Domestic manufacturing supply chains must be supported to boost UK economy

20 October 2014

Reinvigorated UK-based supply chains could bring a £30 billion boost to the economy by 2025, but government must support industry via tax incentives and a national materials strategy in order to realise these benefits.

A report from the CBI and AT Kearney has found that building stronger UK supply chains will help rebalance the economy by boosting growth in the manufacturing sector and creating more than half a million jobs across the UK.

But a growing shortage of skilled supply chain professionals and continued underinvestment in research and development risks pushing the UK manufacturing sector behind its international competitors.

The CBI is calling on the government to create a national materials strategy to protect and enhance critical supply chain sub-sectors, and introduce tax incentives to encourage long-term investment in small and medium-sized businesses.

The government should also carry out a review in 2017 to gauge how effectively public bodies are considering social value in procurement activities.

“As the challenges of global supply chains become better understood, companies are beginning to look beyond the headline cost to the true value,” said Charles Davis, strategic operations partner at AT Kearney.

“Winning will be through supply chains that drive revenue, not just striving to be the lowest cost. This report shows that the most important factor in supply chain location decisions was service/innovation scoring 36 per cent, with total cost next at 30 per cent. While innovation should be the catalyst, at the same time we also need to ensure the skilled resources and correct environment are in place.”

Katja Hall, CBI deputy director-general, added: “We need to see a bold strategy that breathes new life into our supply chains, and makes the UK the destination of choice for manufacturing high value products. The scale of the challenge is sizeable - our competitors are powering ahead, with France outstripping our R&D investment by 40 per cent. At the same time, only three per cent of our graduates end up in engineering or technology jobs."

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