By Jon Quick, CEO, Launchpad
Always fun when you can start writing by trying to decide between quoting George RR Martin or Sun Tzu’s version of the sentiment that change creates opportunity. This week, the UK’s new Employment Rights Bill cleared its final parliamentary hurdle and will soon be signed into law. As with all legislation there will be benefits both intended and unintended, and consequences both intended and unintended. From a manufacturing perspective it will undoubtedly force a major reset in the relationship between employer and employee. The A players in the industry will treat this as an opportunity rather than a threat.
Regardless of which side you are on as to the merits or drawbacks of the legislation, everyone seems to agree on one thing: manufacturing is hard. It involves complex processes, dangerous machinery and punishing environments. Everyone agrees that there need to be protections for workers, the differences occur when you get to the specifics as to what and how. When a government like the UK takes a stand on how they see things, it isn’t done in a vacuum. Manufacturing occurs as part of a global economy and differences in regulatory environments create an uneven playing field in comparison to the US…China…etc.
Those concerned about the UK’s new legislation will go down the path of too much red tape and bureaucracy stifling innovation, dampening investment and harming the industry it is trying to help. Math is math. Increased labor costs have to be borne by someone. It either gets passed on to customers, absorbed by companies, or avoided by moving manufacturing to a lower cost jurisdiction or outsourcing. Before you assume this is a multinational issue you should note that 99% of the manufacturers in the UK are SMEs. This will have a material impact on their ability to compete, to grow/scale and even survive.
Life has been tough for the manufacturing industry. COVID hit harder on industries that can’t work remotely. They had shipping lane shutdowns, tariffs and trade wars, and now a major reset in their regulations regarding labour.
In the UK specifically, manufacturing has fallen out of the Top 10 globally, and the problem goes beyond volume as productivity is lagging. The IMF has highlighted that there is an increasing gap vs the US that has been widening since the financial crisis.
Commentators are increasingly seeing boosting productivity as key to kickstarting Britain’s economy (with similar sentiments being expressed in the US, Canada, etc). A recent Reuters analysis called for a “supply side revolution” to reverse the decline in productivity growth. I’ve advocated for, and have found a number of like-minded people that believe that, reindustrialization is the critical path towards rebuilding western economies. This sits within the broader context of China’s plans to turbo-charge its investment in robotics, and our need to raise our game to remain competitive.
Business groups are looking to massage the final legislation/implementation, as they should. At its best that is a situation of making a bad situation, less bad. Visionaries need to embrace their inner Winston Churchill and “never let a good crisis go to waste.” Automation is an inevitability. Its current penetration is <3% because as an industry it has failed its customers. Large upfront costs, customers bearing all of the business risk, automating everything including things that shouldn’t be automated – is insanity. Thankfully we live in a world where startups, such as Launchpad, are changing the game. Use robots for what robots are good at. Leave humans to do what humans are good at.
This new UK bill is changing the equation when it comes to labour. The UK government’s impact assessment forecast was £4.5-5 billion per year in extra wages and compliance costs, as well as unmeasurable additional legal exposure and liability. This will disproportionately impact small businesses that don’t have, or have small, HR/legal departments. Plus manufacturing is a lower margin industry. With the new math, the UK’s manufacturing companies (mostly SMEs, as noted above) need to take a fresh look at automation…(hint: it will now pencil!)
This year, industry body MakeUK calculated that there are 55,000 long-term unfilled manufacturing vacancies in the UK, costing the country £6 billion per year. The same is true in the US where there are >600k open jobs, a figure that’s expected to increase to >2M by 2030.
The UK already couldn’t find labour to fill the positions it has, and now it has less money to do so. How much more a burning platform needs to exists before fully embracing robots to supplement human labour in the UK?
Everyone seems to have the same goal. Quality, safe manufacturing jobs. Bring in robots to do the high-risk, monotonous manufacturing jobs. Have humans do the higher-value jobs. The combined cost structure enables the UK to be globally competitive protecting existing industries/jobs and leading to a future with increasing investment and additional jobs.
Far from a challenge, the Employment Rights Bill should be a call to arms to UK manufacturers. It’s time to embrace robotics and automation, and step into the future. If you aren’t sure how to do it… just give me a call.
