Ask the Experts: Brexit & Factory Automation

In the last of my conversations with automation industry experts, I spoke with 20 year factory automation veteran Reto Berner. After 20 years with a global leader in factory automation, today he works for one of the world’s biggest providers of construction solutions.

We had a fascinating chat about what he thought Brexit meant for the UK economy and how a faster, wider adoption of automation in manufacturing processes is needed to help the UK stay competitive with Europe.

The Facts

Brexit is going to cause investment in the UK economy to decrease. I’ve already discussed this in my articles about process and building automation at length so I won’t dwell too much on it here. It’s a given that businesses are risk-averse though, and currently the UK in 2019 is a very risky investment proposition.

Looking at 2016 figures, 54% of the UK’s imports and 43% of exports were with the EU. That’s a figure that is almost certainly going to change as the UK distances itself from our biggest trading partner. The only issue is that, with reduced investment, the UK is essentially going through this separation with less money coming in.

So how does the UK mitigate that? For Reto it’s all about adapting in a constantly evolving economic landscape where efficiency and productivity is king. How? By using automation and industry 4.0 as a vehicle.

Ground to Make up

When it comes to productivity, the UK has a lot of ground to make up.

Here’s a graph Reto referenced in our conversation, taken from a fascinating FT article on UK productivity:

Graph originally posted on The Financial Times website. To see the original click here

Japan excluded, there’s a serious productivity gap that needs covering to even achieve parity with other global economies. Reto believed this could be down this to a failure to adopt automation in the way other countries have, as indicated in the Roland Berger Industry 4.0 Readiness Index. The UK has lost out on increased productivity because investment hasn’t been made in the technology. Many commentators believe this is a hangover from the financial crash of 2008 – but a reluctance to take risks on new processes and technology could now, in a Brexit scenario, come back to haunt the UK.

Adding to this is the amount UK manufacturing produces.

Not only are the UK less productive, they’re also manufacturing significantly less. Only 10% of the UK’s GDP comes from manufacturing, compared to 15% from Switzerland (a smaller economy) and 19% in Germany (a significantly larger one). In a post-Brexit UK, it’s a possibility that imports in certain sectors will become more expensive meaning that, for non-essential imports at least, the UK must strengthen its manufacturing capabilities.

The way to do that and remain competitive? Automation.

Don’t Get Left Behind

This could be good news for early adopters. By that I mean entrepreneurs who have adopted automation already in their manufacturing processes. They could see an increase in business as competition decreases – those who aren’t able to keep up with the necessary pace of change will be left behind. Reto mentioned that ‘the invisible hand of the economy’ may have to come out and help certain businesses, but for some it may be too little too late.

One company I spoke with recently are an example of this.

I was speaking with the CEO of an SME responsible for manufacturing sensors. They’re opening an office in either Ireland or Germany just in case a trade deal, or lack of, means imports increase in price.

In the price sensitive sensor market, a extra 15 or 20% in hypothetical tax could render them uncompetitive and ultimately put them out of business. This is a realisation that many companies who don’t have an international presence are coming to. They may need to expand internationally to mitigate additional tariffs or adapt and change their processes to stop being dependent on imports.

Looking Ahead

In summary, the UK needs to cut down on expensive imports through keeping more manufacturing in-country, and do it more efficiently. Easy, right?

Obviously not. But that could provide an opportunity for those early adopters and entrepreneurs I’ve already mentioned. If they continue to be brave that is. The fact of the matter is that there is still work to do for everyone, early adopters of automation included, in order to keep pace with the furious modernisation and progression of manufacturing on the continent and further afield. For some, based on decisions that have already been made – it may already be too late for some to catch up.

On another positive note, Reto echoed the sentiments of all the experts we spoke to, in that the UK economy is in a good place. It’s resilient, adaptable and will almost certainly recover once the next 18 months are out of the way and trade agreements are in place.

In the meantime, in the factory automation space at least, it promises to be the entrepreneurs and early adopters that stand to capitalise, with adoption of technology an especially important part of that. To finish with a quote that we ended our conversation on:

“Automation is an essential part of avoiding the negative impacts of Brexit”

The next 18 months promises to be an exciting and volatile period for the whole of the factory automation industry.

Do you agree? Let me know your thoughts on this subject!

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