Closing robotics and AI gap could boost UK GDP by £150b

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. Our 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.

Making it Smarter: Global lessons for Accelerating Automation and Digital Adoption in UK Manufacturing reveals that nearly half of British manufacturers identify a lack of technical skills as the biggest hurdle to improving their use of innovative advanced technologies. Those projects which do start often stall after implementation stage, because companies cannot find the help and advice they need to make the technologies work well. Countries where all SME innovation funding and advice is held under one easy-to-access ‘umbrella hub’ have dramatically higher success rates.

The Government’s recent Industrial Strategy sets out how it will create a digitally literate workforce by 2035, but we simply can’t wait ten years for this to happen, says Make UK, which is calling on Government to embed targeted funding for digital skills needed in manufacturing and engineering to accompany the existing £100m already set aside for engineering skills.

For decades, South Korea has been undergoing a successful automation drive to transition from legacy production methods to advanced digitalised factories. It has stuck religiously to a single strategy, concentrating on education, infrastructure and innovation. The Government provides SMEs with bespoke incentives – offering easy to access R&D tax incentives of 30% for companies investing in semiconductor facilities, and broader tax credits guaranteed to 2029 and beyond. This certainty and confidence has led to South Korea turning into a global leader in the production of semiconductors and other advanced technologies.

The South Korean Government also saw the need to make education work for industry – providing the employees to power the technologies. It committed to training 40,000 people to operate fully automated production systems and there are now no skills shortages in technical and digital innovation. The rewards are high; firms adopting smart technologies see a 25% increase in productivity and a 27% drop in defects.

Singapore underwent a similar transformation, now a global leader in high-value advanced manufacturing, concentrating on the lucrative semiconductor market, precision engineering, pharmaceuticals and clean energy. Singapore’s pro-innovation environment delivers some of the most generous R&D tax incentives in the world, where companies can claim up to 400% tax deductions on local R&D or opt for a 20% cash payout. The incentives are embedded in a long-term industrial policy, giving SMEs and start-ups greater cashflow certainty and the ability to grow to their full potential.

Germany has stayed top of the international performance leagues consistently over the last decade. It’s success is largely driven by embedding research institutions into local industry, with a particular focus on SMEs. Overall Germany’s successful approach blends SME-only tax relief, sector-specific research and regional accessible digital support.

With a population no larger than London’s, Switzerland delivers a manufacturing output of around £150 billion – astonishingly close to the UK’s £217 billion. This remarkable productivity stems from a national strategy that prioritises advanced technologies, SME competitiveness, and long-term innovation. The Swiss Innovation Agency typically funds up to 50% of eligible project costs for SMEs, while larger firms only qualify if they partner with smaller ones.
 
Seamus Nevin, chief economist Make UK said: “Time and again, we hear from small and medium-sized manufacturers that they’re keen to adopt new technologies, but are being held back by fragmented support, complex funding systems, and a lack of accessible, appropriate digital skills training. If we want to unlock a £150 billion boost to UK GDP by 2035, we must make it easier for SMEs to adopt automation and AI.

“Other countries are accelerating ahead by putting smaller firms at the heart of national strategies – with long-term support that’s simple to access, reliable, and rooted in real business needs. From South Korea to Switzerland, governments have created clear, SME-focused strategies that simplify innovation funding, offer long-term tax incentives, and ensure every business can access practical support.

“These policies work not just delivering improvements in economic growth, but also in more environmentally friendly processes with fewer defects, higher profit margins, and creating more higher skills, better paying jobs.”

Read the full report at:

Making it Smarter - A Make UK/ Sage report - Google Drive