a more INTELLIGENT approach to equipment finance

Is automation the answer to dealing with a shifting workforce?

Technological development is treated with both excitement and trepidation in the manufacturing sector. Despite the fact that automation has been a consistent theme for centuries, it does little to reassure employees threating about their jobs, or businesses that fear getting left behind.

But every period comes with nuances, and today is no exception for British manufacturing firms. Disruption is coming from all angles – from Brexit through to innovations as far reaching as artificial intelligence (AI) and 3d printing – and each has an impact on the shape of the workforce. Here we look at the political and commercial backdrop, arguing that challenge and opportunity comes hand in hand – and that automation might often provide an answer.

Are wage costs about to rise?

When manufacturing leaders like Jaguar Land Rover announce cost cuts, it raises alarm bells. A combination of falling demand from China, government actions around diesel vehicles and the headwinds of Brexit have hit the company, and it seems likely that staff will be cut. Thus, for casual readers of the business news sections of a daily newspaper, it might be easy to conclude that it is doom and gloom for employment opportunities in the manufacturing sector – and that wage costs might be pushed downwards as a consequence.

On the other hand, according to the FT the UK manufacturing sector has just enjoyed its longest period of jobs growth for 40 years. As always though, the real story is a far more nuanced than the headline itself. For example, this UK manufacturing jobs growth is largely attributable to the lower productivity subsectors – arguably those most at risk should freedom of movement under a Brexit deal come up against challenges. Even with total freedom of movement, should the UK economy slump then it clearly will become less attractive to many of the workers coming from other parts of Europe that have been allowing many businesses to keep wage costs down.

The anticipated dwindling numbers of European labourers are seemingly starting to come to fruition, with recent reports of the numbers of workers from ex-Soviet satellite states decreasing already. Such trends will be concerning for manufacturing businesses that might be vulnerable to decreasing labour competition, which is likely to spark a rise in wages.

One obvious solution is to turn to automation. Yet seeing automation simply as a solution to an imminent problem is short-sighted. Jobs growth in manufacturing is often accused of delaying much-needed automation in the sector – having the overall impact of weakening productivity in the medium to long-term. Far from losing staff, automation also offers ample opportunity to upskill, in addition to hedge against an increasingly transient workforce.

Competitiveness: the robot war is already here

Once the preserve of die-hard sci-fi fans, the possibility of the robotic infiltration of our world is no longer fantasy. Interesting developments abound. In the agricultural sector, robotic arms are sweeping through large fields of cauliflowers and broccoli, monitoring yield counts and soil, and even starting to pick some crops – doing away with some of the more laborious, labour-intensive tasks. Such developments are a welcome addition to farmers who see automation as an answer not only to better efficiency and cost-cutting, but to addressing concerns around access to labour mentioned above.

But looking at the bigger picture, the UK is behind its European and global counterparts with regards to automation. The International Federation of Robots – a international robot research organisation – shows the UK to be 15th in the league tables of numbers of robots per industrial worker (at 71 robots per 10,000 workers versus Germany’s 300 robots per worker).

Consultancy firm McKinsey suggests that those companies ignoring the opportunities offered by innovations such as AI will likely drive a wedge between those companies embracing it, and those that choose not to. So perhaps it is time to lose this stigma of more robots equals less job opportunity and truly understand the opportunity offered by automation in increasing productivity and upskilling a workforce.

UK businesses might hesitate to invest on the presumption that the longevity of an investment is limited given the pace of technological development. But this is misguided: today, many industrial robots have the ability to be programmed to other tasks, extending their value exponentially and offering a long-term return on investment. With this in mind, increased automation could help put a business more in control of uncertainties as well as increase productivity and reshape its future agility.

Of course, often being asset rich and cash flow poor, farmers and many manufacturing businesses have something in common in that they don’t always see a way to fund the technology required.

Short-term and flexible equipment financing key to productivity

Without the cash flow it can be hard to find get financial access to the automation technology required to increase productivity and stay competitive. At Somerset Equipment Finance, we specialise in the purchase, management, sale and disposal of a wide variety of commercial equipment, and work in partnerships with businesses and their clients to help them raise the finance and make future-proof business decisions. Whether a business is looking for short-term, early replacement or flexible financing, we are all about helping companies find a way that fits their growth needs and budget.

About Somerset Capital

For more than 30 years, the Somerset family of companies has redefined equipment finance. We take our clients further by providing services around the financing of equipment for mid-sized and large companies throughout the Americas, Asia and Europe. From equipment needs starting under $100,000 and reaching to $25,000,000 and beyond, our unique asset-driven solutions bring a more intelligent approach to your commercial equipment requirements. Learn more about how Somerset helps clients go beyond finance by going to www.somersetcapital.com/solutions.