For the industrial sector, the positives include an extra £20.4bn for the state-controlled national wealth fund and the British Business Bank, investment in apprenticeships, and reaffirming the target of defence spending reaching 3% of GDP by 2030. There was also good news about a multi-decade cooperation agreement with Rolls-Royce, starting with a joint 10-year, £2.5 billion programme to develop next-generation gas turbine technology for civil and defence aerospace.

Broadly, the comments from various industry bodies and associations seem to be quite diplomatic, highlighting the positives while pointing to further work that needs to be done. Over at the IMechE, James Partington, director of policy and impact, welcomed measures to support business investment and industrial competitiveness. However, he went on to warn that: "The Government must now match this contribution with the ambition and investment needed to unlock engineering’s full potential.”

Similar sentiments were voiced by Graham Hoare, CEO of the Manufacturing Technology Centre, who said: “The Budget’s focus on backing enterprising British businesses, improving access to investment, greater devolution, strengthening our defence and industrial capability, and creating the conditions for innovative firms to start, scale and succeed here is welcome. 

“We now need to turn that ambition into delivery, helping businesses commercialise and adopt new technologies, secure the investment and skills they need to grow, and build industrial capability in the UK. Government, industry and academia working together can ensure British innovation translates into British growth.”

Make UK Chief Executive Stephen Phipson CBE was more critical, saying: “We said this Budget was the first real test of the Government’s pledge to reindustrialise Britain. Today they failed to address the one issue that would enable this – high industrial energy costs.

“Our industrial electricity costs are the highest in the world. As I told the Chancellor last week, this is having a ruinous effect on investment and requires urgent action. It is hugely disappointing that he didn’t listen to a sector that supports 2.6m jobs and accounts for 42% of UK exports.

“Likewise, while we welcome the slowing down of increases in the minimum wage, in general employing people remains more expensive and riskier thanks to the Employment Rights Act and higher employer NICs.

“This Budget has failed to address any of the fundamental costs holding back investment and growth in manufacturing."

While Phipson's comments highlight the shortcomings of the budget, particularly with regard to energy costs, I do hope that some of the wider measures will have a positive impact on the industrial sector in what are unquestionably tricky times.

Charlotte Stonestreet

Editor

That certainly seems to be implied by the latest monthly ‘AI sentiment index’ from engineering, technology and consulting services provider Expleo, which points to a widening AI confidence gap among UK business leaders. Indeed, when asked what impact losing the AI tools they currently use would have on their day-to-day work, nearly a third (29%) said it would make no difference.

The data also suggests that many leaders are not yet seeing AI tools significantly reducing complexity or work pressures. Just 24% said their work would become more complicated without them, while 22% said it would become more stressful. One in six said they would not have enough hours in the day to complete their work without their current AI tools, with the same proportion saying valuable data would be lost.

So, are we going to see the AI bubble burst, as the vernacular would have it? Maybe… but I suspect it won’t be any time soon. After all, there is a huge difference between questioning the value of some AI tools and abandoning it by the wayside altogether. It could just mean that the hype is beginning to give way to a more realistic assessment of where AI can – and of course, can’t – deliver genuine value.

Charlotte Stonestreet

Editor

For a problem that first gained widespread recognition in the late 1990s, very little seems to have been done to alleviate the situation. So little, in fact, that we now find ourselves in the perfect storm of an ageing workforce with up to 20% of engineers approaching retirement, 'leakage' where graduates choose non-engineering careers, and not enough new students choosing to study engineering.

At the same time, the UK is experiencing a worryingly high level of NEETS - Not in Education, Employment, or Training - in the 16 to 24 age range. This is something that Enginuity, the former Sector Skills Council for engineering and manufacturing, feels could be rectified by closing the skills gap, and is reflected in its recently published report, which finds that the skills gap in the engineering and manufacturing sector is costing the UK more than £ 5bn a year.

The report, titled Mind the Gap, asserts that the sector faces many interrelated factors which will only make matters worse over time. The £5bn lost annually to skills shortages represents a major missed opportunity.

Based on typical starting salaries in the sector, it would be equivalent to supporting over 300,000 apprenticeships each year – a scale of intervention that could materially reduce the number of NEETs by 30% and thus help to reduce the UK's benefits bill.

Of course, this makes perfect sense. However, the reality is that there are still way too few businesses in the sector offering opportunities to young or newly qualified people. I understand that Government support for apprenticeships is woefully inadequate, but there seems to be a huge reluctance to train and invest in workforces across much of the UK's industrial sector. Businesses want skilled workers, but want someone else to put the money, time and effort into training them. There are record numbers of graduates out of work, including engineering graduates, yet we constantly hear that engineering companies are having difficulty recruiting. What is going so wrong here?

Like many things, the skills crisis is a complicated issue that will not be solved by any one measure, however, if more businesses started to recruit into graduate or entry-level roles and took on responsibility for training, maybe things wouldn't look quite so bleak.

Charlotte Stonestreet

Editor

Meanwhile, in the spirit of carry on, at MACH 2026, the High Value Manufacturing Catapult (HVM Catapult) unveiled a new long-term technology strategy designed to help UK industry develop, adopt and scale the advanced manufacturing capabilities needed to remain globally competitive.

Developed in collaboration with more than 150 industry partners, the strategy outlines a 15-year roadmap for translating emerging technologies into market-ready products. It provides a framework to guide investment and capability development across HVM Catapult’s national network of centres through to 2040.

At its core, says the Catapult, are a series of technology roadmaps that map how critical manufacturing capabilities must evolve to address key national priorities. These include supporting the clean energy transition, strengthening national security, advancing healthy living, and improving industrial sustainability.

The roadmaps also identify specific opportunities for innovation and scale-up across sectors. These range from developing digital twin technologies in composite engineering to enable next-generation floating offshore wind turbines, to advancing joining techniques for future nuclear reactor fleets, and scaling manufacturing processes to meet rising demand for personalised medicines.

The strategy has been highlighted as a key milestone within the UK government’s modern industrial strategy, particularly in supporting ambitions to significantly increase business investment in advanced manufacturing.

Another entity advocating for industry in the UK is the Manufacturing Technologies Association, organiser of MACH 20206, which also used the 2026 edition of its biennial event, to announce the findings of its recent "Sovereign capacity and industrial strategy". According to the findings, thousands of firms are keen to support the national mission to reduce the UK’s manufacturing dependence on international partners, especially in the wake of recent global conflicts and economic uncertainty.
Unsurprisingly, those surveyed also called on the Government to help the ‘sovereign push’ by providing grants, greater tax incentives, and more support for training. James Selka, CEO of the MTA has suggested a ‘sovereign capability fund’ to support companies involved in, for example, defence, aerospace, med tech and energy. And of course that old chestnut, the price of energy, reared its ugly head again, with UK comapnies having to deal with  some of the highest costs in the world.

Anything that can be done to strengthen the UK industrial sector has got to be seen as a positive, but whether the Government is willing or able to provide more support remains to be seen.

Charlotte Stonestreet

Editor

OPENING THE discussion, when asked about the key challenges their machine-building customers face, the panel pointed to a convergence of operational, economic and cultural pressures.

For Andrew Rigby, product manager at Phoenix Contact, the engineering fundamentals remain central. "You've got to mitigate against any potential unexpected downtime," he said, citing site-specific conditions, compliance requirements and the physical constraints of panel design as daily realities. And, he asserted, decentralisation of control architecture is increasingly part of that conversation.

Fabrice Sylvie, head of engineering and service delivery, Europe North West at SKF, brought an economic lens to the discussion, looking at the issues from the perspective of rising operational costs for customers, particuarly in terms of energy and employment.. “We have to be much more efficient when it comes to energy,” he said. Skills shortages compound the problem, he argued, making it essential that suppliers transfer expertise directly to customers and support co-engineering of assets with shorter development cycles. He also highlighted a structural risk often overlooked: "Supply chain fragility is not to be underestimated. We in SKF are regional for regional – we produce in Europe for Europe – and that helps us move away, as much as we can, from the geopolitical challenges we face right now."

Anderson Silva, sales application engineer at Murrelektronik, identified another fundamental barrier: the human one. "The main challenge today is to start to change, because a lot of customers don't want to change, because (what they have) it is working." He drew a parallel that extended well beyond the factory floor: "It's not just for machine builders. For our life, to change is not easy, especially when we are not confident to do it. But sometimes, to reach success, we need to move forward out of our comfort zone."

Industry 4.0

The question of which trends and technologies are having the most immediate impact produced near-unanimous agreement, along with a note of scepticism.

"Industry 4.0 is really what is reshaping the way we look at design and production right now," said Sylvie. "Most probably we're not using the potential to the extent we could." When products can be monitored in real operation, he argued, design cycles can be compressed and improved, but that requires a willingness to act on what the data reveals.

Silva agreed, but also pointed out the gap between rhetoric and reality. "Industry 4.0 is the train that everyone is talking about, but it's funny to say that, because everyone is talking about it but just few people are really doing it." He pointed to the convergence of OT and IT as a defining trend, but stressed that collecting data is only the starting point. "There is one difference between data and information. We can collect data, we can have a lot of data, but how do we transform data and information into something useful?"

Rigby grounded the discussion in practical terms, highlighting the persistence of basic engineering inefficiencies. "We look at a simple thing of just pushing wiring; the error potentials of a standard screw terminal. Is it the right torque setting? Are we getting heat build-up?" The adoption of appropriate communication platforms such as IO-Link, EtherCAT, PROFINET, is essential, he argued, but requires real expertise to implement effectively.

The adoption gap

Another particular theme of the discussion was the gap between technology purchased and technology genuinely deployed. All three panellists had direct experience of customers who owned capable systems but were failing to extract value from them.

Sylvie described a recent visit to a customer who had suffered a critical gearbox failure, and a consequent downtime he estimated at half a million pounds; despite having monitoring data available that could have flagged the problem in advance. "The effort is really to convince the customer that the technology already available today can bring value – it's not only about the cost of that technology, but also about the cost avoidance that comes with it."

As Silva put it: "It's like selling someone a Ferrari but not teaching them how to change the gear. You buy a Ferrari, but you use it like a first-year driver – you're not using the benefit of the car." The result, he noted, is that customers become disillusioned with technology that was never the problem in the first place. "The customer feels unhappy with the technology. They bought it, but they don't know how to use it."

Turning data into action

]The panel also discussed what separates useful data from noise. As Rigby asserted: "If data doesn't trigger an action, it's purely decoration." A production line consuming more power than expected, for instance, may be signalling a motor problem or increased mechanical friction, but only if someone is watching, and only if the organisation is prepared to act.

Sylvie advocated meeting customers where they are on the journey. "It's important to have a proper discussion with the customer – to read, first, where he is in that journey of digitalisation." Customers who are not tracking downtime costs may struggle to see the return on investment in condition monitoring; the job of the supplier, he argued, is to open that window of understanding using cross-industry experience.

Silva favoured an incremental approach to building confidence: "Baby steps. We have something new that we can test, one small part, and then, supporting the customer step by step, they can become confident." He also emphasised the importance of speaking the right language to the right stakeholder. "For the energy manager, money is the most important thing. For the programmer, you explain how easy the technology is to use. We need to talk the same language as the customer."

Compliance

When considering what legislation machine builders need to be aware of, Rigby highlighted regulatory changes that the panel felt were not receiving sufficient attention, particularly in the UK. New IEC standards for surge protection (IEC 61643-11) are set to change by 2027, and the EU Cyber Resilience Act is already reshaping requirements for connected products. "If we're not looking at embracing the new standards and fitting the right components, we're limiting the actual potential and the infrastructure of the plant."

The roundtable's central message was clear: the technologies to improve machine performance, reduce downtime and future-proof operations already exist. The challenge is not invention, it is adoption.

Watch on-demand

This review provides just a taste of what was covered in the webinar, which also included an informative and wide-ranging roundtable discussion, including questions submitted by the audience on the day. If you would like to find out more, you can watch the webinar on-demand for free via the following link:

wbmwebinars.com/modern-machine-building-innovation-efficiency-and-compliance/live

When it comes to the actual cost of energy, though they are pretty much at the mercy of the market. In many cases, no amount of every saving equipment is going to mitigate what are, in the UK, some of the highest energy costs in the developed world. This has been brought into focus by Energy UK and the CBI in their joint report, 'Cutting Business Energy Costs: The case for action'. 

The trade bodies warn that persistently high business energy costs are threatening the UK’s global competitiveness, dampening investment plans and putting the brakes on the country’s growth ambitions. It seems to be something of a downward spiral – as margins are squeezed due to high energy costs, less money is available to invest in energy saving measures.

As the report highlights, while some energy-intensive sectors benefit from partial support, these schemes are limited in scope and often funded through levies on other customers, exacerbating cost pressures for those businesses outside the eligibility criteria.

It further calls upon the Government to deliver a robust national strategy to cut business energy costs – moving beyond short-term crisis responses and setting a clear path to a more affordable and sustainable energy future for businesses across the UK.

Louise Hellem, chief economist of the CBI, said:  “Developing a clear national strategy for business energy costs is about far more than just helping struggling firms to pay down sky high bills – it’s the very foundation of the country’s growth mission.   

“To their credit, the Government has recognised the scale and importance of the issue. But we know we must go further and faster to deliver meaningful solutions.  The modern industrial strategy and the British Industrial Competitiveness scheme represent a welcome start, but in a world where energy costs increasingly determine global competitiveness, the UK simply cannot afford to lose focus or momentum."

This is not the only high profile report of recent times to call upon the Government to take action over UK energy costs. In June last year Make UK published a report on 'Tackling Industrial Energy Costs', which likewise urged action to remove regressive policy levies from energy bills to reduce costs, and create a fixed electricity price to put British manufacturers on a level playing field with international competitors.

WIth businesses and trade bodies broadly aligned on the need to take action on non-domestic energy prices, let's hope that those with the ability to make changes take this as the right moment to take some positive action before the UK falls even further behind its competitors.

Charlotte Stonestreet

Editor

It is worrying, then, that research from European software provider Forterro has found that skills shortages and sluggish digital transformation are putting the UK’s industrial midmarket at risk of falling behind its European peers. The report, The Digital Future of the European Industrial Midmarket, found that almost half of UK manufacturers and wholesalers say the digital skills gap has directly impacted business growth or projects, with more than one-third admitting that they lack confidence in finding recruits with the right digital expertise.

What stands out starkly is the nature of the missing skills. AI literacy, cybersecurity and data analysis – three areas which are always going to be fundamental to any serious digital transformation effort – are where the organisations surveyed see the biggest gaps. In a market defined by automation, predictive intelligence and cloud-driven workflows, this mismatch between strategic priorities and workforce capability poses a significant competitive threat. While 57% of UK respondents say they have a digital roadmap and more than half claim to have a fit-for-purpose cloud and data strategy, the outcomes tell a different story: almost a third rated their digital performance as poor over the past three years, and another third said it was merely adequate. In other words, even the businesses planning to modernise do not seem to be executing at the pace or scale required.

According to Forterro, AI is however seen as a crucial part of the solution, with UK firms citing predictive maintenance, predictive logistics and document management as their most popular ERP add-ons. Looking ahead, UK firms expect AI-driven analytics and risk detection to deliver the greatest value, offering not just incremental improvements but step-change gains in how businesses plan, problem-solve and compete.

“AI isn’t about replacing people and taking jobs, it’s about empowering those people to do their jobs better and allowing them to shape their role in a way that brings greater rewards,” commented Thomas Knorr, vice president cloud transformation, Forterro. “When the right digital skills and technology are harnessed together, AI becomes a practical tool for improving operations, predicting issues, strengthening competitiveness and powering growth."

The report also reveals that one-third of respondents say that keeping pace with competitors and future-proofing the business are the main drivers for digital transformation. More than half believe resisting cloud adoption will damage market share, further evidence that the UK industrial midmarket understands the stakes but struggles to act decisively and even hire the people to help them.

The message for the industrial midmarket is clear: digitalisation is no longer optional and will have a major role in defining the next phase of competitiveness - but businesses need a workforce capable of delivering it.

The full report can be downloaded at:

www.forterro.com/en/resource/digital-future-research-report

WITH ALL the hype surrounding AI and the huge changes it might bring to our day-to-day working lives, it’s easy to overlook the technology’s potential environmental impact. Working to address this, earlier this year the Royal Academy of Engineering – in partnership with the Institution of Engineering and Technology and BCS, the Chartered Institute of IT, under the National Engineering Policy Centre (NEPC) – produced a report calling for the extension of mandatory reporting on AI’s energy and water use, carbon emissions and e-waste recycling of data centres.

Speaking about the issues highlighted in the report, Dr Natasha McCarthy, Associate Director of Policy at the Royal Academy of Engineering emphasised: “AI is fundamentally a physical, engineered system. It's quite easy to think about AI as ephemeral; it’s digital; it doesn't exist in real form. But actually it's got this huge footprint, and we need to think about the way that we manage that – and we also need to think about the engineering and design choices that we have in order to build systems that work really well.”

So, how can the engineering community go about achieving environmentally safe, stable AI?  One of the Academy’s strongest calls is for better monitoring and standardisation across the AI value chain. 

“We are calling really clearly for better data, better monitoring, better standards,” McCarthy said. “There are frameworks already – for example, the UK’s Streamlined Energy and Carbon Reporting framework, and the EU’s Energy Efficiency Directive – but reporting is inconsistent. Only one in six data centres in Ireland are actually reporting, and that shows the scale of the challenge.”

AI’s global nature also makes consistent measurement difficult. “AI companies are transnational,” she explained. “The EU has a different system to the UK, and the US doesn’t have the same level of mandatory reporting. That makes it much less easy to get consistent, cross-national comparisons of different AI systems.”

However, McCarthy believes this inconsistency presents an opportunity for leadership. “We think the UK could be a real leader here,” she said. “If we strengthen our reporting mandates and call for standardisation, we can start to deliver AI where we’ve got a clear sense of how much energy and water it’s using, and how we can improve that.”

Data centres and resource use

A central concern is the sustainability of the data centres that form the industrial backbone of AI systems. “It’s well known that data centres have a huge appetite for water and energy,” she said. “We’d like to see more stringent sustainability requirements, particularly around the use of potable water.

“We can’t really afford to have data centres using potable water in cooling. Some are designed with closed-loop systems that recycle water more efficiently, but even those have an environmental footprint and can affect local ecosystems when wastewater is discharged.”

Locating data centres in areas with sufficient water and renewable energy resources could help, she argued, but these developments should also be treated as opportunities for local growth. 

“We’ve seen government talk about AI growth zones and the ambition to build more data centres in the UK. We’d love to see that become a broader opportunity to create innovation hubs, bring investment, and support local businesses and skills.”

Frugal AI

The Academy’s report highlights the growing concept of “frugal AI”,  which focuses on building systems that use less compute power and energy. McCarthy pointed to the example of the Chinese large language model DeepSeek, which surprised observers by achieving high performance with far less energy and less powerful chips. “Not all AI models are the same,” she emphasised. “Not all have to run on the most powerful chips.”

Supporting frugal AI, she argued, could also help smaller organisations and research institutions that struggle to access high-performance computing. “If there’s an opportunity to build AI differently so that it doesn’t use such intensive compute, then we can create wider opportunity as well as reach that environmental sustainability goal.”

Looking to the future, McCarthy described emerging computing architectures such as neuromorphic chips based on memristors, which mimic how the human brain processes information. “The human brain is the most powerful computational tool, and possibly the most energy efficient,” she said. “This technology could use up to a thousand times less energy than a classic computing chip.”

With UK researchers already working at the forefront of this field, there's an opportunity for the country to lead in the next generation of sustainable computing.

McCarthy also urged businesses to rethink how they approach data and algorithms. “We don’t always need to be using the largest language models for everything,” she said. Smaller, task-specific models that run on edge devices rather than in data centres can reduce energy use and bring wider benefits in privacy, data protection and fairness.

"If we can do that, we can create sustainability benefits as well as address some of the bias and copyright challenges that come from harvesting huge amounts of data from the internet.”

Sustainable AI

For McCarthy, the challenge of sustainable AI is ultimately one of systems thinking: viewing AI within the broader context of energy, infrastructure, and society.

 “We simply can’t afford for AI to make a disproportionate demand on our energy system, especially as we electrify transport and heat,” she said. “We need to think about AI as part of our overall transition towards a decarbonised grid.”

At the same time, AI can play a vital role in supporting sustainability. “AI has a huge contribution to decarbonisation,” she said, citing UK companies funded by the Academy’s Enterprise Hub, such as Q Flow, which uses AI to monitor sustainability across supply chains, and DonAAI, which applies AI to detect manufacturing faults and reduce waste.

“What we really need,” McCarthy concluded, “is a whole-systems approach that ensures AI has a net benefit rather than a disproportionate cost.” 

That means designing AI that is “proportionate to its appetite”, enabling applications that truly matter, from decarbonisation and healthcare to scientific discovery.

nepc.raeng.org.uk

Meanwhile, the Government has pledged to bring 400,000 clean energy jobs as part of a plan to double the number of people working in green industries by 2030. To help ensure people have the skills needed, five new ‘technical training centres’ will be established to train young people for essential roles. Skills pilots in Cheshire, Lincolnshire and Pembrokeshire will be backed by £2.5m – which could go towards new training centres, courses or career advisers. The Government is also working with Mission Renewable, an Armed Forces engagement initiative for the UK Renewable Sector,  to match up ex-military – a great deal of whom already have many of the required skills – with careers in clean energy. Whether the overall skills needed are actually delivered though, time will tell, particularly when compounded with existing skills shortages across industry.

Regardless of the attitudes of the Government and opposition, Britain’s manufacturers are powering ahead with investment in green technologies, with the vast majority planning to include a commitment to green growth in their business plans over the next five years.  The findings come in a major report from Make UK, Manufacturing a sustainable future – capitalising on green technologies, which reveals that manufacturers are more committed than ever to net zero, with more than 8 out of 10 companies planning to invest in green growth, in particular prioritising renewable energy. In addition, a previous Make UK survey  found that more than 9 in 10 companies (92%) believe the transition to net zero is important for their business.

However, barriers to further investments remain, in particular the fact investments in energy efficient technologies such as solar panels, wind turbines or low-carbon heating systems face higher rateable values and, as a result, such investments are in effect penalising companies by increasing the value of their factories and therefore their business rates.

In response, Make UK is urging the Government to announce in the Budget that these investments will be removed from business rates calculations given more than 4 in 10 companies (44%) say this is holding back investment in green technologies. This factor is a greater barrier than even the cost of energy (41%), so let’s just hope that the Government takes heed.

Charlotte Stonestreet

Editor

According to Make UK, the required digitalisation and innovation boost needs a simple one-stop-shop focused on SMEs to deliver funding, training and innovation support, with the industry body highlighting how targeting dedicated programmes to SMEs has delivered a 25% increase in productivity in South Korean smart factories and a 27% drop in defects as an example.

British manufacturing companies have been lagging behind international competitors over the last two decades, with manufacturers falling dramatically down the global automation tables. The UK's use of robotics and AI systems is poor, with training of people in relevant digital skills to take advantage of the innovation tech, well below what is needed to catch up, finds the report.

Don’t get me wrong, many of the surveys and reports that cross my desk really do make interesting reading and offer a wide range of expertise and insight. Indeed, the report from Make UK and Sage mentioned doesn’t just look at how the UK has generally been slow to adopt technological advances compared to its international competitors; it then goes on to explore what can be learnt from the internationally leading countries in manufacturing digitalisation. If you fancy taking a look (which I wholeheartedly recommend) you can download the report via bit.ly/46cG9G9

However, despite the value to be found in reports and surveys, it does sometimes feel as if the authors/commsisioners/surveyors are (and I should probably include the industrial media in this as well) more often than not simply preaching to the choir: Adopting Automation increases productivity; AI could make the UK more competitive; the UK lags when it comes to digitalisation – these are all valid findlings, but honestly, if you’re not aware of these issues already, you really haven’t been paying attention.

I guess what I'm trying to get to in a roundabout way is that there's little point in all the reports and surveys if they don't result in some sort of potitive action. I'm not suggesting that businesses should go out and make radical changes on back of reading the latest industry observations and insights, but they could at least use any knowledge gained as catalyst for change. So read the reports, absorb the statistics, learn the lessons and, most importantly, take some action.

Charlotte Stonestreet

Editor