Manufacturers in the UK are making significant strides in their digital transformation journey towards achieving Net Zero goals. This movement is driven by a commitment to reducing energy consumption, cutting greenhouse gas emissions, and enhancing overall productivity within the manufacturing sector. Recent research, published by Make UK, the manufacturers' organisation, in collaboration with Sage, the market leader in cloud business management solutions, highlights these encouraging developments.
The study, titled 'Decarbonisation through Digitalisation,' reveals that manufacturing companies are embracing digital technologies at an unprecedented rate, reaping numerous benefits along the way. These benefits include increased productivity, product enhancements, reduced waste, and improved labour efficiencies. A diverse set of digital tools, including data analytics and supply chain management for enhanced resilience, as well as full automation of business processes spanning finance, human resources, manufacturing, and procurement, are contributing synergistically to the boost in productivity.
An impressive 48% of manufacturers have active plans to invest in digital technologies to decarbonise their operations
An impressive 48% of manufacturers have active plans to invest in digital technologies to decarbonise their operations, with nearly a quarter having already made significant investments in digital solutions. Additionally, 23% of manufacturers intend to make similar investments within the next year. Among companies that have already integrated digital technologies into their production processes, 62% reported energy cost savings. More than half of these companies saw savings ranging from £10,000 to £100,000 in the past year, while another 46% reported energy savings of under £10,000, still significant to their bottom lines.
However, the benefits extend beyond energy cost savings, with companies reporting tangible reductions in labour costs, material wastage, and water usage. A substantial 44% of the surveyed companies stated that digitalization has been the primary driver of their productivity improvements, leading to the optimisation of production processes.
It is noteworthy that the imperative to reduce carbon emissions is now deeply ingrained in the business plans of most manufacturing companies, with a quarter of UK manufacturers acknowledging that new digital technologies have already influenced their decarbonisation efforts and their pursuit of ambitious Net Zero targets. Only a small minority, just one in ten businesses, do not anticipate any impact from digitalisation on their Net Zero ambitions.
Among the surveyed companies, 30% have already invested in digital tools for supply chain management, which can reduce emissions and enhance resilience in response to challenges such as disruptions caused by new Brexit trading rules and long-term disruptions related to the Covid-19 pandemic in Asia.
Despite these positive developments, significant barriers to digitalisation remain, with 60% of manufacturers expressing concerns about upfront costs and the lack of precise timelines for return on investment. To drive further adoption of digital technologies in their journey towards Net Zero, 45% of companies indicated that more evidence of the return on investment would be essential.
Tax incentives were also highlighted as a potential catalyst for adoption, with half of the manufacturers emphasising that tax incentives for investing in digital decarbonisation technologies and upskilling their workforce would greatly accelerate their efforts. It is worth noting that smaller companies face greater challenges in taking the initial steps towards digitalisation, with 64% of SMEs experiencing skills shortages while attempting to invest in and adopt digital technologies.
In conclusion, the manufacturing sector in the UK is making remarkable progress in its digital transformation, driven by the imperative to reduce carbon emissions and achieve Net Zero targets. However, challenges such as upfront costs and the need for tax incentives remain, and government support is seen as crucial in accelerating this transition. By expanding initiatives like the industrial digitalisation program 'Made Smarter' and providing incentives for sustainable production, the government can play a pivotal role in ensuring a more sustainable and technologically advanced future for the manufacturing industry.
Stephen Phipson, CEO of Make UK, the manufacturers' organisation, emphasised the need for government involvement to expedite this process. He called for a national rollout of the industrial digitalisation program 'Made Smarter' and its expansion to include industrial decarbonisation. Additionally, Phipson proposed the expansion of R&D tax relief to cover capital equipment related to industrial decarbonisation and the introduction of a 'Help to Grow Green' tax credit to incentivise businesses to adopt more sustainable production practices, particularly in the face of rising labour and energy costs.
The Path Forward for a Sustainable and Technologically Advanced Future for Manufacturing
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