This is Part 2 in our series on manufacturing, which looks at the Advanced Manufacturing sector in the East. You can read Part 1 here.
1. A place of knowledge and innovation
The East of England has many recognised centres of knowledge and innovation with important links between higher education institutions and industry. Approximately 18% of all businesses in the East of England can be classed as knowledge-intensive industries. These firms account for nearly 15.5% of all employees in the region, which is broadly in line with the national average. While most industries depend in some way on knowledge, knowledge intensive businesses are particularly dependent on highly skilled workers and technology. In terms of jobs, manufacturing is the third largest knowledge intensive industry in the region employing just over 3% of the total workforce and over 40% of all manufacturing jobs in the East.
Chart 1: The ratio of employees in knowledge intensive businesses (KIBs) in the East
As Chart 2 below shows the East has a concentration of knowledge intensive businesses in the manufacturing sector which is 1.04 times greater than the UK as whole. This means that the region has a small specialist advantage relative to the national economy.
Chart 2: Location quotients for KIBs in East of England
2. What is Advanced Manufacturing?
Advanced manufacturing is a broad term that refers to knowledge intensive activity including the use of innovative technologies, materials, and processes to improve the production of manufactured products. In this sense advanced manufacturing represents more than an efficiency gain or improvement on past methods. It is a Key Enabling Technology that transforms both the inputs of manufacturing (new innovative processes and techniques) and the outputs (new innovative products). It uses new knowledge and cutting-edge technologies such as automation, robotics, artificial intelligence, augmented and virtual reality, software development, high-performance computing and modelling, and digital design to add value in the manufacturing process. Advanced Manufacturing helps to support a wide range of other industries, with techniques being used across automotive production, pharmaceuticals, aviation, food and drink and much more.
While manufacturing has declined over the past 60 years the number of active Advanced Manufacturing firms has steadily increased in recent years.[1] See Chart 3 below. This rise corresponds to the increased investment in Advanced Manufacturing that has occurred over the same period. However, not all of these firms have grown in size or output, in fact according to Data City, who have developed a measure of growth at the company level, approximately 11% of the sector is shrinking while 16% of the sector is growing, the majority are broadly stable.
Chart 3: Increase in the number of Advanced Manufacturing Companies in the UK
[1] Data City is a UK-based data provider focusing on emerging sectors, high growth companies, innovation clusters and investment. (https://thedatacity.com/rtics/)
3. Advanced Manufacturing businesses in the East
There are over one thousand Advanced Manufacturing firms in the East of England, comprising less than half of a percent (0.4%) of all businesses in the region. This is in line with the national average (0.41%) but ranks below a number of other regions, particularly the West Midlands and Yorkshire and The Humber.
Chart 4: Percentage of Advanced Manufacturing Businesses in all regions and nations
There are, however, a number of places in the East with higher concentrations of Advanced Manufacturing relative to all local businesses. There are 20 local authority districts that surpass the regional benchmark of 0.40%, with Uttlesford in Essex having the highest proportion (0.66%) of Advanced Manufacturing among all businesses in the district. The top 10 authorities are listed below.
Chart 5. Percentage of Advanced Manufacturing Business in local authorities (Top 10)
The geographical distribution of Advanced Manufacturing businesses in the East appears relatively scattered. Basildon and Central Bedfordshire each contain nearly 5.0% of the total Advanced Manufacturing businesses in the region. Only 8 other local authorities, as shown below, have a percentage above 3.0%.
Chart 6: Concentration of all Advanced Manufacturing Business in the East (Top 10)
Using data from Data City’s Real-Time Industrial Classifications (RTICS) we have categorized Advanced Manufacturing Businesses into various subsectors.[1]. These companies use the most innovative technologies and processes to increase productivity, often in the highest value-add parts of manufacturing sectors. Computer Aided Manufacturing claims the largest percentage of businesses in the East at 24.2% (250) while robotics and automation makes up over 8% of the sector.
Chart 7: Percentage of business in each subsector of Advanced Manufacturing in the East
[1] As per DataCity's categorization rule, a single company could belong to multiple subsectors. Consequently, the percentages presented in Chart 5 do not sum up to 100%.
4. Employees in Advanced Manufacturing in the East
Advanced manufacturing supports relatively few jobs in the region – approximately 0.4% of the total workforce, in line with the national average but below the West Midlands, the South Yorkshire and Humberside, and the South East. Low employment rates are not surprising given the high levels of automation and technology required in the sector. This said, firms across the UK and in the region are reporting difficulties recruiting, due to skill shortages, and the need to address skill gaps among the existing workforce. This suggests that there is potential to grow the manufacturing workforce and bolster employment in the East of England.
Chart 8: Percentage of Advanced Manufacturing Employees in all regions and nations
Chart 9, below, provides a breakdown of the workforce by subsector in the region. Advanced Measurement claims the largest share at 25.2% followed by Computer Aided Manufacturing (23.3%) and Prototyping (19.3%).
Chart 9: Percentage of employees in each subsector of Advanced Manufacturing in the East
5. Policy implications for Advanced Manufacturing in the East
Manufacturing is an important part of the solution to the UK’s productivity challenge. It is one of the economies most productive industries, second only to IT and Communications. Since 1998 the sector has delivered impressive growth in productivity per hour (3.9%) relative the economy as a whole (1%).[1] Given the relatively even distribution of manufacturing across the East of England and the particular specialisation in Advanced Manufacturing, the sector offers an opportunity for productivity growth in the region’s local economies, especially in places that might struggle to attract or operate high-end services.
However, Advanced Manufacturing is unlikely to deliver significant job growth. Increased mechanisation and automation imply that workers will be replaced by machines. While those jobs that are created are likely to be at both the high and low skilled level, with a hollowing out of mid-level occupations. Yet there are opportunities to maintain and grow manufacturing strengths in the region in leading sectors where the UK has a competitive advantage such as aerospace, automotive, pharma, food and drink. Focusing investment on the development of Advanced Manufacturing in key tradable sectors of the economy will keep regional manufacturers globally competitive.
The new Government has set out a clear ambition to transform economic growth with a focus on green technologies and sustainable practices. It is likely that all UK manufacturers across the value chain will need to adapt to new environmental regulations while responding to opportunities that will come with increased investment in clean energy.
Infrastructure development is another area where the new policies could influence UK manufacturing. Investments in the transport and energy infrastructure will increase demand for high-quality materials, advanced manufacturing techniques, and precision engineering.
The increased focus on automation and digitalisation will also transform manufacturing requiring substantial investment in smart technologies alongside workforce training and upskilling. Collaboration between industry and educational institutions will be critical in ensuring the region’s workforce is prepared for this.
New trade policies and international agreements could open doors for manufactured goods. However, navigating these new trading environments will require manufacturers to stay adaptable, ensuring they meet both domestic and international regulatory standards.
Advanced Manufacturers in the region will need to navigate this new policy and funding landscape to innovate new production techniques and stay ahead of shifting regulation.