Manufacturers are failing to take crucial steps to boost their productivity, according to a new report from Lloyds Banking Group and the Manufacturing Technologies Association (MTA).

The ‘Understanding the Puzzle’ report canvasses the views of more than 1,500 businesses across the UK, highlighting a widespread concern about productivity levels in the UK economy and echoing worries that have been raised by Government and industry bodies.

It raises an urgent need for investment in order to prevent UK productivity levels falling far behind other countries.

The report found nearly three fifths (59%) of manufacturers recognise productivity is an issue for the UK economy, but as few as a quarter (28%) believe it is a problem for their own businesses.

While two thirds (66%) say they have a plan in place to improve their productivity, nearly a fifth (19%) do not have a plan yet, and almost a sixth (15%) say they never will.

Lack of investment

More than half (54%) of manufacturers recognised that their own lack of investment was the main problem, and more than two thirds (68%) intend to invest in their business in the next year – and of those, only three in ten (31%) are increasing their spend, while more than a third (35%) are freezing it and a tenth (11%) are making cuts. Among those firms that are planning investment, only a third (32%) plan to do so with the specific goal of improving productivity.

The main priority for investment to boost productivity for manufacturers is production machinery (44%), with skills and training (37%), automation (30%) and robotics (12%) also important.

Of those reigning in investment, nearly half (45%) cite economic uncertainty; almost a sixth (15%) feel there is a lack of available skilled labour; and one in ten say they are simply unsure of the benefits any investment would provide.

Obstacles to productivity growth

Manufacturers cited a range of obstacles hindering their productivity growth, led by a shortage of skilled labour, cited by three fifths, and the quality of management in their businesses (54%). More than half said that concerns over regulation (51%) were an issue, while half cited inadequate R&D and nearly two fifths (37%) mentioned restrictive labour practices.

Innovation

The study also examines the issue of innovation, which is widely seen as key to increasing productivity.

Half of manufacturers say a lack of innovation is an obstacle to productivity for them and that innovation is being stifled by factors including a lack of ideas (26%); their firm’s culture (20%); their business’ attitude to risk (19%) and a lack of skills (16%).

Dave Atkinson, head of manufacturing, Lloyds Bank Commercial Banking, said: “Productivity is one of the defining economic issues of our time. The UK’s low level of productivity compared to its G7 peers remains an unsolved puzzle, and it is crucial that we seek to understand how businesses view the problem in order that we can try to fix it.

“Manufacturers do recognise that productivity is an issue for the wider economy, but this research indicates they are less convinced that it is a problem within their own businesses. While many firms do have a plan in place to boost productivity, most are not investing enough to overcome the barriers to productivity growth.

“It is hard to overstate the importance of productivity growth in securing the economic prosperity of our nation – and we must do everything possible to avoid the risk of getting stuck in the productivity slow lane,” he emphasised. “It’s encouraging to see investment in new technology and automation as a priority for manufacturers, as there is no doubt in the huge efficiency and productivity benefits this can bring for firms.

“That is why – through our Helping Britain Prosper Plan – we are working hard to help our customers grow at home and overseas.”

James Selka, CEO of the MTA added: “Getting investment right is one of the biggest challenges manufacturers face. By investing in technology, especially new technology, manufacturers can grow their productivity and give their businesses an edge.

“We – the MTA, which represents the technology creators and suppliers; Lloyds Banking Group, which funds so much of UK manufacturing; and Government, which helps set the economic landscape – need to help them to do that.”

The full report can be viewed here.

Lloyds Bank
www.lloydsbank.com

MTA
www.mta.org.uk

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