The government must match the ambitions of industry and ensure that the UK’s education and training system delivers the skills that employers require. Policies must help, not hinder firms. They should provide support, rather than hitting employers with additional costs that could potentially hold them back. At the same time, the government must start thinking like business and take a long-term view.
This means ensuring that the UK isn’t just geared up to deliver the skills that employers require today, but has a strategy in place to be able to keep pace with Industry 4.0 and the accompanying skills requirements in five, ten and 15 years’ time.
The UK’s skills crunch needs a consistent and concerted approach. Manufacturers already have workable ideas on how it can be tackled. In the short-term, the main priority is to scrap the proposed immigration skills charge and introduce grants to tackle under-representation in apprenticeships. Mid-term, the Institute for Apprenticeships should identify gaps in provision and capital funding for further education, and the roll-out of National Colleges should follow employer demand. Longer term, we want to see targets for secondary schools for the number of Key Stage 4 pupils going on to apprenticeships.
These are practical solutions that the government could and should commit to today. The clock is ticking. The reality is that Britain needs to start putting a long-term industrial strategy in place now, if it is to capitalise fully on the opportunities to be had from the digital industrial revolution.
Our sector’s ability to remain on top of the fourth industrial wave hinges on the decisions made now and over the next decade. The government must work hand-in-hand with our sector to alleviate the pressure that Industry 4.0 will place on skills. If it fails to act, today’s skills crunch will rapidly tip over into a crisis – and with that the UK runs the stark risk of being left behind.