Automation, 4IR and renewables to drive future growth of UK mechanical equipment sector03 July 2018

The UK’s second biggest manufacturing employer has opportunities for growth, according to a new sector report from Santander and EEF.

Manufacturing as a sector enjoyed an excellent year in 2017 expanding at its fastest pace since 2014. Encouragingly, the healthy performance was broad based across sub sectors, but as the industry continues to thrive, the strong global economy is also bringing investment back online, and pushing the UK’s £11bn mechanical equipment manufacturers to keep up with the digitalisation and modernisation of the supply chain.

Intelligent manufacturing, the rise of automation and other Fourth Industrial Revolution (4IR) technologies, and increasing demand for renewable energy equipment are central to the future growth and success of the UK’s mechanical equipment industry. In an industry worth £11 billion to the UK economy in terms of Gross Value Add (GVA), growing sector exports internationally is also vital to secure the long-term success.

The sector report says that while automation, digitalisation and the renewables sector are longer term, global trends, there are also a number of near term opportunities which mechanical equipment manufacturers should grasp in order grow their market share and output, according to the EEF and Santander UK. Three of these are: aftersales markets; global construction equipment industry; and new financial models (leasing).

According to the report, UK government schemes including the Clean Growth Strategy, and carbon budgets, which have the aim of reducing greenhouse gas emissions by 80% by 2050, will see renewable energy technologies rapidly grow in importance. Mechanical equipment manufacturers, and specifically specialised oil extraction equipment manufacturers will need to adapt and focus on the equipment needed for the production and distribution of renewable energy equipment – for example, hydro‐electrical turbines, fuel cells and biomass systems.

The report emphasises that trade is essential to the mechanical equipment sector’s standing and performance. Some 55% of all UK firms are classified as either an importer and/or exporter of goods and services, considerably higher than the manufacturing average at 33.5%, and the mechanical equipment sector is one of the most export intensive, with almost half of its demand generated from overseas sales.

In 2017, the sector generated £33 billion from exports and since 2000, the sector has seen foreign demand for its goods increase by almost a half (46%). Despite this, the sector has seen its trade position deteriorate as other countries, both developed and developing, have expanded their mechanical equipment industries at the expense of the UK.

EEF economist Martyn Jenkins says: “Our sector bulletin shines a light on the often less heralded mechanical equipment sector, highlighting its role as a critical pillar in manufacturing and wider UK economy. The success of the sector in continuing to evolve its production processes in the digital age, as well as seek out new markets abroad stands it in good stead for the future. That said, policy makers must continue to support this vital sector by ensuring the UK business environment is cost competitive, trade links are retained and the longstanding productivity issue is addressed.”

Adam Offord

Related Companies
EEF (Engineering Employers Federation)

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