Manufacturers to adopt servitization to continue boosting the UK economy

Britain's strengthening manufacturing sector helped industrial output increase by more than expected, adding to signs that the recovery is gaining traction.

Manufacturing output accounts for 7% of the UK economy. This sector rose more than predicted by 1.1% following a 0.7% increase in February according to the Office for National Statistics (ONS).

This boost to the economy comes as companies ramped up production of basic materials and overseas demand increased for UK equipment and machinery, suggesting that a weaker pound has made British exports more attractive.

Although economists hailed the figures as "stunning", most said the sector still faced significant discharge from a declining Eurozone economy and faltering growth in emerging nations such as China and Brazil.

However, a study from Aston University and Xerox reveals that early adopters of ‘servitization’ can drive annual growth by 10%.

Servitization is the concept of adding technology-led services to manufacturing, and by doing so has the potential to represent 50% of a company’s revenue. Servitization reduces costs up to 30% for manufacturing customers by aiding those to simplify business operations and streamline labour-intensive processes. Examples of servitization range from the delivery of spare parts to product maintenance repair and overhaul.

Despite the cost saving displayed to participants in the study, servitization has failed to generate a widespread awareness in the UK market.  Companies are failing to understand that the combination of manufacturing and service can re-shape the future of UK manufacturing, benefiting them in the long haul.

The qualitative study revealed several perceived barriers to the adoption of servitization, including lack of skills and concerns around budgets, processes, legislation and contracts. Therefore the report calls for businesses to encourage skills, contracting structures, risk management mechanisms and financing systems that will allow companies to deliver services while building their capabilities and utilise innovative technology along the way. 

UK manufacturing growth at 10-month high in March

The UK manufacturing industry grew at its fastest rate for 10 months in March 2012. This is very encouraging news considering the current economic conditions.

The Markit/CIPS Purchasing Managers' Index (PMI) for manufacturing rose to 52.1 last month from 51.5 in February. The key to this data is that a reading above 50 implies growth within the industry.

The data is very encouraging sign that the UK economy grew in the first three months of 2012 and avoided a recession.

But while there was a pick-up in new orders within March general output was increased by clearing backlogs of existing work.

Markit Economics an independent, global provider of some of the world’s most influential business surveys said that conditions in the sector remained tough, with firms facing high oil and metal prices. Combine this with challenging conditions in the Eurozone export producers are having to develop markets further afield.

"UK manufacturing has made a brighter than expected start to 2012, with PMI data pointing to output growth of around 0.3% in the first quarter," Rob Dobson, senior economist at Markit, said.

Promising news came in the form of data showing that new orders rose at their quickest pace for a year in March. Another encouraging indicator of growth is that the PMI for February was also revised upwards to 51.5 from a previously-stated 51.2.

Here is a link to the Markit/CIPS UK Manufacturing PMI® report, it makes interesting reading..

BBC show Made In Britain

A recent BBC show provided a fascinating insight into how Britain still leads the world at the forefront of manufacturing and how important it is to our economy.

In the show Evan Davis looks at the British economy and asks what our country is good at and how it can pay its way in the world. He examines how focusing on high value and high skill provides the best opportunities for our manufacturing future and how working closely with emerging economies Britain can maintain a successful manufacturing base.

It is a fantastic programme that looks at the positives and negatives of manufacturing progress and decline in the UK economy. Weston Body Hardware are proud to continue to play a part in the process and value our expertise and skills that are recognised all over the world.

You can view the show here here...