Manufacturers say digitalisation is top catalyst for productivity improvement

Britain’s manufacturers are powering forward in their digital journey towards Net Zero as the sector moves to reduce energy usage and costs, cut greenhouse gas emissions and boost productivity, according to new research published today by Make UK, the manufacturers’ organisation and Sage, the cloud business management provider.

The research - ‘Decarbonisation through Digitalisation’ - shows manufacturing businesses are investing in digital technologies more than ever before and reaping benefits – from productivity increases, product improvements, reduction in waste and labour efficiencies.

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Nearly half of manufacturers have an active plan to invest in digital technologies to decarbonise their business and almost a quarter have already invested in digital solutions. A further 23 per cent plan to do so in the coming 12 months. Some 62 per cent of companies which have already adopted digital technologies into their production processes reported energy cost savings – over half said those savings were between £10,000 and £100,000 the last 12 months. A further 46 per cent said energy savings came in under £10,000 but were still significant to their businesses.

Companies also cited cost savings on labour, material wastage and water usage. Almost half of companies surveyed said that digitalisation has been their firm’s top driver of productivity improvements, with production processes tightened up. 

The need to reduce carbon is now embedded in most companies’ business plans with a quarter of Britain’s manufacturers believing new digital technologies have already had an impact on decarbonisation and their ability to achieve challenging Net Zero targets. Just one in 10 businesses do not believe that digitalisation will have an impact on their Net Zero ambitions.

Of those surveyed, 30 per cent of businesses reported they had already invested in supply chain management digital tools which can reduce emissions and build resilience from delivery disruptions caused by new Brexit trading rules and long-term Covid disruption in Asia. 

However, significant barriers to digitalisation remain, with six in 10 manufacturers still wary of the upfront cost without accurate timings for return on the investment. Almost half of companies surveyed said more evidence on investment return would help drive positive decisions towards the adoption of digital tech as part of their journey towards Net Zero.

Half of manufacturers said that tax incentives to invest in digital decarbonisation technologies and upskill their current workforce would provide a major boost to uptake. Again, SMEs found taking those first digital steps much harder than larger companies, with  64 per cent of smaller firms saying they experience skills shortages while trying to invest and adopt digital tech. 

Stephen Phipson, CEO of Make UK, the manufacturers organisation said: “Britain’s manufacturers have long been at the forefront of digital innovation globally and they have taken significant steps to cut carbon emissions and move towards Net Zero. 

"But in order to supercharge that journey, business needs Government to play its part in driving the process forward.

“To that end, Government needs to help them move forward faster by committing to a national rollout of the industrial digitalisation programme Made Smarter across the UK and expand its remit to include industrial decarbonisation. Made Smarter has already delivered amazing successes in helping SMEs boost their productivity through digitalisation, and they are ideally placed to pick up the mantle to help decarbonise through digitalisation. 

“We need to see an expansion in the R&D tax relief to include capital equipment relating to industrial decarbonisation and the introduction of a Help to Grow Green tax credit to incentivise businesses to take those first active steps to produce goods more sustainably at a time companies are cash-strapped through the burden of higher labour and energy costs. ”