Innovating for the recovery, innovating for the future

It’s not just the design and development of the next wave of new ideas that will be important for longer term manufacturing prospects, but the way in which manufacturers have rolled with the economic tide in recent years through the agility and breadth of innovation activities.

I’ll start with the economic ups and downs manufacturers have had to manage through in recent years. Badly hit by the financial crisis and subsequent recession in 2008/09, firms have seen a slower and more unsteady recovery than many had predicted with continuing uncertainty both at home and abroad.

There have been some pockets of real strength across UK manufacturing – particularly in sectors such as aerospace and investment goods; some good inroads made into new export markets and some big investment plans committed to in the UK by major manufacturers. And while overall output is still quite a bit south of where it was before recession hit, there are more and more signs emerging that trading conditions are on the up. EEF’s latest Manufacturing Outlook report showed a broad-based improvement in output, orders, employment and investment plans.

But the risks to this recovery haven’t entirely dissipated. While our major markets in Europe are looking more stable, recent US events go to highlight that the potential for further disruptions are not far away. All of which mean that UK companies are having to be agile and responsive to the needs of their current customers while looking at where they can capture future value.

UK manufacturers have been responding in a range of ways to these new challenges. And one significant way has been an ever greater focus on innovation. In the past three years EEF’s Innovation Monitor has shown the significant emphasis placed on process innovation to meet customer needs and strengthen their position in existing markets.

For many companies during the recent period of weak and uncertain demand, process improvements have delivered quick, visible returns, reduced costs and increased efficiency. This has undoubtedly given them an edge against competitors and kept them fitter for the upturn.

Looking ahead, manufacturers are reporting a shift in focus again – in the coming years this will be towards product and service innovation. While this strategy can carry more risk, it is allowing companies to diversify into new sector markets and find new customers in overseas markets.

We see companies looking at new ways of deploying existing resources, for example companies currently in the defence sector might move towards security or civil aerospace, where there is growing demand.

We are also hearing about ever more ambitious strategies to develop export markets with new product launches and services. From the use of new materials to improve the product performance to the addition of new services targeted at a completely new customer base in developing economies.

We also see much more collaboration, with research institutions and through the supply chain to get maximum benefits from innovation investment. Just in the past two year our surveys have noted a substantial jump – from just under half to two-thirds – in the number of manufacturers working with their suppliers on innovation priorities.

And in a clear sign of confidence in the UK’s manufacturing base and its innovative capabilities, this growing appetite for collaboration is leading to a return of some production from far-flung and previously lower cost locations. Closer working with the supply chain and the ever-increasing need to be more flexible and more responsive is providing another spur to increase the use of local suppliers and bringing manufacturing back in house.

While the prevalence of uncertainty at home, and particularly overseas, looks like the ‘new normal’, UK manufacturing has been proving its ability to adapt, respond and meet the challenge of a choppy recovery. The ambition amongst UK firms to bring something new to their market, to seek out completely new markets and compete with the best in world is exactly what’s needed to deliver the export led growth the UK needs. There will also be hurdles that get in the way, but we should be confident that the next items to be added to the list of great British innovations aren’t far away.