See the big picture
Many businesses across the manufacturing, transport and logistics sector have enjoyed a strong 2024 and expect this to continue into the new year. Nevertheless, challenges remain around the shortage of skills and labour, and the sector will of course have to manage the recent rise in business taxation.
Head of Manufacturing, Transport and Logistics, Barclays Corporate Banking
Tackling the skills shortage
With 61,000 vacancies1 currently unfilled in UK manufacturing, clients tell me the sector’s biggest challenge is the ongoing skills shortage, which they worry could be a significant barrier to future growth. To help address this, I’ve seen some great examples of manufacturers building partnerships with schools and colleges to try to change perceptions of manufacturing among younger people. Many are also looking at how they can best use automation, artificial intelligence and robotics to reduce headcount.
There’s expectation in the sector that the government’s 2025 Industrial Strategy will lay the foundations for a more flexible approach to the Apprentice Levy and providing the training needed to boost manufacturing skills. However, there are still challenges facing the sector – for example, the many businesses now selling direct to consumer needs different skills, such as in technology or logistics. This is of course in addition to the additional costs businesses are facing due to the increases in employers’ national insurance contributions and the minimum wage, which may well result in fewer new hires.
A lot of my clients tell me they are struggling to attract and retain staff – there is a real battle for skilled talent at the moment.
Head of Manufacturing, Transport and Logistics, Barclays Corporate Banking
The uncertain geopolitical landscape means security and continuity of supply chains is once again a concern for manufacturers and logistics operators, and many are taking steps to avoid reliance on a single source, such as China, for materials or components. Clients tell me they expect a continuing trend in nearshoring and reshoring, while the latest buzzword is friendshoring – supply chains based in countries which are more geopolitically friendly to the UK.
With robustness of supply chains at the forefront of CFOs’ and supply directors’ minds, another continuing trend in the year ahead is likely to be the maintaining of higher inventory levels. With reliance on a just-in-time supply strategy becoming more of a challenge, I’m hearing that businesses are nervous about possible disruption to production lines are keeping more stock in warehouses, despite the additional costs.
Embracing technological advances
The so-called fourth industrial revolution driven by digitalisation, robotics and now artificial intelligence (AI) means manufacturers and logistics firms will have to continue to adapt their operations, but many in the sector, particularly smaller businesses, say they don’t have the skillset within the business to ensure they can exploit this. The potential benefits are certainly there: robotics has transformed many of the factories I visit, and AI can bring benefits like predicting equipment failure, so proactive measures can be taken to repair or replace machinery.
Businesses say they need more help to engage with technology – bringing together all of the various government schemes in a one-stop shop would be one welcome change. Whether it's debt funding, grants or outside expertise, the key is ease of access, and manufacturers say they are looking to the government’s Industrial Strategy to deliver more technological support for the sector. I’m convinced that embracing tech can help the UK restore its global competitiveness – having dropped out of the top 10 rankings for manufacturing for the first time in 2024 – and provide solutions to the skills shortage too.
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To be blunt, businesses can’t afford to wait for someone else to address the skills shortage and should do what they can to partner with educational establishments to engage with young people and work with FE colleges to ensure they provide the skills training the sector needs.
Whether it's robotics, AI or the Internet of Things, businesses need a clear plan to deliver the potential benefits, rather than being tempted to ‘bury their heads in the sand’.
From what we are hearing from clients, many manufacturers are facing increasing pressure from customers who want action to cut their scope 3 emissions across their supply chain. Failing to focus on such issues could lead to potentially losing out in future tenders for new work.
Keeping fraud front of mind
Fraudsters are as active as ever across the manufacturing, transport and logistics sector, impersonating our colleagues and attempting to defraud our clients. To help protect you and your business we have a wealth of resources available. You can view our quarterly fraud webinars and take a look at our other educational resources on our Fraud Protection Hub.
To discuss your business requirements and how Barclays can support you, contact us today.
