Industrial Strategy - Q4 - Nov 2018

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NOVEMBER 2018 BUSINESSANDINDUSTRY.CO.UK RT HON GREG CLARK MP, BEIS

PROFESSOR DAME WENDY HALL

STEPHEN PHIPSON CBE, CEO, EEF

This time of unprecedented change offers unprecedented opportunities P2

How technology creates more jobs than it kills P12

The future of manufacturing is digital with 4IR P10

Industrial Strategy

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BARONESS FAIRHEAD CBE, DIT £50bn of finance is available for British companies to help their exporting journey P14

BEN CARPENTER MERRITT, POLICY CONNECT Addressing the UK’s productivity problem P7

PROFESSOR SIR JOHN BELL The UK is the best-placed country to grow the genomics sector P6

Our modern Industrial Strategy: Forging Our Future We are at one of the most interesting and exciting times in modern history, where new technologies and innovations present huge opportunities for our country.

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n recent years, this country has built an economic track record to be truly proud of. Three million jobs have been created, delivering the lowest unemployment rate since the 1970s. Our economy has grown every year since 2010 and the deficit cut by three quarters.

In an ever-changing and rapidly developing world, it is right that we look to the future and have a plan for how we can ensure the UK is prepared and ready to seize the opportunities ahead and forge our future.

One year ago, we launched our modern Industrial Strategy: a longterm plan of how Britain can build on its economic strengths, address its productivity performance, embrace technological change and boost the earning power of people across the UK.

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The Industrial Strategy focuses on three key areas Firstly, we are strengthening the foundations of productivity by encouraging innovation, developing high-quality jobs, supporting UK businesses and fostering growth in all parts of the UK. Secondly, we are building longterm strategic partnerships with businesses through Sector Deals between Government and industry, driving economic growth and commercialising the technologies of the future right here in the UK. Finally, we are taking on the Grand Challenges – the global, society-changing opportunities and industries of the future, finding where the UK can build on its strengths and lead the world.

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Rt Hon Greg Clark MP Secretary of State Department for Business, Energy and Industrial Strategy

These Grand Challenges, identified by working with businesses, innovators, and scientists – in the expansion of artificial intelligence and the data-driven economy, the global shift to clean growth, the future of mobility, and meeting the needs of an ageing society – are challenges all societies face and in which the UK has unique heritage and strengths to tackle and exploit. There is scarcely a corner of the world that will not be transformed by them.

Work is well underway to meet these challenges across the UK In Wales, we’re helping Swansea University develop new building materials1, which generate electricity from light and heat, transforming buildings from energy consumers to power stations, not only helping cut emissions, but save money too.

In Scotland, we’re building on the UK’s leading life science sector by backing a new Medicines Manufacturing Innovation Centre2 in Renfrewshire to help companies develop new medicines, get them to market faster, and treat people quicker.

In Northern Ireland, we’re accelerating the diagnosis of dementia and other cognitive diseases by backing tech company, BrainWaveBank, to develop a wearable brain activity monitor, allowing people to measure the health of their brain from their living room.

And in England, we’re helping commuters to reach their destinations safely and efficiently by backing Leedsbased Citi Logik in creating a tool that maps commuting patterns using mobile network data, potentially

transforming urban planning and local transport networks.

These are just a few examples of the hundreds of companies, researchers and innovators being supported through our modern Industrial Strategy.

Committing to the biggest increase in public R&D investment in history

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In the Industrial Strategy, I committed to the promotion of highquality good work so that jobs are not just on offer, but also provide the opportunities and skills to progress.

That is why we are backing major reforms to technical education,M to ensure that both today, and for generations to come, the young people of this country have the skills they need to thrive, well into theb future.

And, as we build on the UK’s reputation as a great place to discover new technologies and do business, we have committed to – and are delivering – the biggest increase in public research and development investment in UK history.

This time of unprecedented change offers unprecedented opportunity – and we have the plan to ensure UK businesses and workers reap the rewards of those opportunities. With an economy founded on invention and innovation, Britain is well-placed to lead the world in the industries of the future and our modern Industrial Strategy is how, together, we are forging our future.

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“UK life sciences needs a blend of expertise — from everywhere” What is it really like to be working at the sharp end of the UK's fast-moving life sciences industry?

We talk to three senior women from pharmaceutical company MSD to find out.

Dr Julie L Gerberding Chief Patient Officer and Executive Vice President, Louise Houson Managing Director, MSD, UK & Ireland

Strategic Communications, Public Policy and Population Health, MSD

My role: Responsible for a broad portfolio spanning patient engagement, policy, communications and social responsibility.

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r Julie Gerberding has worked in various arenas: at the bedside, in academia, then government and now the private sector. “But at my core,” she says, “I am simply a physician.”

Gerberding, former head of the Centers for Disease Control and Prevention (CDC) and now MSD’s chief patient officer, is an infectious disease and public health expert who has led emergency responses to more than 40 highprofile health crises, including SARS, bird flu, foodborne outbreaks and natural disasters. She also served as an advisor to governments and world leaders on combating public health concerns, including HIV/AIDS. In her current role, she leads the charge to ensure that everything MSD does centres on improving patient health and well-being.

Gerberding insists that the complex, far-reaching health challenges we face today like cancer, antibiotic resistance, HPV and Ebola will only be solved through coordinated contributions across different disciplines, sectors, and different parts of the world. “This requires building a robust network of people who bring a diverse range of experiences and perspectives to the table, and playing to their collective strengths,” she says. “And most of all, it requires leaders who are equipped to manage this kind of horizontal network, which is very different from managing a vertical hierarchy.”

This type of leadership requires collaboration, negotiation and complex multi-tasking. “It also requires emotional intelligence and shared values – more learning and less knowing,” says Gerberding.

“Plus, it requires recognising that a ‘winner-take-all’ outcome may not be the winning outcome.

Collectively, these attributes are hard to find in any one leader. But in my experience, when I do find such a leader, more often than not that leader is a woman.

That’s why it is so critical that we include more women around the table when important decisions about the toughest problems are being made.”

My role: I’m responsible for all commercial aspects of MSD’s business.

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ife sciences is one of the UK's flagship industries, says Louise Houson. “The Life Sciences Industrial Strategy — which provides recommendations about how the sector can best succeed — was the first Industrial Strategy to be launched in 2017. That's a reflection of just how important life sciences is to this country. It's a sector that supports economic growth, obviously, but it's also a driving force behind innovation, which has the potential to benefit UK patients and healthcare delivery.”

Houson's post-Brexit vision is for British life sciences to continue to flourish. “The industry's priority is to secure continuity of supply for both UK and EU patients,” she says. “Each month, around 45 million packs of medicines move from the UK to the EU, and 37 million move the other way, so frictionless trade and regulatory alignment are key.

Plus, traditionally, there has been strong scientific research collaboration between the UK and the EU. We want to see that continue, and we want to be able to keep employing the best life sciences talent from around the world.”

If anyone knows what's best for the industry, it's Houson. She joined the company 21 years ago and, since that time, has worked in 14 different roles. “Those different experiences have given me broad understanding of the sector,” she says. “I'm really grateful for that perspective. Certainly, there's a lot going on at the moment so it's an interesting — and at times challenging — place to be doing business. It's also a very exciting time to be in my particular role.”

Dr Fiona Marshall VP Head of Discovery Research, MSD in the UK

My role: I lead MSD's UK Discovery Centre in London, currently based at the London Bioscience Innovation Centre (LBIC), to undertake research into new medical advances.

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n her 25 years-plus working at the forefront of the life sciences industry, Fiona Marshall has faced various personal challenges. “Like most women, the classic one has been finding a worklife balance,” she admits. “Life sciences is a global environment, which means travelling a lot and working long hours. That can be difficult when you have a family to think about.”

Nevertheless, it's a circle that somehow needs squaring, she insists, because at MSD's UK Discovery Centre — and in the life sciences sector in general — diversity isn't just preferable. It's absolutely vital.

That's why the company's flexible working policies have been so helpful. “I'm pleased to say there are many women in senior positions across the company,” says Marshall. “That's good, because they're essential role models for the younger generation.”

It's not just about the right gender balance, however. “In life sciences, we have to take different routes to solve different problems,” says Marshall.

“That requires diversity of thinking. So we need people from different countries, backgrounds and ages, too: a blend of talent from everywhere.”

Marshall is busy leading a diverse team at the UK Discovery Centre and excited by the possibilities offered by the UK sector. “One of the Discovery Centre's aims is to train the next generation of drug hunters,” she says. “Over the last 10-15 years, the UK industry has been in decline with a number of pharma companies pulling out and research sites closing down. We're resetting that, taking advantage of London's strong science base and showing what significant investment in UK life sciences can achieve.”

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Tony Greenway Read more at msd-uk.com/index.xhtml Jobcode: GB-NON-00127 Date of prep: November 2018

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Cloud-based software has been vital to our expansion International fruit and fresh-produce company, Jupiter, use cloud-based technology to reduce waste, increase efficiency and boost growth.

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n the fresh-produce business, inefficiency can – quite literally – rot your profits. Every item you order, handle and ship is perishable, so lengthy processes can reduce quality, destroy your stock and lose you customers. Tight business controls are essential to competition – and survival.

"Packing fruit is a business in which it is hard to monitor costs, man-hours and all the metrics that are so important in running a successful enterprise," says Mark Tweddle, Founder and Managing Director of fresh-produce specialists, Jupiter Group in Newport, Shropshire.

Back in 2003, Jupiter opened in a small office with a blank sheet of paper and a telephone. Now is now one of the world’s leading fresh produce companies, delivering a year-round supply of high-quality produce, specialising in new varieties, year round supply and prepared fruit. It works with growers worldwide and serves major retailers internationally, centralising its operation from the UK, aided by a global team of over 150.

We had to invest in tech to keep up with our growth Mark says: 'Within two years of start-up we’d outgrown our initial accounting package - it wasn’t giving us the accurate information we needed. We needed a solution for that if we wanted to maintain our momentum."

Jupiter invested in the Sage Business Cloud Enterprise Management solution which delivers fast, simple and flexible financial, supply chain and production management, with lower cost and complexity than typical enterprise resource planning software.

Mark continues: “Jupiter has invested heavily in technology. Enterprise management is the next stage in this journey with a cloud-based solution that enables us to join up all the business elements.” Sage partner, Datel, helped with implementation.

Manual processes are now automated "Enterprise management has helped with apportioning costs and bringing statutory reporting into line," says Mark. "Processes like these used to be manual but are now automated, which makes monitoring (and therefore management) much easier. Similarly, it’s always been a challenge trying to account for the time taken packing fruit, but automation makes this easier too.”

The upgrade has also delivered efficiencies in the streamlining of staff and reduced errors across processes.

“Our favourite thing is the availability of bolt-on features, which make it so flexible. That’s important for us because our business is 24/7 with offices in South America, South Africa, India, Greece, Turkey and Hong Kong. No two days are the same,” says Mark.

Linda Whitney

The right software can help stop supply chain crises Supply chain meltdowns can cost companies millions, destroy reputations and result in massive food waste. The right enterprise management software can cut the risk.

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n Spring 2018, people were calling the police to report a personal crisis: KFC had run out of fried chicken. Laugh if you like, but it was certainly a crisis for KFC. Deliveries of fresh chicken to its restaurants had broken down. At the peak of the crisis, 646 of it 900 UK restaurants were closed, and the cost to KFC was estimated at US$1 million a day.

The root cause was a problem with the supply chain. Under KFC’s system the chicken should be consumed within five days of the company ordering it. Any longer, and it is consigned to waste. For KFC, supply chain disruption meant closed restaurants, wasted food, unsatisfied customers, huge financial losses, and a damaged reputation.

How could this happen?

The answer is: very easily - and not just to KFC. Supply chain problems can - and have - resulted in huge losses for other major companies too.

The reason is that many organisations adopt the ‘just in time’ (JIT) system of distribution, whereby product stocks are kept as low as possible, but replenishment deliveries are frequent. This saves warehouse space, reduces waste and ultimately cuts costs. It’s a strategy adopted across a variety of supply chains, from cars to pharma, but it’s particularly well-suited to food and drink.

However, if anything goes wrong, big problems result. And the most unlikely things can throw a spanner in the works of a supply chain - including software problems.

In KFC’s case, the problem was rooted in a decision to stop using its logistics supplier, foodservice specialist, Bidvest, which has a network of distribution centres, and to start using DHL and QSL. The new arrangement meant supplies

of chicken would be delivered daily to all of KFC’s 900 restaurants from one depot.

Many UK companies have a similar one-depot arrangement. However, if something goes wrong at that single depot there aren’t ready alternatives. This was one of the problems in the KFC crisis but other factors were also involved.

Software problems - and solutions Logistics expert, Professor Richard Wilding, from the Cranfield School of Management, insisted that, “neither the use of a single warehouse or DHL” were to blame for the meltdown, but said that new technology and software being introduced to each other for the first time often presents problems.

Dr Virginia Spiegler, a senior lecturer in operations and supply chain management at the University of Kent, also pointed to the difficulty of pairing unfamiliar IT systems. She said: “This problem could have been anticipated by comparing Bidvest and DHL capabilities.”

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Getting the right recipe for today's kitchen buyers Supplying today's demanding kitchen market is a complex task, but enterprise management software is helping kitchen supplier Burbidge to deliver the right recipe.

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IT also proved to be part of KFC’s salvation: Stowga, an online platform that pairs businesses with excess warehousing and logistics, says it created a temporary network for KFC within hours.

Improving supply chain efficiency is believed to be able to cut waste by $700bn globally Software can cut supply chain risk - and waste The right software can reduce the risk of supply chain problems, and make many other business processes more reliable, increasing efficiency and cutting costs.

It can also make businesses ‘greener’ by cutting food waste.

Nicole Hardin, director of product management at software supplier Sage says: “Business management solutions, such as Sage Business Cloud Enterprise Management, can connect all areas of a business, enabling the factory and the supply chain to work more effectively. Business management tools bring critical information from different systems together – inventory and order management, for example – to significantly increase operational insight through real-time data analysis.

“As a result, manufacturers will be able to identify the most inefficient areas of the supply chain, as well as streamlining processes and improving collaboration.”

This can also cut waste. “Improving supply chain efficiency across key areas such as production, handling and storage, and processing and packaging, is believed to be able to cut food waste by $700bn globally, which would have a direct monetary impact on the businesses involved,” said Hardin.

She cites a 2017 report from Champions 12.3, which found over half of businesses that invested in reducing food waste earned a 14-fold or greater return on their investment.

Hardin says: “Software will enable manufacturers to modernise their business processes, improve collaboration and drive greater efficiency – all of which will contribute to a reduction in food waste and, ultimately, increase profits.”

Linda Whitney

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itchens are now a subject of dinner party discussion. Everyone wants something slightly different - and kitchen manufacturers like Burbidge in Coventry, must adapt to keep up.

Burbidge has used enterprise management software since the 1990s, and currently uses Sage Business Cloud Enterprise Management system, as its multiple modules match the multiple tasks Burbidge faces.

Burbidge financial director, Graham Heaven says, "We’re a manufacturing business, so the system's manufacturing, stock control, and costing modules are key. But we also have a warehouse and we distribute to our customers.

“It's a fairly complex challenge, having to manufacture and despatch to order, and also supply and distribute both from stock and made-to-order products.”

Coordinating both the stock and bespoke sides of the business is critical. A kitchen has many parts, and for Burbidge kitchens, that often means many bespoke component parts.

“We supply a kit of parts that are sold literally kitchenby-kitchen to our retail base," says Graham. "Ensuring the availability and coordinating the dispatch of all those parts is a complex business and the software ensures an efficient operation."

He adds: “We use its sales order processing module for the distribution side of the business. That ties in seamlessly with the manufacturing module. We see them as different options on one menu, so it feels like one solution rather than separate modules. That’s what you need when you’re running a sophisticated business with quite a lot of transactions going through. That automatic, seamless integration must work smoothly - and it does.

Software that can flex to your business model "The software can be moulded to fit your business rather than your business having to be moulded to fit it.”

This is a big benefit when it comes to developing the business, says Graham. “We can get the software to adapt to our new ideas and try different ways of operating."

Graham also values the close relationship with Sage.

"Having a team there that wants to work with you and help you get the most out of the software is fantastic.”

This has given Burbidge a competitive edge, he says, offering an example. "Our business came originally from a stocked solution. We then expanded to include colour choices, so we could create bespoke designs, matching any colour that the customer likes. Spraying specifically to many differing customer requirements, particularly on a small number of units, is quite complex, but enterprise management has proved adaptable enough to meet that challenge while still allowing us to manufacture stock items too."

Linda Whitney

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What's next for the UK's life sciences industry?

The Life Sciences Sector Deal is helping to strengthen the UK's life sciences industry, improve patient lives, commercialise innovation and drive economic growth.

Professor Sir John Bell Regius Professor of Medicine, University of Oxford and Life Sciences Champion

Despite some of the headlines you might have read recently, the UK doesn't plan to become a world leader in life sciences, notes Professor Sir John Bell, Regius Professor of Medicine at the University of Oxford.

That's because it already is one.

“I don't think there's anyone who would dispute the UK's worldleading status in life sciences,” he says. “It's the most productive economic sector in the country and is highly competitive. It has a £69bn turnover and accounts for some 250,000 jobs.

The UK is the world leader in life sciences “For a country of just 65 million people, the UK's pharmaceutical sector has been disproportionately successful. We have some of the best universities and research institutes in the world. We have a lot of smart people. The challenge we face, now, is how to successfully commercialise and scale all of that innovation and talent.

“The South-East is home to the third biggest biotech cluster in the world and we produce lots of little life sciences companies. We now need to be able to develop them into substantial, product-generating, tax-paying mid-size or large life sciences companies.”

UK-produced medtech to improve lives and boost the sector The Life Sciences Sector Deal — between the government and the life sciences industry — aims to help by modernising the industry and giving its large and small businesses a boost. Announced in December 2017 by Business Secretary Greg Clark and then Health Secretary Jeremy Hunt, it was based on recommendations drawn up by

Professor Bell that were published in August of last year in the Life Sciences Industrial Strategy.

The government said the Sector Deal, “involves substantial investment from private and charitable sectors and significant commitments in research and development from the government [that] will help ensure that new, pioneering treatments and medical technologies are produced in the UK, improving patient lives and driving economic growth.”

“Internationally, the strategy was received well,” says Professor Bell. “It's coherent, sensible and plays to our strengths. And, since its publication, investors have stepped up and shown interest in committing more activity and resource to the UK.”

Pharmaceutical research companies coming back to the UK When deciding upon an industrial strategy, it's vital to decide which areas of the economy will generate thriving businesses. Professor Bell believes life sciences is a key sector in this regard, although it has faced challenges over the years. One has been the exodus over the last two decades of large pharma companies involved in discovery research.

“The UK wasn't optimally positioned to help them with drug discovery, so they left,” explains Professor Bell. “Now, the climate has changed and they're beginning to come back. I hope more companies will be able to commit to discovery science in the UK very shortly.”

NHS struggles to adopt new opportunities Another problem has been how to introduce innovative new products into the NHS. “The NHS doesn't adopt innovation very well,” says Professor Bell. “That's an issue if you're a company wanting to complete the cycle of innovation, discovery, development and uptake.

It's no use going three quarters of the way around if you find that, ultimately, the uptake part doesn't happen.” He is, however, hopeful that things are starting to change.

UK is best placed country to grow genomics sector Now, Professor Bell is keen to see the sector develop the recommendations outlined in his strategy — and he's optimistic that it will.

“Obviously, we need to consolidate and strengthen UK presence in pharma and classical biotech,” he says. “But I think we'll also see new growth in genomics because we're probably better positioned than any other country in this particular space. I'd hope to see the sector make more of opportunities in the wider digital health arena, too, using digitisation and AI to transform pathology and imaging.

Plus, we have to create a platform for developing effective diagnostics. That way, people will be treated earlier, so avoiding a lot of downstream complications.”

Brexit should have little impact on the life sciences sector Professor Bell is also optimistic about the impact that Brexit will have on the industry's talent pipeline. “The government says it has no intention of cutting off the flow of skilled people coming here to do skilled jobs in the R&D environment,” he says.

“They've given very clear reassurances about that. If that's true — and I have no reason to believe it isn't — then the UK life sciences sector will be fine.”

Tony Greenway

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Grand Challenge Maximising the advantages for UK industry from the global shift to Clean Growth.

Opportunity The UK’s low carbon economy could grow around 11% a year to 2030. That is 4x faster than the rest of the economy.

Keeping it local: Increasing the regional impact of the Industrial Strategy Supporting manufacturing and utilising local strengths is the best way to achieve the win-win of addressing the UK’s productivity problem while also increasing employment.

Ben Carpenter Merritt Manufacturing Policy Manager, Policy Connect

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he 2008 crash had a huge impact on manufacturing productivity, which dropped from nearly 5% - outperforming the service sector - to less than 1% a year1.

To help get manufacturing back up the curve, the government created an industrial strategy with the joint aims of strengthening the foundations of productivity (Ideas, People, Infrastructure, Business Environment and Places) and addressing the biggest challenges of the future; AI and the Data Economy, Clean Growth, the Future of Mobility and the Ageing Society. Learning from the past, government has recognised that addressing these underlying challenges is impossible to achieve from Westminster.

Instead, local industrial strategies are being developed across the country to be jointly signed off by ministers and the chairs of local enterprise partnerships (LEPs){2}.

The opportunity of the local strategies The clear opportunity of this programme is that local challenges can be addressed by those best placed

to understand and address them.

Manufacturing has a unique ability to develop areas by providing highlypaid and highly-skilled jobs and adding value to local economies.

As manufacturing currently only accounts for 10% of UK output3, how can these local strategies help increase that share, while also driving productivity and job growth in manufacturing?

The challenge facing regions Each region’s requirements differ hugely, from the predominantly automotive-focussed manufacturing of the North East, to the ceramic industry in Staffordshire. The challenges faced, and the solutions needed by manufacturers, will not be easily transposed from one region to another. This makes it all the more important that government does treat the LEPs as their partner, not use the local strategies to impose its own ideas. It’s the local delivery bodies that can assess, for example, whether conditions post-Brexit will need new, geographically close supply chains. Only they know how

best to drive productivity through investment in skills, innovation, infrastructure and business growth.

Staying ahead in the future As we look towards a more uncertain future, one in which the UK must increase global trade, the country needs to increase the value added in manufacturing. We have seen this already, as many manufacturers have looked to reshore or localise their supply chains to protect their production post-Brexit. Further reshoring of manufacturing will also be required, not only to meet domestic demand, but also global demand in what seems to be an increasingly unstable world.

A truly successful local industrial strategy must prioritise the UK manufacturing sector, as this will add value to regions, create highquality jobs, enable us as a nation to capitalise on global trading opportunities, and provide security of supply.

Of the 11.5 trillion dollars expected to be invested into new power generation, by the middle of the century, 9 out of 10 dollars will go to low-carbon electricity generation.

The UK is no 1 in the world for: The most installed offshore wind capacity

Green finance capabilities

Low carbon design and services; e.g. low-carbon technologies including batteries, buildings and agriculture

1: EEF, THE MANUFACTURERS’ ORGANISATION. (2018). PRODUCTIVITY: THE STATE OF THE MANUFACTURING NATION. AVAILABLE HERE: HTTPS://WWW.EEF.ORG.UK/RESOURCES-ANDKNOWLEDGE/RESEARCH-AND-INTELLIGENCE/INDUSTRY-REPORTS/PRODUCTIVITY-THE-STATE-OF-THE-MANUFACTURING-NATION 2: BEIS. (2017). INDUSTRIAL STRATEGY: BUILDING A BRITAIN FIT FOR THE FUTURE. AVAILABLE HERE: HTTPS://WWW.GOV.UK/GOVERNMENT/PUBLICATIONS/INDUSTRIAL-STRATEGY-BUILDING-A-BRITAIN-FIT-FOR-THE-FUTURE [2]: BEIS. (2018). LOCAL INDUSTRIAL STRATEGIES: POLICY PROSPECTUS. AVAILABLE HERE: HTTPS://WWW.GOV.UK/GOVERNMENT/PUBLICATIONS/LOCAL-INDUSTRIAL-STRATEGIES-POLICY-PROSPECTUS 3: EEF, THE MANUFACTURERS’ ORGANISATION. (2018). UK MANUFACTURING FACTS, 2018/19. AVAILABLE AT: HTTPS://WWW.EEF.ORG.UK/CAMPAIGNING/CAMPAIGNS-AND-ISSUES/MANUFACTURING-FACTS-AND-FIGURES

Source: Department of Business, Energy and Industrial Strategy

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ямБt for the future Rt Hon Greg Clark MP Secretary of State for the Department for Business, Energy and Industrial Strategy

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Building a Britain

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Grand Challenge We must harness the power of innovation to meet the needs of an Ageing Society.

1 in 3 babies will live to 100

By 2050 the world’s population is expected to host 2 billion people over 60

Over 50s now make up nearly 1/3 of the UK workforce (10 million people) and is expected to rise by 1.8m by 2022

By 2025 we expect the over 50s in the EU to spend €5 trillion on goods and services Source: Department of Business, Energy and Industrial Strategy

The future of manufacturing is digital While much of the future may be uncertain, one thing we can be sure about is that with the fourth industrial revolution (4IR), the future of manufacturing is digital.

Stephen Phipson CBE Chief Executive, EEF, The Manufacturers’ Organisation

Manufacturers talk about this revolution as using new technologies such as sensors, robotics and data analytics to gain insights into product use. The adoption and development of these will be crucial to improve competitiveness and to tackle the “productivity puzzle”, which is seen by economists as the most compelling issue to ensure future prosperity.

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etter customer experiences, higher levels of efficiency and more highly-skilled jobs will result. The opportunity is clear, but with this, will come disruption to traditional business models, new types of supply chain engagement and the need to take employees and suppliers on the journey too.

Manufacturers are starting their 4IR journey with growth ambitions underpinned by the development of new business models, including new services. There will also be greater focus on innovation in both new products and processes, along with closer collaboration within supply chains and investment in new technologies.

That's not to say that all companies are quickly moving ahead in these areas. The application of 4IR technologies is one area where companies are still trying to understand how best to apply to their own businesses in three distinct phases.

Three distinct phases The first phase, ‘conception’, is where companies figure out what

4IR is all about, what it can offer and how it could apply to their business.

The second phase, ‘evolution’, is a period where there is some advancement on current practice.

Concepts and off-the-shelf solutions can be implemented and tested, further optimising current processes and putting in place new solutions.

The third, and final, phase, ‘revolution’, is where the step change occurs in terms of how value is derived and how interaction with customers and suppliers happens.

For those at the 'conception' phase, optimising processes and supply chains is where some early wins will be found. The evolution of manufacturing processes and the revolution of the product and service offerings to customers will follow, but this will happen in fits and starts.

Knowledge sharing as understanding of 4IR progresses Sharing of best practice through technology diffusion and peer learning from companies at the frontier is where a lot of improvement will take place. We are helping manufacturers navigate the complexities and challenges presented by 4IR and to seize upon the many opportunities it will afford.

According to the latest EEF 4IR fact card, 27% of manufacturers are in the conception phase, 39% are in the evolution phase and only 4% are currently in the revolution phase.

Even if the numbers are lower than what we’d prefer, more and more companies are getting familiar with the 4IR concept.

The main barrier faced by those in the ‘pre-conception’ phase is the lack of adequate knowledge on how technology may help their business.

Those on the first step of the ladder, the ‘conception’ phase, instead see lack of skills as the main barrier.

The last group before the frontier (‘evolution’) on the contrary sees data compatibility between systems as the main hurdle to cross.

4IR, Industrial Strategy and government’s role In addition to manufacturers adapting their own processes to meet this evolving challenge, there is a role for government policy.

Industrial strategy must play a role in enabling companies to learn and adapt more quickly, not just to keep pace with competitors but to propel them to the head of the league table.

Initiatives such as “Made Smarter”, led by Professor Juergen Maier of Siemens on industrial digitalisation, should help inform this.

Government must also play a role in the skills required to implement 4IR. From encouraging our young people to pursue a career in engineering to upskilling the current workforce with the necessary digital skills.

Despite the political turbulence and potential uncertainty, this is a very exciting time for industry in the UK and the economic gains will be significant. UK manufacturing will always adapt, as it will to a new world, post-Brexit, and a new way of maximising value through the fourth industrial revolution.

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UK is in the top 10 largest global manufacturing nations Even in uncertain times, companies in the UK manufacturing sector need to invest in innovation if they are to offer the best products to their customers and seize future opportunities.

There's been a lot of talk over the years about the terminal decline of Britain's manufacturing sector, and how we as a country don't make anything anymore.

However, there's just one problem with that notion, says Dick Elsy. It's not true.

E

lsy is Chief Executive of the High Value Manufacturing (HVM) Catapult, created in 2011 to accelerate new manufacturing concepts from the research base into commercially successful realities via seven UK centres of technology excellence. “Actually, the UK is in the top 10 largest manufacturing nations in the world,” he points out. “The sector is responsible for around 3% of all global manufacturing output and 50% of all UK exports. It employs just shy of three million people.”

Benefits of investing in innovation It’s fair to say that the UK's manufacturing sector needs to continue to invest in innovation if it's to deal with a challenging economic future and move further up the league table. That's not always easy because R&D can be a risky and expensive process. Nevertheless, it's vital for future prosperity, says Elsy.

“With the latest know-how and technology you'll be well-placed to offer the best products to customers in your supply chain or direct market; and you'll be infinitely better placed in terms of productivity,” he says. “It will help you win.”

Encouragingly, in the Industrial Strategy published last year, the government stressed its commitment to raising the level of UK R&D from 1.7% of GDP to a level closer to the OECD average

Applying digital processes to your production line will increase your efficiency and productivity of 2.4%. And that's going to have to involve British manufacturers because a staggering 68% of current R&D investment comes from the manufacturing sector.

Digital processes improve efficiency Indeed, Elsy sees great opportunities for UK manufacturing in a number of areas in the years ahead, including, new materials and materials

Dick Elsy CBE Chief Executive, High Value Manufacturing Catapult

processing for things like the next generation of batteries for cars, manufacture of the next generation aircraft wings and aero propulsion, food and drink production — and, importantly, green tech, digital and automation technologies.

“Applying digital processes to your production line will increase your efficiency and productivity, improve the way you connect to your customer and control stock, and reduce energy consumption,” he says. “Robotics, meanwhile, can help you manage your production lines or, at the high end, work for you in the most hazardous environments.”

He remains optimistic that, despite worries about Brexit, the UK's manufacturing sector is uniquely placed to weather any gathering storms. “Creativity and invention is embedded deeply in the British DNA,” says Elsy. “And the

quality of our research base — and the kind of support now available to manufacturers from organisations like ours to help harness ideas emerging from it — is second-tonone. This is a sector which has the potential to do well for many years to come.”

Tony Greenway

Read more at hvm.catapult.org.uk

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Grand Challenge To put the UK at the forefront of AI & Data revolution.

Could be an estimated

£232bn...

Government to use data, Artificial Intelligence and innovation to transform the prevention, early diagnosis and treatment of chronic diseases by 2030

Opportunity

58m

jobs in 5 years The worldwide market for AI solutions could be worth

£30bn by 2024 Progress

£1bn sector deal

launched in April 2018

Government investment in AI Artificial intelligence is starting to make its presence felt in our everyday lives. Used properly it is also going to be beneficial for business, says the UK's AI Skills Champion.

Professor Dame Wendy Hall Regius Professor of Computer Science, University of Southampton

£210m government investment to transform early diagnosis, prevention and treatment of chronic diseases

Announced AI Skills Champion: Dame Wendy Hall

AI Business Champion: Tabitha Goldstaub Source: Department of Business, Energy and Industrial Strategy

and AI Skills Champion for the UK

Artificial intelligence is coming. That sounds vaguely threatening, but it shouldn't because — developed, used and regulated properly — artificial intelligence, or AI, offers myriad benefits to business. In fact, the question isn't, 'which industries will be affected by AI?', says Professor Dame Wendy Hall. It's, 'which industries won't be?'

“Over time, every reasonably sized business in any sector will be able to use AI to make itself more effective and productive,” says Hall, the University of Southampton’s Regius

Professor of Computer Science and co-author of a government review called ‘Growing the Artificial Intelligence Industry in the UK.’ “Plus, knowledge-based companies will be able to use it for discovery, such as finding new drugs, for example.

It's going to have a huge impact in health services.”

AI is already used by social media and search engines AI isn't new, of course. Social networks and search engine companies have used it for years. But it's only recently that it has started to come out from behind the scenes and begun to impact our lives directly — with voiceactivated technology, for example.

Our roads could see automated vehicles in the near future Its growth may continue slowly, but this is just the start, says Hall.

For example, over time we'll see it revolutionise the energy industry and the transport industry. “With the introduction of automated vehicles, our road systems will change in ways we can't even imagine,” says Hall. “There are so many areas it will creatively change to help us live better lives.”

That's why the UK is now looking seriously at AI, notes Hall, and has established an Office for Artificial Intelligence to understand how best to use it for maximum advantage.

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“All technological revolutions end up creating more jobs than they destroy, but that doesn’t help the person who becomes redundant tomorrow, so it’s important for companies to upskill their workers.”

“I'm pleased the government has decided to make AI a Sector Deal (a partnership between the government and industry to transform productivity) as part of its Industrial Strategy,” she says. “It means there will now be money available to fund AI developments.”

Supporting UK tech start-ups Thanks to leading AI research groups in its top universities, the UK is on a par with the US when it comes to AI ability and innovation. “Where we can't compete is on scale,” says Hall.

“And it's harder for companies who spin out of university research to gain momentum in the UK. So we have to

be clever – and fast – with AI. The importance of AI start-ups is something we highlighted in the review — and is something the government picked up on also. We have a good tech start-up culture in this country and more AI start-ups than in the rest of Europe. We need to keep that economy here for as long as we can and try to stop a brain drain to the US.”

Artificial intelligence sector needs philosophy grads too In June, Hall was appointed AI Skills Champion in the UK, with the role of promoting jobs in AI. “At one end of the spectrum we need experts in machine learning, data analysts

There’s a public perception that AI is scary; we have to regulate tech so it will support humans, not dominate them and data scientists,” she says.

“But, actually, AI requires broader talent. When designing AI systems, it's important to include people from other disciplines: those with philosophy or humanities degrees,

for instance, or people who've worked in accounting or in the NHS. Essentially, this field should be open to anyone who can become familiar with AI and help government and industry utilise it for the good of society.”

Artificial intelligence isn’t quite like the scary films, but we need to keep it that way Thanks to sci-fi movies, there's a public perception that AI is scary.

As the industry develops, we have to r egulate the technology so that it will support human beings — not dominate them. But people are also nervous about it taking their jobs away.

Tech creates more jobs than it kills “All technological revolutions end up creating more jobs than they destroy,” says Hall, pointing to the finance industry as an example. “But that doesn't help the person who becomes redundant tomorrow, so it's important for companies to upskill their workers. We have to make sure that in schools and universities we're training people for an AI future and not for jobs that are going to disappear. And for people who are in jobs now that are going to disappear, we have to help them into the new jobs that AI will create.”

Tony Greenway

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Grand Challenge The Future of Mobility. We will become a world leader in the way people, goods and services move.

Tackling our Future of Mobility Grand Challenge will put the UK at the forefront of the 21st Century transport revolution. This will ensure the automotive sector - one of our greatest success stories - continues to thrive and create good jobs across the country.

The opportunity is huge.

The market for connected and autonomous vehicles in the UK is estimated to be worth £28bn in 2035, capturing 3% of the £907bn global market.

The Government's first mission: we will put the UK at the forefront of the design and manufacturing of zero emission vehicles and set an ambition for all new cars and vans to be effectively zero emission by 2040.

Source: Department of Business, Energy and Industrial Strategy

Our export strategy will deliver for small businesses

Baroness Fairhead CBE Minister of State, Department for International Trade

I am often asked why Germany has managed to increase its exports as a percentage of GDP from 30% to 47%, while the UK has not. It is a good question. But the answer isn’t to look at what we didn’t do in the past; it is to look at what we are going to do in the future.

I

t has been three months since the Department for International Trade (DIT) launched the government’s Export Strategy, setting out our ambition to increase exports as a percentage of GDP to 35%.

Achieving this target will move the UK forward from the middle of the G7 to near the top in terms of export performance. It is ambitious, but I am confident that it is achievable.

Within the strategy, we set out 52 measures to help businesses export their goods and services. These range from giving UK firms better access to commercial opportunities, to assessing how DIT can work better with overseas delivery partners and giving companies advanced notice of overseas ministerial-led trade missions.

Potential goods exporting opportunities with new strategy Since the launch, we have already implemented a number of these measures. For example, we have successfully expanded a programme of supplier fairs and increased the size of our UK Export Finance network based in overseas markets.

Additionally, we have increased the number of export opportunities on great.gov.uk to more than 20,000, showcasing potential contracts for British companies such as cheese to Hong Kong, chocolate to

India and touch-screen computers to the Netherlands.

Expansion is crucial for stabilising family businesses for generations to come With 99% of businesses in the UK being SMEs, these measures are vital to helping our small businesses begin or expand their existing export operations. In turn, this can have an incredible impact - making small companies more profitable, allowing them to take on more staff and increasing their staying power, allowing family businesses to move seamlessly between generations.

Yet, if you ask small businesses if they are already exporting, a lot of them say that they cannot get the finance, or that they are not familiar with foreign markets, or simply that they don’t have the connections to open the door to new markets.

Peer-to-peer advice for SMEs That is where DIT and private sector support can rise to the challenge.

Businesses have told us that our support for them is vital. This includes our network of export champions, who can provide peerto-peer advice and expertise that is often relatable and exemplifies the ‘If We Can, You Can’ message of our campaign.

Additionally, our award-winning export credit agency, UK Export Finance, has £50bn of finance available for British companies and our website, great.gov.uk has a wealth of resources that can help businesses begin their exporting journey.

But supporting businesses isn’t solely the preserve of government. I know that others offer vital support that businesses can take advantage of as well. A great example of this is the new Barclays trade centre in Birmingham, which I opened

recently. The centre has 30 dedicated staff helping UK businesses take the next step to selling overseas, providing an extremely useful link between finance and export support.

Other banks, local chambers and LEPs have terrific trade support networks too.

Our economic strength is built through exports As we approach Small Business Saturday and the busy Christmas period, we want to make it clearer than ever that we will build our economic strength through our modern Industrial Strategy to create an environment in which SMEs can continue to thrive. Exporting is vital to that and there is an obvious overseas demand for British goods, services and skills.

Every £100 of exporting makes a direct contribution to the economy of £30-40. British companies can and should be pursuing these opportunities. And we stand ready to support from that first expression of interest to the moment a consumer in the US, China or Australia takes a British product off the shelf or uses a British service.

The UK exported £637bn of goods and services in 2017 The UK is already great at exporting: it is the world’s sixth largest overall exporter and we sold £637bn of goods and services overseas last year.

However, there are still thousands of opportunities for our companies around the world, and the best way to encourage companies to take advantage of these is to keep talking about the significant benefits they can bring to businesses of all sizes, in all corners of the UK. I’d urge any and all SMEs with a desire to grow to consider exporting – and to reach out to the DIT. We’re here to help.

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BUSINESSANDINDUSTRY.CO.UK Get in touch for the 2019 edition 07748 324843 roz.boldy@mediaplanet.com uk.info@mediaplanet.com @mediaplanetUK