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Digitalisation has potential to add £2.9 bn to manufacturers’ revenues in the East Midlands

Digitalisation has potential to add £2.9 bn to manufacturers’ revenues in the East Midlands

Research from Siemens Financial Services (SFS) estimates the potential value digitalisation offers manufacturers in the East Midlands.

Entitled the Digitalisation Productivity Bonus: Manufacturing in the East Midlands, the report estimates that manufacturers in this region stand to gain £ 2.9 billion from digital transformation and the resulting improvements in manufacturing productivity.  This equates to around 6% of total revenue for manufacturers in the region. These efficiencies, although not estimated here, can also be realised throughout the supply chainAs the UK faces a period of sustained significant economic crisis, this greater productivity and agility will help manufacturers in the region cope with the market disruptions.

Digital technology (also known as Industry 4.0) is enabling manufacturers to improve performance through increased manufacturing productivity, improved planning and forecasting, enhanced competitive capabilities and greater financial sustainability.

The East Midlands has the second highest proportion of manufacturing output within the UK, with global investment continuing in sectors such as food and drink, and rubber, plastics and non-metallic minerals in the region.  The region’s food and drink industry, for example, boasts global exports of £1bn. Together these industries generate billions in GVA for the economy.

Although the exact building blocks of productivity differ between industries and regions, increasing that productivity - to either produce the same number of products for less or more products for the same - has a clear and calculable positive effect on costs and margins. This positive effect has been labelled the Digitalisation Productivity Bonus.

The paper draws on a statistical model, developed by SFS, which estimates the Digitalisation Productivity Bonus in the East Midlands to demonstrate the potential gain from Industry 4.0 for manufacturers in the region even through the current economic difficulties. The average ‘Bonus’ percentage range was applied to the total annual revenue of the manufacturing sector in the East Midlands (revenue data derived from official third party sources).

To overcome the obstacle of investing in Industry 4.0 technology, specialist financiers have developed a set of smart financing tools that enable the transition to new-generation digital technology in a way that is affordable, sustainable and is designed to alleviate the manufacturer’s cash flow and working capital pressures. Aligning payments to commercial outcomes is particularly important during an economic period where all expenditure has to deliver an exceptionally clear and tangible link to business benefits.

The paper explores these specialist financing methods, including machinery & technology financing, retrofit finance, software finance, outcomes finance, digital enterprise finance and working capital solutions.

“The manufacturing sector in the East Midlands makes a significant contribution to the local and UK economies, however, research suggest that the region’s manufacturing productivity level is the lowest in the UK,” comments Neli Ivanova, Sales Manager, Industrial Equipment at Siemens Financial Services in the UK. “Manufacturers in the East Midlands must recognise increased productivity as a key outcome of digital transformation and begin investing in equipment and technology upgrades, if they are to be more competitive.”

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