Looking beyond the hike in National Insurance Contributions (NICs), Hague believes that it could actually help to trigger a wave of spending on automation and outsourcing.
Hague said that he expects the £25 billion annual rise in employers’ NICs will test the resilience of manufacturing even further and that companies will start to pivot to strategies that will look to grapple with high operational expenses and widespread skills shortages.
However, according to Hague, it will also see businesses 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 Hague, 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, which operates from facilities in the West Midlands, is a strategic outsourcing manufacturing specialist, and is currently working through a host of enquiries – post Budget - 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.
“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,” suggested Hague.
“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?
According to Hague when looking for such a partner companies should select businesses that align with their strategic goals, ensure quality standards, comply with regulatory requirements, and have 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,” he concluded.
“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. “Reeves probably didn’t realise it at the time, but the employment tax rises could well have given the UK the biggest push towards automation and outsourcing we’ve seen in decades.”