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KPMG Global Manufacturing Outlook

UK ranked alongside China as a sales growth country for global manufacturers, survey reveals

. Senior manufacturing executives rank the UK 2nd, along with China, as a country where global companies expect to derive the majority of their sales growth over the next two years, ahead of Germany, India and Japan

. 85% of UK manufacturers are moving to 3-D printing to reduce their product development life cycle

. UK companies are falling behind their global peers in R&D spending, despite recent UK tax incentives

. Supply chains are playing an active role in innovation, yet concerns about poor IT systems limiting supply chain visibility and product profitability are high on the agenda

Global manufacturing executives rank the UK as one of the top destinations for future sales growth, ahead of established manufacturing economies such as Germany. The UK has risen to second place – ranked equally with China – as a country where global companies expect to derive the majority of their sales growth over the next two years. Only the US (45 per cent) beats the UK (17 per cent) which is ranked in joint second place with China (17 per cent), according to the Global Manufacturing Outlook published today.

Global Manufacturing Outlook, which surveyed 460 executives globally, also reveals that in terms of a country where global companies expect profit growth in the next two years, the UK is ranked third (16 per cent), only marginally behind China (18 per cent), and marginally ahead of Germany (15 per cent).

Stephen Cooper, KPMG’s UK Head of Industrial Manufacturing, said: "This is encouraging news for manufacturers in the UK and reflects the increasing confidence in the sector we have seen in recent months. The UK economy overall is showing positive economic signs, while comparatively, some of our overseas competitors are on more shaky ground."

"It is also interesting that the global companies expect a higher profit growth in the UK than Germany. Germany traditionally has a reputation of being efficient in manufacturing processes, so one would expect them to rate perhaps higher than the UK as a naturally more profitable country for investors. The wider Euro crisis and European debt issues may still have a lag impact on Germany"

The report also found that manufacturers were making a dramatic move to 3-D printing technology to reduce product development life cycles. While 81 per cent of global companies said that they were using 3-D printing in product development, this trend was even more marked with UK companies where 85 per cent said that 3-D printing was used to speed up product development.

Mr Cooper said that in terms of development focus, it seemed that innovation efforts were focused on enhancing existing product lines and services (with 71 per cent of UK companies spending in this area), rather than on breakthrough innovation in which only 29 per cent of UK companies put their efforts.

He said this was perhaps due to a lack of R&D funding, which was reported in the survey as being the top issue limiting the ability of companies to innovate, with 46 per cent of global companies selecting this as the top challenge. An even higher proportion of UK companies (62 per cent) indicated that R&D funding is the top challenge limiting innovation.

Mr Cooper said: "Perhaps the fact that the UK has only recently turned the corner in emerging from the recession has put a damper on recent commitment of UK funds to R&D, despite governmental incentives; UK companies may have felt the need for spend caution in the uncertain and recessionary markets of recent years."

The report also found that the number one issue for UK companies in managing their supply chain was inadequate IT systems for supply chain visibility, planning and execution.

Mr Cooper said: "It seems that UK companies need to increase their focus on improving their IT and information systems in order to more effectively manage their suppliers. They are seemingly behind the curve of global manufacturers in addressing this issue. Visibility of the supply chain in order to effectively manage it is a real UK concern, with 44 per cent of UK manufacturers stating this as their top supply chain issue, versus only 36 per cent global manufacturers saying IT systems were inadequate in managing the supply chain."

"This can be a big issue, for instance, in the automotive sector, where prior to a product launch, manufacturers must audit the readiness of suppliers to meet lead times and quality standards in time for launch deadlines. Failure to do so may incur both severe reputational and financial costs."

Mr Cooper added: "While UK manufacturers are still facing a number of challenges, it is encouraging that global businesses are increasing their focus on the UK for growth in sales and profit. This is great news which should further speed up the already promising UK economic turnaround. The UK has signalled that it is ‘Open for Business’, and the global market place is responding."

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