DON’T DESPAIR OF SCOTTISH MANUFACTURING

We highlighted in Scot Buzz last week the changing nature of the manufacturing sector at the recent SMAS conference. It highlighted growing incursions by Scottish companies into the fields of 3-D technology, robotics and IT. 

Scotland’s wide-ranging manufacturing industry plays a central role in sustaining and growing our economy. It’s a broad church accommodating industries from chemicals to food & drink, textiles and shipbuilding. But it’s been in decline.

Forty years ago the sector represented around 40 per cent of the economy and accounted for around 30 per cent of all employment.  These days, it accounts for 12 per cent of the economy with just nine per cent of the workforce – around 190,000 people.

But as SMAS director Nick Shields points out, “it’s a real wealth generator for Scotland, delivering over 50 per cent of our international exports and 54 per cent of our expenditure on research and development.

“Those employed by our manufacturing companies are at the heart of a high-skills, high-wage economy with earnings in the manufacturing sector 30% higher than average. It is where our innovation happens – the lifeblood of future business opportunities.”

But investment in Scottish manufacturing has fallen behind the rest of the UK and the UK is behind our European competitors.  To move us towards the first quartile of productivity when compared to OECD countries, we need, says Shields, an additional £6.5bn of capital spend in our industry.

“There needs to be a determined and intense focus on further improving our productivity, and one of the ways to achieve this is through investment in new technology. The best products are often made using technology and automation that reduces cycle time, increases quality and therefore maximises businesses productivity.

It seems a mountainous challenge. But a lengthy and detailed article in the latest Investors Chronicle highlights some of the competitive markets in which the UK has established a significant presence through the employment of advanced technologies. It offers hope for manufacturing advance in Scotland.

The article, Britain’s Transforming Economy, cites the rise in the number of intellectual property patents “as a pointer to the renewal of what might be described as entrepreneurial spirit in the country”

Patent applications from the UK at the European Patent Office (EPO) grew by 5.7 per cent last year, the biggest increase in five years and the second highest in the past 10 years.

With 540 applications, Rolls-Royce was the UK’s most prolific patent applicant. By upping the number of applications from 182 in the previous year, it was the UK frontrunner, followed by last year’s leader Unilever and BAE Systems, which increased its number of patent applications by 152 per cent.

Meanwhile, latest figures from the World Intellectual Property Organisation show that patent applications by UK companies have not only started to rise above the global average, particularly in the filing of international patent applications, but that UK innovators are increasingly looking to market inventions and technology globally.

Overall, the UK ranked seventh in the 2015 league of countries that submitted applications under the Patent Cooperation Treaty, which is one of two routes to secure international legal protection for a new idea.

“It seems a reasonable position in the global pecking order”, says the IC, “although we still only file about a tenth of the number of applications submitted by the US and roughly a third of those filed by South Korea. Obviously, that needs to improve.”

The article also cites latest figures released by campaign group StartUp Britain showing the UK “continuing to thrive as an entrepreneurial hub, with new business registrations up in the first half of 2016.”

This period saw some 350,000 companies launched, a 14.3 per cent increase on 2015 on an annualised basis.

Concludes the IC: “The UK has a long history of shaping and commercialising advances in science and technology. Today the country has world-leading capabilities in the aerospace, defence and automotive manufacturing sectors, and we haven’t even mentioned the influence of corporate Britannia in areas such as software and pharmaceuticals, never mind the billions of pounds generated annually through ‘invisible exports’ from the wider corporate advisory complex.

“The rise of the fin tech industry is testament to how rapidly and effectively the economy can now respond to changes in technology – the digital revolution. The pace of change is only going to accelerate thanks to developments in the ‘internet of things’, data analytics and robotics, but the UK, soon to be unfettered in our commercial arrangements, is well placed to respond to the pace of industrial change.”

We couldn’t agree more.

For the full article and more details go to FTPersonalFinance@ftmail.ft.com.

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