UK Manufacturing Competitiveness: The Threat from Energy Costs and Skills Gaps

An important contribution to the debate about the UK's industrial strategy was made by the CBI in October 2014 and much of what was said is directly relevant to students researching the opportunities and threats facing UK manufacturing.

The CBI press release can be found here.

In his speech, John Cridland (CBI Director-General) paints a fairly optimistic picture of the opportunities for UK manufacturing, highlighting the reshoring trend, exporting to emerging markets, and greater use of domestic firms in the supply chain as three key opportunities.

However, he points to two key threats which he claims have the potential to de-rail UK manufacturing:

• High energy costs
• Skills shortages

The importance of energy costs to manufacturers depends, to a large extent, on the nature of the manufacturing process. For some sectors such as chemicals and steel production, energy costs are a very high proportion of overall production costs. The CBI indicates support for the adoption of fracking as one method of reducing industrial energy prices:

"The undoubted benefits of fracking must also be recognised and carefully exploited"

The growing skills shortages or gaps in UK manufacturing might be a harder problem to overcome in the short-to-medium term. But the CBI are clear that they present a significant threat:

“We have to grasp the urgency of the skills crisis, which feels like a car crash in slow motion. As engineers hang up their hard hats and head for retirement, we simply don’t have enough of the next generation coming through."