A review of the year in engineering-based manufacturing
By Will Stirling
Semiconductor shortages, battery factories (good but not enough), diversification, digital medtech, hydrogen and synthetic fuels in aviation – 2021 was a pivotal year for UK manufacturing when Covid began to be eclipsed by the climate.
Confidence in the market is returning – slowly
AEROSPACE
Civil aircraft orders are recovering from their 2020 nadir, but the recovery is slow. 216 aircraft orders were placed globally in the third quarter of 2021, just 13 more than were placed in Q3 2020. ADS, the aerospace, defence and security business group, expects total 2021 deliveries to reach 988.
Despite beating 2020 figures for orders and deliveries, UK aerospace output in Q3 2021 remains significantly weaker than February 2020, pre-Covid, with output 38.3% smaller. ADS statistics show that civil aerospace turnover from full-year 2019 to FY2020 fell by 27% to £24.9bn.
The supply chain has had to adjust. Andy Page is CEO of Sharing in Growth, a programme to help engineering companies secure big orders and grow. “It is apparent from the companies that Sharing in Growth supports that most have adjusted the size of their business some months ago to the reduced civil aerospace market, recognising that many also supply Defence Aerospace which has held up well,” Andy says. “There is growing confidence that the market is showing signs of returning, albeit slowly. Many suppliers are in an apprehensive crouch with concerns about the labour shortage, customer cost pressure, risk of consolidation and increased competition for opportunities in associated sectors.”
The big theme in aerospace, that will run, is the transition to net-zero. Warren East, CEO of Rolls-Royce, told Radio 4’s Today programme in October, the company was wholly focused on low carbon aircraft solutions. The breakdown, he said, is all-electric for very short-haul and low passenger numbers, hydrogen and hybrid-electric for short and medium-haul with modest passenger numbers. For long-haul, the jet engine will remain the only viable powertrain technology, but these will be fuelled by synthetic fuel, ‘sustainable aviation fuels’ or SAF, which are almost identical chemically to aviation fuel but produced from non-oil sources like crops.
The company is trying to reach regulatory approval for using these SAFs in all engine models by 2023. These new fuels could theoretically result in zero carbon emissions for the lifecycle of an engine.
In June 2019, the UK became the first major world economy to legislate for net-zero carbon emissions by 2050. To reach this goal in aviation, the UK aerospace and aviation industries set out a roadmap to reduce carbon emissions over the next few decades, issued by ADS, in July. This step includes the development of zero-emission aircraft, the rollout of sustainable aviation fuels, and improvements to existing operations.
Pushing for net-zero again, the five main business groups serving the automotive, aerospace, chemicals, pharma and food & drink industries have formed a consortium, M5, to explain how vital advanced manufacturing is to the government’s carbon and levelling up targets. It launched its first report on 21 October, with details on how each sector can hit this ambitious goal.
Its report can be found here: https://www.adsgroup.org.uk/blog/policy-politics/m5-launches-report-setting-out-how-to-maximise-the-potential-of-uk-manufacturing/
Disruptive chip shortage to stay, battery investment kicks in
Automotive summary by Prof David Bailey
As many as 9.5m fewer cars will have been built globally in 2021 owing to the chip shortage. The industry found itself competing with lots of other users for chips including computer and console makers (demand for these fuelled by lockdowns and people working at home) as well as chips being used in everyday devices all around us, as the ‘internet of things’ takes off. While chip-making capacity is now being built, this will take time and the shortage is likely to persist well into 2022, disrupting auto output.
Carmakers cut output and prioritised high margin models, and in some cases cut out options requiring chips. Longer-term there will be questions for automakers as to whether they ‘make or buy’ strategically key components like chips, batteries, and electric drive units. A trend towards ‘internalising’ production of key components appears to be underway – witness Ford’s decision to buy out its Getrag JV with Magna and shift its Haleswood plant to producing its own electric drive units. See also major investment in battery making in the European Union by the likes of VW and Stellantis.
The trade deal agreed between the UK and the EU at the end of 2021 was critical in ensuring the viability of mass car production in the UK. ‘No deal’ would have meant 10% tariffs and a huge blow to the industry. The deal effectively gave the green light to investment by Nissan and its battery partner Envision at Sunderland (£450m), as well as investment by Stellantis at Ellesmere Port and Ford at Haleswood.
At the same time, however, GKN is aiming to shut its historic driveline plant at Erdington in Birmingham. The latter is sadly of little surprise after the takeover of GKN by Melrose a few years ago and the subsequent focus on cutting costs.
While the Nissan/Envision investment got the UK off the starting grid in terms of the race to build battery gigafactories, it is behind the EU, where major investment has already gone into building major battery-making capacity, supported by the EU battery alliance and individual countries.
The UK will need lots more in the way of battery production to underpin a mass car industry domestically. The UK-EU trade deal requires battery electric vehicles to have a UK or EU battery to avoid tariffs after 2026, and the race is on to build battery-making capacity at scale quickly. Here the UK needs to step up its efforts, and quickly.
The closure of the Honda plant in 2021 took out a major auto plant from the UK with an impact on the supply chain. UK production volumes will nevertheless hopefully rise in 2022 to around 1.05m to 1.1m units. Returning to the 2019 output level of 1.3m units will take longer but is achievable by the late 2020s with modest growth from remaining OEMs and a determined policy effort to switch assemblers and the supply chain over to EVs.
Digital is the future for MEDICAL DEVICES
Medical devices (MedTech) cover a vast array of products. At the Association of British Healthcare Industries, 80% of members are manufacturers of products typically used in hospitals and by doctors: medical equipment, scanners, monitoring, dialysis, respiration, prosthetics and more. Their primary customer is the NHS, which has had an incredibly challenging 18 months.
Overall, the UK MedTech sector is healthy with steady output and decent exports of expertly engineered clinical products, but volumes are down due to the backlog of elective surgical procedures affected by Covid. The backlog is beginning to clear but as winter approaches more elective operations will be postponed for Covid cases, postponing the demand for medical equipment.
Supply chain delays have affected manufacturers, especially for products that need electronics from abroad, although not as badly as semiconductors have affected the car industry. The biggest trend in this sector is digitalisation. 60% of digital healthcare businesses did not exist three years ago. They are helping to transform how healthcare is delivered – Babylon Health, for example, provides 24/7 digital access to GPs, nurses and pharmacists.
In 2021 Open Bionics launched its first clinic in the UK to deliver 3D printed bionic arms for amputees. The company is creating new jobs and it received a grant under Innovate UK’s Sustainable Innovation Fund, aimed at building UK resilience following the Covid pandemic. This enabled Open Bionics to switch from being a manufacturer of bionic limbs to a clinical provider.
And in October, CMR Surgical, a manufacturer of surgical robots based in Cambridge, announced a new 76,000sq/ft factory in Ely, to expand production of its Versius robotic system. The robot system is used in hospitals in Europe, India, Australia and the Middle East.
