Barclays claims robotics and automation will “safeguard” manufacturing jobs

SUMMARY:

The report also states that new technologies could add £60bn to the British economy within a decade. But will Barclays be able to protect itself from technology changes?

The future?

Banking giant Barclays has released a report this week that says that not only could investment in robotics and automation “safeguard” tens of thousands of jobs in the manufacturing sector, but it could also add £60 billion to the British economy within a decade.

Detail within the report raises questions about what types of jobs would be saved, given that it also claims that automation would replace certain skills. However, there are some interesting highlights that indicate that the British manufacturing sector is perhaps not recognising the economic advantages of newer technologies.

The report also comes, ironically, as former chief executive of the bank, Antony Jenkins, has said that half of all banking jobs could be lost as big lenders struggle to keep up with technological change.

Mike Rigby, Head of Manufacturing, Barclays said:

This report highlights the importance of investing in robotics and automation for manufacturers as a potential solution to the on-going ‘productivity puzzle’.

However, to reap these rewards we need to address some of the barriers to investment including the need for more user-friendly and flexible technology, addressing skills barriers within the sector and supporting manufacturers to access the funding and information already available to them for robotics investment.

But let’s deal with the report’s highlights first of all. It states:

• Even a moderate increase of £1.24 billion in automation investment could raise the overall value added by the manufacturing sector to the UK economy by £60.5 billion.
• With this investment, UK manufacturing could grow to £191 billion in 2025, a £38 billion increase on the value of UK manufacturing today.
• This will safeguard 105,800 jobs across the economy – 73,500 of which would be in manufacturing.
• Currently 58% of British manufacturers already invest in automation, but 76% believe there are opportunities for further investment.

One of the interesting highlights from the report is that the size and age of a manufacturing company appears to directly correlate to the level of investment made in robotics and automation. For example, of those surveyed, from companies with an annual turnover of £10 million or more, 71% say they have invested in automation. In contract, just 21% of businesses with an annual turnover of less than £1 million have done so.

Equally, it seems that companies between five years of age and 20 years of age are more likely to invest (67% to 69% already invested). Companies over 20 years old and under 35 years old were the least likely to have invested already, with only 45% stating that they’d made some investments already.

The Barclays reports states:

Lower levels of automation among small and medium enterprises (SMEs) may be due to concerns over the costs of the necessary capital expenditure, although the falling cost of robotics technology may make automation more accessible to SMEs in the future.

Barriers

The report also highlighted that the UK ranked 19th worldwide in 2012 in terms of robot density int he manufacturing sector with a level barely above the global average. For example, the UK automative industry has shown to be operating with half as many robots as those used in Germany.

Equally, the ONS said in April that the lack of improvement across all UK productivity sectors is “unprecedented in the post-ware period” and suggested that the UK’s productivity gap was widening with major economic competitors.

Basically, there is room for improvement.

So what are the barriers to investment? It appears that manufacturers in the UK identify both a lack of funds and a priority to invest capital in other areas as the main blockers for using more robotics and automation.

Some 26% of respondents said that they were prioritising other capital expenditure projects over automation and 29% said there was a lack of funds within the business to make either short or long term investments.

Interestingly, 18% stated that automation/robotic equipment is too inflexible for the business’ product and 28% said that the business didn’t need to invest in or invest more in such technologies.

Jobs

One of the interesting stats in the report is that Barclays’ economic modelling found that while investments in automation and robotics would still lead to an overall reduction in manufacturing employment, the level of job losses would be lower than if the investment continued at the current rate.

The report sates:

Overall gains for the UK economy of our moderate investment uplift scenario compared to business-as-usual would be expected to amount to 33,000 manufacturing jobs by 2020 and 73,500 jobs by 2025. Jobs created in other parts of the economy as a result could amount to 14,600 and 32,300 by 2020 and 2025 respectively.

However, it’s this part that leaves more questions than it answers:

In other words, while some jobs would be replaced by robots, the boost to production would be sufficient to increase demand for skills in other activities in UK manufacturing and/or among supply chain businesses in the sector.

Equally, it adds:

For example, additional investment in automation and robotics in part of the production lines of Original Equipment Manufacturers (organisations that makes finished goods from component parts bought from other organisations) might be expected to boost employment in other parts of that business that are stimulated by the increase in activity.

And this is where I’m left assuming that whilst more jobs may be created by robotics/automation, or shall we say, less jobs lost, it appears that these may not be the same ‘types’ of jobs. And this has always been true of technological change. As automation increases, different skill sets are required.

However, it’s important to remember that just because more jobs may be created in the manufacturing sector – this doesn’t mean that huge groups of people with pure ‘manufacturing’ skillets may be left without jobs.

The financial industry

As I noted earlier, it’s ironic that Barclays has released this report this week, touting jobs saved through technology adoption, given that its former chief executive Antony Jenkins has come out and said that half of banking jobs and branches could be scrapped in the next ten years because of technological change.

We’ve seen in the financial sector a growing shift towards challenger operators and lenders that have adopted a ‘digital first’ approach and don’t have the legacy that traditional lenders have holding them back.

It could be argued, that increased automation and less manual process has made these challenger banks barclays4more appealing. But, this does mean less jobs.

Jenkins described the finance sector as getting close to an “Uber moment” and said that technology was an “unstoppable force”. He said:

The number of branches and people employed in the financial services sector may decline by as much as 50% over the next 10 years, and even in a less harsh scenario I predict they will decline by at least 20%.

The barriers to entry are quite high in financial services, so that will allow the incumbents to probably last longer than in many other industries.

The risk is that incumbents will be pushed into this utility, capital-heavy role that we’ve seen in other industries like telecoms. Ultimately, that will become intolerable to shareholders, so we could see consolidation and mergers.

My take

Don’t assume because technology is creating more jobs in your industry that it means your job is safe.