After a challenging period dealing with Brexit, rising energy prices, international uncertainty and more, the next five years are set to be crucial for UK manufacturers. As the nation moves ever closer to its Net Zero target of 2030, manufacturing companies of all shapes and sizes are aiming to increase their sustainability credentials, while external factors impacting global supply chains are also proving a threat.

In line with these trends, UK manufacturers are expected to implement a number of measures to support growth and efficiency, insulate themselves against external pressures and align themselves with changing customer preferences.

We explored some of the medium-term trends expected to impact UK manufacturing between now and 2030, with support from Carl Johnson, UK Sales Director at specialist manufacturing asset finance lenders Anglo Scottish.

Opportunities for manufacturers with Defence compliance

Uncertainty in the Middle East and Eastern Europe shows little signs of slowing down and these effects are likely to be felt at home. Even in the event of a swift conclusion to conflicts in Israel and Ukraine, general unease on the international front means Defence spending is set to increase at a faster rate than previously forecast.

According to Make UK, there are only 12,000 companies in the UK Defence industry, though many operate in the periphery, manufacturing small components or paint finishes for military vehicles. This means that manufacturers in the UK can gain a competitive advantage by holding the required approvals and certifications for supplying the Defence and Aerospace sectors.

The relevant approvals will vary according to specific suppliers, but holding ISO accreditations and AS9100 approvals may become more important than ever as manufacturers vie for Defence contracts.

SMEs turn to sustainable finance

With the Net Zero deadline looming, expect to see manufacturing SMEs and companies with limited resources turning to third-party funding to help increase their sustainability credentials. The vast majority of the UK’s 270,000 manufacturers fall into the SME category – and with energy prices expected to continue rising, external funding will be an increasingly useful facility for these companies looking to become more sustainable.

Studies have shown sustainability to be a key purchase driver across a number of sectors and manufacturing is no different. Even pre-COVID, 40% of manufacturers experienced increased profit margins, while 30% reported increased competitiveness when sustainability credentials were met.

“And,” says Johnson, “with net zero approaching, we can expect sustainability to be even more prudent for manufacturers. Businesses in other areas of the supply chain will also be looking to decarbonise, so it won’t just be B2C manufacturers that have something to gain from becoming more sustainable.”

Digital transformations drive efficiency We are already seeing how investment in new digital technology is helping today’s manufacturers operate more efficiently than ever – and this trend will only accelerate over the next five years, fuelled in part by the wider drive for sustainability and the skills gap in the labour force.

Expect investment in digital tech to be done in the name of efficiency. Predictive maintenance and demand forecasting will be vital in helping manufacturers cut costs and increase flexibility, particularly amongst external market uncertainty.

“Over the next five years,” says Johnson, “there’ll no longer be any point in differentiating between manufacturers that have digitalised and those that haven’t – because, frankly, those that aren’t investing in digital technology will have already been left behind.

“Now, it’s far easier to differentiate between manufacturers that have a well-defined digital strategy in place and those that have been investing in new tech without auditing where their business is – and where they wish to be – in terms of digitalisation.”

Supply chain reinforcement becomes vital

Amongst all this uncertainty, expect to see manufacturers across the UK reinforcing their supply chain. Economic relationships between other world powers like the US, China and Russia are increasingly fractious and threaten to impact globalised supply chains.

Johnson says: “Between now and 2030, expect manufacturers to diversify their supply chain to avoid outages caused by these external factors. Similarly, there may also be an increase in the number of businesses localising their production, in order to gain closer control over vital functions of their business.

“Supply chain reinforcement may be done in conjunction with the adoption of new technology – such as AI-powered analytics, which can predict demand fluctuations and supply disruptions or blockchain usage, to provide tamper-proof records of any and every transaction taking place in the supply chain.”

Adoption of circular economy

Over the next five years, we can also expect to see B2C UK manufacturers (particularly in the tech space) increasingly adopting the principles of the circular economy. We will see more businesses increasing their products’ durability, reducing waste and demand for raw materials and meeting the consumer demand for repairable and upgradable products.

The UK’s Right to Repair legislation came into effect in 2021, but a recent breakthrough in the US – which saw all 50 states give people the right to take their tech to a repairer of their choosing – indicates that increasing numbers of UK manufacturers exporting to the US will turn to modular design, allowing for easy repair and parts replacements.

Johnson comments: “We might also see an increase in manufacturers taking responsibility for disposing of their products after point-of-sale. We know that consumers appreciate an environmentally conscious company, so manufacturers that begin offering recycling and material repair could also stand to benefit over the next five years.”

Trends in manufacturing and the wider world suggest that, while manufacturers are facing a number of threats, there are certainly a number of opportunities to be found. Uncertainty remains, but in protecting supply chains, accessing sustainable finance and adopting to changing market trends, UK manufacturers can ensure survival and growth between now and 2030.