This post is by Angela Francis, chief economist at Green Alliance, and Caterina Brandmayr, policy analyst at Green Alliance.
UK productivity hasn’t grown for nine years. Investment in digitalisation, also known as the fourth industrial revolution, is one way to kickstart the economy and end economic stagnation.
That is why we contributed to Made smarter, the final report of the government’s recently published Industrial Digitalisation Review (IDR) which aims to set out how the UK can become a digital world leader. The report shows how these technologies could completely reshape notions of production and consumption, disrupting and creating business models and sectors.
Industry 4.0 is here but business take up is slow
The ways in which blockchain, AI and the internet of things might affect our lives all are hot topics in the media. But the reality is that most of these new technologies have so far had limited take up and remain the preserve of early adopters.
That is the challenge Made smarter will address, because, if used well, digital technologies could boost productivity and breathe new life into the UK’s manufacturing sector. The IDR estimates that digital innovation and adoption could improve industrial productivity by more than a quarter by 2025, growing manufacturing by 1.5 to three per cent a year over the next decade and creating 175,000 new jobs. That represents a seven per cent increase on the current 2.6 million jobs in manufacturing.
The IDR is important because, while 80 per cent of UK manufacturers think industry 4.0 will be a business reality by 2025, in 2016 only 11 per cent thought their sector was ready to capitalise on it. Commissioned by the government as part of its industrial strategy, the review has focused, not on the technology, but on what’s needed to persuade manufacturers to adopt it.
Will it be a green revolution?
If businesses invest in digital, we argue they should futureproof the investment by focusing on technologies that will make them more productive by using energy, water and resources more efficiently, as these account for around half of a typical UK manufacturers’ costs.
We’re pleased that the IDR has identified digitally enabled resource efficiency as part of an exciting new vision for UK industry. Effective adoption of digital could cut resource costs by £10 billion, increasing manufacturers’ profits and reducing their exposure to resource availability disruptions. Other novel solutions, such as better grid management, are currently valued at over £2 billion. The IDR proposal for a digital circular economy demonstrator programme will be important to discover more efficient ways to use materials and components, with potential applications ranging from smartphones to the built environment.
How to accelerate the uptake of the best digital applications?
The adoption of digital technologies will inevitably be a messy process, with starts and stops caused by fluctuating political support and public acceptance, as well as technical factors.
Green Alliance is establishing a new Tech Task Force because we believe digitally enabled resource efficiency is the best route for UK productivity growth and we want to accelerate its take up. The task force aims to ensure that the potential is understood and will be plugging into the big policy debates on north south rebalancing, wage growth, house building and air quality.
We’ll be showing the contributions digital can make to some of the pressing environmental, economic and social challenges of the day and helping to create momentum around its positive use.
Our initial scoping work supported by Innovate UK has identified opportunities for leading sectors and lower productivity sectors. And we are focusing on the long term competitiveness of industry right across the country rather than just in London and the south east.
Technologies that can increase resource efficiency, by key sector and value chain
As the IDR sets out its recommendations to drive industrial adoption, the Tech Task Force will complement it by providing the political and policy impetus, so digitally enabled resource efficiency opportunities are understood and supported as they move from idea through testing to realisation.
Being a leader requires long term thinking. If the UK wants to become a world leader in the fourth industrial revolution, it should ensure UK businesses can capitalise on the resource efficiency opportunities that digital can make possible.
