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 PP Control & Automation (PP C&A), says he expects the £25 billion 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.
The Cheslyn Hay-based company, one of the UK’s leading strategic outsourcing manufacturing specialists, has already seen an initial increase in enquiries following Rachel Reeves’ tax changes.
Tony said: “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).
“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 C&A 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.
“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.”
