Bigger threat than Brexit?

Commentary by Claire Lauder, Director of Manufacturing and Engineering.

Brexit vs ageing workforce

I believe a combination of an ageing workforce, poor succession planning and lack of leadership pose a greater threat to UK manufacturing and engineering businesses than the looming Brexit. This is particularly true across the SME sector, which in turn threatens the stability of the supply chain to larger corporates. 

 

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My opinion has developed through discussions with senior executives in the sector. Many of the interim managers I place resolve longstanding people and performance issues which have not been acknowledged or addressed. I regularly place interim managers into SME manufacturing businesses who cannot afford a big hitter permanently on the payroll but can benefit immensely from an injection of specialist knowledge for a short period of time.

I cannot help but notice the aging profiles of the leadership teams in these businesses. Owner managers in particular are often the driving force behind the business they run and without them the viability of that business is sometimes questionable. The profile of many of these leaders means they will be leaving the workforce in the next 5-15 years, often with no obvious successor to take the helm.

One Managing Director recently told me he had taken over a business where 37% of the workforce were over the age of 62. Perhaps an extreme example, but one that is not completely unheard of across the manufacturing and engineering sectors.

Many of these leaders have come through apprenticeships, HNC, City & Guilds etc. and worked their way up the ranks. Over the last 20 or so years apprenticeships went out of fashion, as did manufacturing, and this has left a huge skills gap which has prevented businesses from nurturing the leaders of the future. The big corporates will undoubtedly continue to hire apprentices but the apprenticeship levy may discourage SME’s from doing so.

According to the Business population estimates report (October 2016, the Department for Business, Energy & Industrial Strategy), total employment in SMEs was 15.7 million – 60% of all private sector employment in the UK. The combined annual turnover of SMEs was £1.8 trillion – 47% of all private sector turnover in the UK. Almost a third of SME turnover was spread across three more sectors: Construction (11%), Manufacturing (10%) and Professional, Scientific and Technical (10%).

The importance of the SME sector to the UK is not to be underestimated, it contributes significantly to the UK economy. It will be strong leadership that makes a success of a UK post Brexit and not government policy.

Since the Brexit vote, the initial resilience of the manufacturing sector has surprised many. BDO reported that manufacturing confidence is at a 20 month high, but according to the latest Markit/CIPS, UK Manufacturing MPI figures, whilst factory output grew to the highest level for 32 months, apparently costs also saw their largest increase since 1992 when data started to be collected.

There is no doubt that post Article 50, uncertainty lies ahead for most businesses in the UK. It will be survival of the fittest. Those most adaptable and agile with the strongest leadership teams will be the ones with the best chance of staying afloat. Companies must improve their succession planning and start thinking who their future leaders might be.

Please feel free to share your thoughts and personal experiences.

Claire Lauder is Director of Manufacturing and Engineering

Comments

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Philip Holland

17 Feb 2017 09:50 AM

Claire
It's worth considering that the cohort of senior people to whom you refer, those due to leave our industry in the next 10 - 15 years (to which I belong) were privileged to have started our careers through an extensive programme of apprenticeships,  sandwich courses and often with financial sponsorship throughout a university degree and with an  almost guaranteed role on completion.

I am therefore saddened that the current succession planning issues faced by manufacturing industry have, in my opinion, bcome almost cultural and not due to lack of specific sucession planning by any one organisation. They relate to our failure to plan in the longer term and our failure to promote both engineering and manufacturing careers to the next (younger) generation.

In times of difficulty (as has often been the case in recent decades) the training budget in our larger manufacturing organisations has been one of the first to go in support of the bottom line and this has often been followed by a 'last in first out' redundancy policy driven by the prohibitive cost of losing those with long service. With regard to our SME's I have worked with several who have an equal and well founded reluctance to invest in training based on the increasingly short term nature of employment and by the fear of losing staff before realising any return on their investment.

One further negative in the UK is the differential between ourselves and Europe with regard to the esteem in which manufacturing and engineering careers are held and once again this has diverted UK talent towards more 'sexy' if (in my opinion) less rewarding career choices.

None of this has engendered  manufacturing industy to be the career of choice for our 'up and coming talent' but despite these comments I am seeing a slow reversal which has been taking place over the last few years and I am optimistic for our manufacturing future. I have seen renewed interest in apprenticeships from both employees and employers alike and have seen potential students questioning the value of the traditional three year university degree career path in favour of longer courses offering real world experience and increased prospects of actually gaining employment at the end of the course.

Our Manufacturing future lies with our ability to attract increasing numbers of talented individuals into the industry, it is our role to promote the sector and to create an environment where training is both encouraged and rewarded - In the way in which it was promoted to us. If we fail to make Manufacturing Industry the career of choice for a greater number of our younger generation, then Brexit will indeed be the least of our worries!

Phil Holland
Redgate Support Ltd


15 Feb 2017 12:18 PM

Mike, Peter and Barry, thank you for your comments. There has been some good engagement with the survey with the majority agreeing that succession planning and lack of leadership is a bigger threat to #ukmfg than Brexit. There are also lots of good comments so I shall leave it to run for another week and then share the results on here. Thank you to those who have participated in the debate.


Mike Ward

13 Feb 2017 16:11 PM

Clearly we find ourselves in a period of conflict where we need 1939 resolve to come together and succeed.

Each company needs to have a system which enables it to outperform their competition irrespective of the local, regional or global economic environments. Profits may not be as strong but the company must perform better than the competition and position to lead their sector of a market. Investment in brand and systems is key.

In respect of future development and training schools need to promote apprenticeships and university career paths and not cast those following a non universtity path on the heap.


Peter Alderslade - Productivity is UK chance to grow wealth

13 Feb 2017 12:16 PM

It's not one or the other. There are four linked issues. An aging U.K. population that drives care costs up. The determination of that population to halt immigration and free movement. UKs poor skills and education. Robotisation of many jobs. All to which, as far as I know nobody has an answer.


Barry Ryan

13 Feb 2017 10:58 AM

SMEs and their owners, are their own worst enemy. Owners often manage in a dictatorial fashion. Employees, in fear of their jobs, back away.Owners often won't take advice. Even when they bring an interim in, then within 6 weeks of them departing, the company reverts to its old practices. There is very rarely any succession planning in place because owners live in the 'now'and don't, can't or won't look ahead. This is why your remarks are so true. The answer isn't easy, because most owners don't want to hear it.