UK manufacturing revival as circular economy and servitisation transform business prospects, according to Sage research

Sage, the cloud business management solutions, has launched a report into the UK manufacturing sector.  The results reveal how advanced the nation’s manufacturing sector is, compared to global counterparts, in adopting new processes and thinking to drive growth.

The Sage ‘Discrete Manufacturing in a Changing World’ report, , found that adopting circular economy and servitisation strategies are critical in driving new revenue and profitability opportunities for discrete manufacturers. 

The Circular Economy

In fact, 96% of British discrete manufacturing companies stated that they have been impacted by green manufacturing trends. As a result, nearly eight in ten manufacturers (79%) have adopted a system to eliminate waste and recycle existing resources, also known as the circular economy. 

The vast majority of UK manufacturing professionals who responded see the circular economy as a net benefit to their organisations from a brand reputation and profitability perspective. However, 65% said they face undertaking substantial transformation to take advantage of it – especially in adapting supply chain practices and balancing sustainability with the bottom line.

Three quarters of UK firms surveyed said they are in the middle of their transformations. Many are working on driving down waste in the supply chain and using data to better understand consumer demand, to adopting more environmentally friendly practices and creating new operational efficiencies. Interestingly, 2% of discrete manufacturers say they have a fully functioning circular economy business model, while a further 16% say they have nearly completed the transition to it. 

Servitisation

Servitisation is the opportunity for businesses to expand their product lines with services and solutions. The report found that 66% of companies impacted by green manufacturing trends are pursuing a servitisation strategy. 88% of British manufacturers see servitisation as having a positive impact on their business. 

Today’s report shows that the UK could move from the eighth largest manufacturing country in the world, to fifth in the next 12 months. By harnessing Fourth Industrial Revolution technologies including artificial intelligence (AI), the Internet of Things (IoT), 3D printing and robotics, there is a window for British manufacturers to re-establish itself as one of the top five manufacturing countries in the world.

Rob Sinfield, Vice President Product at Sage, said: “The troubling headlines we have seen for UK manufacturing recently may not mean doom and gloom. In fact, the sector has a huge opportunity to grow and expand its position globally. While its unsurprising that sustainability is a challenge, it’s very encouraging to see how British manufacturers have embraced the disruption and looked at new models, including the circular economy and servitisation, for growth.  

“That said, the sector must overcome a sense of inertia, outdated business models and technology and a lack of IT infrastructure to capitalise on the window of opportunity. IT modernisation is a critical component in making the most of the new industry dynamics. Using data more effectively will enable them to be more agile in the way they source, design, make and recycle their products.”

Tim Figures, Director of Industrial Sectors, Technology and Innovation at MAKE UK, commented: “The issue lies mainly in having access to the data to adopt the right technological solutions that will have an impact on sustainability. By better analysing data, manufacturers can better predict demand, which would help them drive down product wastage and improve productivity. 

“The smart use of technology - and above all data - has the potential to unlock significant improvements in productivity, hone their supply chains and explore more sustainable and digital business models.” 

Methodology

This survey was conducted by IDG – the technology media, data and marketing services company, between the 7th October through to the 30th 2019. The total number of respondents was 658 globally; US = 140; Canada = 61; UK = 202; France = 101; Germany = 102; Australia = 52.

This was submitted to manufacturers in all eight regions, as an online questionnaire with 36 questions. To qualify for this survey, respondents were required to work for a discrete manufacturer with 2,500 employees or fewer and have a title of manager or above in an IT capacity. 

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