The Manufacturing Employer of Choice

As a manufacturer, have you considered how employee engagement and becoming an ”employer of choice” can be used to recruit and retain key members of staff which can be used to push forward your growth plans?

Recent research by the EEF suggests remarkably optimistic growth predictions amongst our manufacturers for the year ahead. These forecasts were also mirrored in our 2017/18 manufacturing and engineering survey, with 78% of respondents expecting growth for their business. The optimism is marred however by growing concern over increased production costs and a mounting skills shortage. There is a rejuvenated and increasing trend towards re-shoring in a bid to control costs and improve processes. Wage costs are generally going in one direction and to control these can seem impossible but perhaps the key is to get more out of your workforce by managing retention and recruitment – in essence to establish yourself as an “employer of choice”.

A common complaint amongst business owners revolves around recruiting, and retaining, younger people in to their company. Industry stigmas and attitudes to work have their part to play but a well prepared employer can attract the talent needed to take the company forward and respond appropriately to changes in the market. In the same way that many manufacturing processes have moved with the times, so too have employee perceptions and expectations.

Engagement may sound like a buzzword but it is not something to be overlooked. Understanding your business needs and having a plan is key – for example do you know what the cost of recruiting or replacing one individual is to your company? Multiplied by the number of starters/leavers this can have a significant impact on your finances and productivity levels. In order to become an ”employer of choice”, do you understand the demographics of your workforce and what is important to them? Do your employees have a voice, and is it listened to? As a local manufacturer, are you engaging with the educational establishments within your vicinity and demonstrating the opportunities available?

Taking the time to mull over these questions, and recognise the cost to your business of getting it wrong, can lead to a focussed strategy to retain and attract talented staff. Consider flexible working options – the constraints of production line timings might impinge upon the possibility of flexible working hours but there may be other options that could be considered. Whilst cold hard cash is what’s needed to pay the bills, additional, non-monetary rewards and recognition can be just as well received. An improved quality of work life can lead to increased efficiency & effectiveness, at little or sometimes no extra financial cost to the business.

As an employer you need to understand that people talk about their work, both the good and the bad. Your staff are your best marketing tool – treat them well and they will shout about it, do the opposite and they’ll shout even louder. Becoming an employer of choice evolves over time but starts with recognising and rewarding your existing staff members. Listen to them – often the best ideas come from the shop floor, are easy to implement and have the greatest impact. Investing some time in developing the right culture now should make it easier in the long term to attract and retain the right staff for your business.

If you would like to discuss the recruitment and retention for your manufacturing business, or you would like to speak with a member of our team, please contact Ginni Cooper or call 01772 821021 to be put in contact with a member of our Manufacturing team.

Annual MHA Manufacturing and Engineering Report 2017/18

Our Manufacturing and Engineering Annual Report 2017/18 is now available to download.

Drawing on national and regional insight from over 450 clients and contacts, the findings of our recent survey identifies opportunities and concerns facing UK manufacturing and engineering businesses. Despite uncertainty over Brexit, the majority of businesses have managed to achieve growth over the past 12 months and the sector remains optimistic about the future. The respondents were from a variety of sub-sectors within manufacturing and engineering including: aerospace, automotive, agriculture, biotechnology, chemical, construction, electrical and electronic, food and drink, healthcare, leisure, metals, minerals and materials, oil and gas, pharmaceuticals, renewables and transport, to name but a few.

The report contains a national snapshot from each of the MHA member firms covering England, Wales and Scotland. Along with commentary from sector expert Philippa Oldham CEng MIMechE, Head of Transport and Manufacturing at the Institution of Mechanical Engineers and insight from Sir John O’Reilly, chairman of The ERA Foundation and government adviser on manufacturing and engineering.

Dispelling the myths around automation

Industry 4.0 has evolved from the need for increased flexibility, quality, efficiency and speed – It is a vision of changes in technology and the convergence of the digital and physical world. Manufacturers are starting to embrace the concept of the smart factory, either on a small or large scale. Whilst most of the technology used has been around for some time, it’s implementation is starting to make more commercial sense with the falling costs of sensors and the affordability and availability of cloud computing.

 

But there are still doubters, those who resist change and can only identify the negatives in a plan rather than appreciate the possibilities. Some are of the opinion that jobs will be lost as robots replace people, that the quality of a product will be compromised due to lack of supervision, or that the brand will be adversely affected due to customer reaction. In some specific cases this may be true but let’s also consider the advantages:

 

Robots replacing people

People will not be replaced fully by automation – yes people will be redistributed, but this will be one of the advantages automation brings. Where there is currently a repetitive, dangerous job being carried out by a human who is exposed to risk, there is an opportunity for automation. Safer operations will surely improve an employee’s quality of work life and possibly give them the opportunity to move into a higher skilled role. Resultant improved staff morale and a better skilled workforce can only be good for business. The key is to keep the staff in the loop, letting them know of any planned changes and setting out the impact and benefits for them as individuals and the business as a whole.

 

Product quality

As already demonstrated, the human is not being taken out of the equation, therefore a level of supervision on any production line will still be evident. What will be minimised however is the error rate that can arise due fatigue, or distraction, or ill health. Subject to the robot being correctly programmed and the quality of the materials being used, the automated production line will keep on churning out the same product to the same specification every time, with minimum wastage.

 

Impact on the brand

Consumers’ expectations are driving automation – how else can a bespoke product be ordered online and delivered the following day ? Automated processes can cut down on errors, enable faster deliveries and speed up the restocking process – autonomous fleets of delivery vehicles are not too distant a vision. All of these factors contribute to a company’s ability to review and make improvements to customer service, giving the end used exactly what they want. It may well be that it is the failure to consider automation that will impact the brand due to a perception of outdated processes or obsolescence.

 

If you would like to discuss Industry 4.0 in more detail, or you would like to speak with a member of our team, please contact Ginni Cooper or call 01772 821021 to be put in contact with a member of our Manufacturing team.

The Connected Factory – in the most tax efficient way

It is difficult to read any manufacturing and engineering related article without seeing reference to Industry 4.0 or the Fourth Industrial Revolution or The Connected Factory, dependent upon which title is preferred. The sector is currently presented with great opportunities that can arise from automation, the Industrial Internet of Things (IIOT), servitization and robotics. These advances in technology should enable businesses in the sector to increase output levels, improve quality and accuracy and reduce down time. Sceptics warn that increased automation will lead to lost jobs in the workplace but in practice this does not seem to be the case and many SME’s are investing in Human Machine Interface (HMI) technology to augment their manufacturing processes.

 

As business owners consider investing in advanced technologies to stay competitive within the market place, there is significant merit in researching the various products available, in addition to mapping out the time line for expenditure. The amounts involved can be substantial and it is vital that capex projects are well planned to take advantage of the various tax reliefs and allowances available.

 

Stagger the project

 

Subject to meeting the commercial objectives of the investment, where total expenditure exceeds the Annual Investment Allowance (currently £200,000 per annum for qualifying expenditure) , it may be worth considering deferring or advancing part of the project to stagger the expenditure over two financial years. There are rules that dictate when the capital allowance can be claimed so care needs to be taken to ensure these are adhered to, but staggering the capex project can mean the difference between an allowance of 100% in the year of expenditure or 18% write down on an ongoing basis.

 

Consider Enhanced Capital Allowances (ECA’s)

 

There are further opportunities to maximise allowances where qualifying expenditure is incurred on energy saving and environmentally beneficial plant and machinery. Where such assets meet the government’s approved energy efficiency ratings and are listed on certain databases populated by the Carbon Trust, such assets can qualify for ECA’s and receive the benefit of 100% tax relief in the year of expenditure.

 

Don’t overlook R&D expenditure

 

Companies should review their expenditure and consider whether there are any elements of Research & Development within the project. SME’s can claim an enhanced deduction against tax of 230% of the eligible costs incurred. R&D relates to activities treated as such under UK accounting practice, as modified by HMRC. Where work has been carried out to improve processes and overcome a scientific or technical uncertainty, a claim may well be possible.

 

This is an exciting and challenging time for the sector and investment in advanced technologies and factory connectivity is vital for many businesses. Whether the investment project is on a relatively small or large scale, taking the time to plan can have a real impact on the company tax position and therefore cashflow.

 

If you would like to discuss Industry 4.0 in more detail, or you would like to speak with a member of our team, please contact Ginni Cooper or call 01772 821021 to be put in contact with a member of our Manufacturing team.

Industry 4.0 risk evaluation

The manufacturing industry is evolving at a significant pace – the need for increased flexibility, efficiency and speed of production has evolved into what we now refer to as Industry 4.0, or the Fourth Industrial Revolution. The smart factory, with intelligent networks where everything from the assembly line to goods outwards is connected, autonomously exchanging information and triggering actions, is becoming the norm.  Whilst this revolution can be extremely beneficial in increasing efficiency, it also brings with it new risks that business owners need to consider.

 

These cyber-physical systems cover smart machines, storage systems and production facilities – not just in one factory but possibly across many. In addition, many manufacturers are now closer to their business partners and openly share knowledge and data up and down the supply chain in an effort to harmonise systems and increase productivity. While the integration of systems that were once separate benefits manufacturers, it also carries risks in particular to security. Processes that were once isolated are now vulnerable to cyber attacks that may cause disruptions or loss of assets, at enormous cost to businesses.

 

Just as manufacturing businesses employ people to spend time and resources on ensuring that machinery is properly maintained and serviced, so the same levels of care and attention must be paid to security. Highly confidential data must be encrypted to ensure that only those with authorisation have access. Network security, deployment of anti-malware, instilling data loss prevention solutions should all be considered to protect systems, processes, IP and high value data assets.

 

In a similar way to which health and safety, or production maintenance is approached, business owners should develop a plan – a risk management strategy to define who will be responsible for identifying threats and weaknesses within the system, how these will be prioritised and what can be done to mitigate the risk. Being prepared for the possibility of attack is important, it is impossible to be 100% secure so a response plan is essential. Even with the best preventative measures, attackers can gain access to sensitive systems. In this case, it is vital to detect the attack as soon as possible, isolate affected systems and take remedial action. All staff in the business should be made aware of such plans and take responsibility for their part in the process. In addition, as manufacturers are increasingly sharing data across supply chains, there is a growing need to also assess the security strategies of business partners.

 

As part of the planning process in the move towards a smart, connected factory, the business owner that evaluates and manages the associated risks should be well placed to take advantage of the competitive edge offered by Industry 4.0.

 

If you have any questions or would like to discuss Industry 4.0 with us in more detail, please contact Ginni Cooper or call on 01772 821021 to be put in contact with a member of our Manufacturing team.

Measures Impacting Manufacturing Businesses

Measures to support the Governments Industrial Strategy for which there is a current Green Paper, together with the Industrial Strategy Challenge Fund are to be welcomed.

 

The Chancellor also confirmed the that there will be funding to develop so called ‘T levels’ which will see an academic and vocational divide at 16, with 15 new technical education routes being made ready for launch in 2019. It remains to be seen how this will work in practice, but at least there appears to be something more than lip service to the skills shortage faced by the sector.

 

There is renewed focus on higher technical education alongside the Talent Funding program to fund additional phD places, and the vast majority of these places will be within STEM disciplines.

 

The Chancellor underlined his support for ensuring the UK leads as a centre for innovation by bringing forward simpler administration for the R&D Tax Credits mechanism, which provides funding for many companies across the UK.

 

Overall, this budget will have a broadly negative impact in tax terms on many businesses in the sector, but with some focus on skills, for once, the direction of travel on that score looks more positive.

 

Ginni Cooper, Corporate Services Director says:

We are all too aware of the skills gap and its effect on businesses in the manufacturing and engineering sector so any drive towards addressing this is welcome. The newly announced “T” levels are a while off launch yet though, so it’s vital that employers look at what they can do now. The new apprenticeship levy may be a useful aid in enabling the upskilling of current workers as an alternative to taking on new recruits. 

 

The Apprenticeship Levy also kicks in soon which, if it delivers what has been promised, should help to improve prospects for securing the sector’s future workforce. In conclusion, whilst there were a number of missed opportunities to encourage accelerated growth in the manufacturing and engineering sectors, perhaps we can look forward to more positives when the Chancellor presents his second budget of the year in the autumn.

Spring Budget 2017 – Manufacturing and Engineering Sectors

The most noticeable aspect of the final Spring Budget (for the foreseeable future) was the brevity and lack of new content!

 

At the same time, the lack of major reform also allows for a period of certainty which is welcome whilst wider economic issues take precedence. Notably, whilst there had been commentary from the government that the Budget would encourage positivity ahead of Brexit, there was little mention of the impact of Brexit, positive or negative.

 

Tax Measures Impacting Manufacturing Businesses

The tax related measures were mainly limited to raising taxes from the self employed and owner managed businesses, whilst softening the impact of previously announced changes to Business Rates and Stamp Duty Land Tax.

 

Owner managers and the self employed were subjected to a week during which they were faced with an increase in Class 4 NIC in addition to a reduction in the dividend allowance. The Chancellor’s rationale in raising more tax in this way was to find the money to pay for increases in funding for Social Care and to help soften the impact of the Business Rates increases. The Chancellor also sought to remove any disparity in tax payable between the employed and the self employed to ensure that those opting for the so called ‘Gig Economy’ are doing so for commercial rather than tax reasons. Seven days later the Chancellor announced a U-turn in respect of the hike in Class 4 NIC and confirmed that the abolition of Class 2 NIC will still occur in April 2018.

 

To one extent or another, these measures will impact owners of many businesses involved in the manufacturing and engineering sector. For example, owner managers will face increased costs in the form of increased income taxes on extraction of profit. At the same time, in tax terms, it will be less attractive to be a “consultant”. It remains to be seen whether we will see an increase in businesses hiring on fixed term or full time employment contracts, rather than using workers who operate as self employed or via personal service companies.

 

Ginni Cooper, Corporate Services Director comments:

As expected, the budget was far from exciting for the most part, firming up on some previously announced measures here and there. The controversy surrounding the planned increase in Class 4 NIC rates was certainly a talking point and our owner manager clients will welcome the U-turn at a time when, as an individual consumer, they are already feeling the pinch elsewhere. We’ll have to wait until the Autumn Budget to see how the Chancellor plans to fill the gap now left by the reverse decision.

 

From an administrative perspective, the deferral of entry into Making Tax Digital for businesses below the VAT threshold will be helpful to a large number of the smallest businesses across the UK.

Could the rise of import costs be an issue for UK manufacturing?

Reports show that over the last month the cost of imports has risen significantly, since the Brexit vote, which may take the shine off the strong performance the manufacturing sector has been showing recently. The rising cost of imports is expected to push the price of UK-make goods notably over the coming year.

 

The Bank of England has highlighted that price pressures in the economy are growing and especially in the manufacturing industry due to the sector relying heavily on raw materials and components brought in from overseas.

 

Industries with different overseas suppliers are also thought to be lobbying to stay inside the single market and maintain access to the various EU markets tariff free. Car firms have also warned the government that if they face tariffs and higher regulatory costs on imports and exports to the EU, the future of their investments in the UK might not be certain, as the fall in sterling against the dollar and euro would not be enough to keep their investments. Nevertheless, a consistent increase in new orders and activity has been registered since May 2014.

 

Overall manufacturers shouldn’t rely too much on domestic demand as it could fade away once the price rises feed into the supply chain.

 

Ginni Cooper, Corporate Services Director said:

 

“The effect of weakened sterling brings an added challenge to our UK manufacturers who import a significant proportion of their raw materials. Whilst our net exporters may currently be enjoying the upside of a weakened pound, many manufacturing businesses supply solely or predominantly to the UK. Business owners are having to weigh up whether increased prices can be passed on to the customer or absorbed via effective cost control elsewhere, easier said than done in light of ever increasing energy and employment costs.”

Industry 4.0: The smart factory of the future

Industry 4.0 is transforming the sector by introducing automation and data exchange in the manufacturing technologies. It includes advanced robotics and artificial intelligence, sophisticated sensors, cloud-based computing and the Internet of Things (IoT). This technological innovation is still in its early stage of development but it has already started changing the face of the sector.

 

The main focus of Industry 4.0 is the end-to-end digitisation of all physical assets and their transformation into the digital world. In theory, the cyber-physical systems are designed to help monitor the physical processes and introduce a virtual copy of the physical world, which will help in the central decision-making process.

 

So you might wonder where the Internet of Things comes in. Well, the cyber-physical systems are designed to communicate with the corporate and “human” departments in real time via the Internet so that they can make sure both internal and external parties in the production process are kept up to date. This helps develop a more advanced level of cross – organisational services offered and used by all players involved in the value chain process.

 

Mainly the automation of the manufacturing sector will help businesses optimise productivity and develop a better understanding of how digital technologies can help create many much-anticipated solutions for their factories.

 

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Ginni Cooper, Corporate Services Director, at Moore and Smalley adds:

 

“Recent technological advances have altered consumers expectations – technically competent customers now expect to be able to research, download and obtain what they want, when they want it. Sustainability is an important factor and if a product is personalised to the individual, even better. All this means that manufacturing and engineering companies have to differentiate themselves and work smarter. Industry 4.0 is not necessarily just about mass automation but a step towards more flexible, collaborative working throughout the production process, with feedback at all stages resulting in improved knowledge and products.”            

                                                                                                                                

Many manufacturers are still confused as to what Industry 4.0 is and what exactly it can bring to the table. Some, who are aware of the new trend in the industry, are still sceptical of what they might see as marketing build-up. We encourage businesses to monitor the coming changes and introduce new plans to help make the most of the new opportunities which will become available.

 

The highlights of Industry 4.0 include better transparency and agility integration for businesses, together with the way it allows industrial manufacturers to be more responsive to customer needs and reach the end customer more directly. Finally, you have the option for self-monitoring products and services, which enables a better analysis of the data generated in the business. For example, companies will be able to gain a better understanding of how well their products and services are functioning and how well they are used, by getting this information directly from their customers.

 

Industry 4.0 is the future for the manufacturing sector, so if you would like more information on anything mentioned in the blog or on how our services can help your manufacturing business, please contact me on 01772 821021 or email me on ginni.cooper@mooreandsmalley.co.uk.

 

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MHA Manufacturing and Engineering Annual Report 2016/17

Our 2016/17 MHA Manufacturing and Engineering Survey Report is now available. Drawing on national and regional insight from over 560 clients and contacts, the findings of our recent report identify opportunities and concerns, signposting future developments in the sector.

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