Additional
tax measures announced in the recent Budget could help trigger a wave
of spending in automation and outsourcing according to an industry
expert.
Tony
Hague, CEO of Cheslyn Hay-based PP Control & Automation (PP C&A), expects the
£25billion annual rise in employers’ National Insurance
Contributions (NICs) to test the resilience of manufacturing even
further, with companies pivoting strategies to grapple with high
operational expenses and widespread skills shortages.
He
believes many companies will instead turn to investing in new
technology and partnering with manufacturing specialists for non-core
competences to alleviate immediate financial pressures whilst also
building foundations for sustainable growth.
“Our
sector is highly sensitive to changes in employment costs, given its
dependence on a diverse, skilled workforce. NICs, representing a
significant portion of employers’ expenses, directly impact our
operational expenditure (OpEx),” explained Tony, who has overseen
PP C&A’s rise to a £36m business.
“Automation
and strategic outsourcing can give management teams some comfort if
they can look past the initial investment and instead look at it
through the joint lens of long-term productivity and efficiency
gains.”
He
continued: “Automating repetitive, high-labour tasks can lead to
substantial savings, including NICs, wages, and training investments,
whilst also freeing up team members to take on higher value tasks.
“Machines
also offer consistent performance with minimal error, contributing to
higher product quality and fewer costs associated with rework or
quality control. You can also easily manage fluctuations in demand,
whether that is scaling up or scaling down.”
PP
Control & Automation has already seen an initial increase in
enquiries following Rachel Reeves’ tax changes.
The
company, which operates from a state-of-the-art facility in the West
Midlands, is one of the UK’s leading strategic outsourcing
manufacturing specialists, helping build machines that robotically
milk cows, provide everyday packaging solution, protects your phone
from water damage and cut parts that are used in F1 cars and the
world’s airlines.
It
is currently working through a host of enquiries from companies
operating in the clean energy, agritech, and warehouse automation
sectors, who are all keen to tap into how outsourcing can shift
certain fixed costs associated with in-house capabilities into
variable, on-demand costs.
This
aligns expenses with operational needs and is particularly valuable
when NIC increases make the cost of ownership for employees and
assets prohibitive.
Tony
continued: “Rather than investing in an in-house team for every
phase of production, manufacturers might contract with outsourcing
partners for supply chain management, engineering and production
requirements, from new product introduction (NPI) to final assembly.
“When making this decision, it is important to evaluate which processes are critical to competitive advantage and which can be automated or outsourced without compromising quality or brand value. You’ll then be faced with a decision – who do we partner with?
“Firms
should select businesses that align with their strategic goals,
ensuring quality standards, compliance with regulatory requirements,
and the ability to scale alongside their growth. Finally, conduct a
thorough cost-benefit analysis, considering not only the initial
costs of automation or outsourcing, but also the long-term financial
and operational benefits.
“The
strategic shifts that I believe will now play out will enable
manufacturers to transform traditionally rigid cost structures into
agile frameworks, allowing them to respond effectively to both
current challenges and future demands.”
He
concluded: “She probably didn’t realise it at the time, but the
Chancellor’s employment tax rises could well have given the UK the
biggest push towards automation and outsourcing we’ve seen in
decades.”