Industry Insights

A case for positivity in the future of UK and Irish manufacturing

Author: Joe Booth, CEO, Altus Group

I’m keen to share some of the positive news we see from the coalface of electronics manufacturing in the UK and Ireland.

While there is a valid case for scepticism, I aim to demonstrate in the following paragraphs why there is ample cause for optimism. To provide some context, it’s worth noting that 2023 marked an historic milestone as our revenue reached an all-time high, with the preceding year having already set a record. This indicates that the market for investing in electronics equipment is thriving, making a compelling case for our optimistic outlook.

This year has been a standout year for many reasons, but the most important factor for the success has been the re-shoring of production to our region.

There has been re-shoring to local Contract Electronics Manufacturers (CEMs), of which there are many in the UK and Ireland, and investment in in-house capabilities by Original Equipment Manufacturers (OEMs). Last year many new manufacturing facilities were established with more planned for 2024. This trend is significant as it not only benefits new staff and local community of the manufacturer, but it also positively impacts the entire supply chain for the foreseeable future. The establishment of a single Surface Mount Technology (SMT) line and the construction of a new building at an OEM includes many economic activities, encompassing various trades; building materials, staffing needs, software development, legal services, accounting requirements, capital equipment procurement, component parts acquisition, consumables, contracted sub-assemblies, support for local businesses, and a myriad of other interconnected elements.

The shortage of skilled labour exasperated by workers departing the UK for EU post-Brexit and amid the challenges of COVID-19 has meant that companies have made strategic investments in automation. This proactive approach aims to address gaps in availability of staff effectively. While capital equipment may carry the perception of being costly, it often represents a smart investment into automation enhancing production speed, improving quality, and reducing risk. It also frequently yields a quicker ROI than expected. Consequently, this makes the service more appealing to potential applications, paving the way for increased business from local, regional, or international markets in the future.

This amplifies the impact of re-shoring efforts as the price delta between local and the eastern manufacturing reduces. The investment in automation not only streamlines processes but also generates opportunities for higher-skilled roles which require more training and education, accompanied  by higher salaries, making the manufacturing industry more attractive to a younger demographic.

Moreover, there is an influx of young skilled people entering and leaving the education system making their mark in our industry. From diverse backgrounds including software development, electro-mechanical, mechanical, and entrepreneurial background, they are acknowledging the ubiquitous presence of electronics in our daily lives.

The government has also taken long overdue steps to make our investment environment more competitive by supporting capital equipment investments, further helping ROI, with the aim of increasing the manufacturing sector’s contribution to GDP. The introduction of the super deduction to support capital equipment investments, together with ongoing tax relief schemes has enhanced the attractiveness of investing in capital equipment.

Many investment projects are benchmarked around a specific ROI duration. Undoubtedly, these incentives are playing a crucial role in reducing the timeline for achieving that return. There are also significant grants available in almost every region to fund projects, and some of my partners have been incredibly successful in securing as much as 50% funding of investments. This level of financial support is particularly invaluable for small, privately owned CEMs, empowering them to augment their capabilities and better serve their end customers.

While it’s not always talked about, a pivotal contributor to recent successes in the regional electronics industry is our robust military manufacturing capabilities. It is an unfortunate reality that around the world, there is a consistent deployment of weaponry. Given the increased tensions and the rhetoric signalling a ‘war footing’, we are seeing unprecedented investments into military equipment to replenish what is being used, but also to stockpile in anticipation of escalating tensions.

Locally, industry giants like MBDA, BAE, Plexus, Ultra, and Thales are at the forefront of military manufacturing. Their high-tech products are in global demand and these OEMs strategically leverage in-house production and collaborate with high-end CEMs. The resulting contracts, known for their high value and long term nature, boost many manufacturing organisations in their supply chain. Although I would of course prefer more peaceful times globally, it is clear that this increase in military spending will have a profound impact on electronics manufacturing locally for a long time to come.

As I said from the start, there are certainly grounds for scepticism, and I acknowledge that the reality often lies somewhere in between the optimistic and pessimistic perspectives. However, I hope that the insights shared above offer a glimpse into some compelling reasons to be optimistic about the future of electronics, coming from a company actively engaged in the industry across Europe. We remain hopeful that the momentum in the local electronics manufacturing market continues to build and 2024 will mark another record breaking year.

This article originally appeared in the February issue of Procurement Pro.