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Business & Economy

Digitalisation could add £1.65 billion to North East manufacturing revenues

A new research paper by Siemens Financial Services estimates that digitalisation has to potential to add £1.65 billion to manufacturers’ revenues in the North East.

The value of digitalisation to manufacturing firms is calculated on the basis of improvements in productivity that go along with digital transformation.

It is thought that next generation digitalised technology or Industry 4.0, will enable manufacturers to improve performance, planning and forecasting and enhance competitive capabilities and financial sustainability.

This news is particularly relevant to the North East, where the manufacturing sector is growing faster than in other UK regions, with strong investment coming into sectors such as automotive, technology, pharmaceuticals and food production.

The region now has more than 240 automotive companies and 145 companies in the medicines and manufacturing industry.

The research paper from Siemens, titled Digitalisation Productivity Bonus: Manufacturing in the North East, recognises that while the components of productivity differ between industries, being able to increase that productivity has a clear and calculable positive effect on costs and margins – the Digitalisation Productivity Bonus.

The paper uses a statistical model, developed by SFS, to estimate the Digitalisation Productivity Bonus or the gains to be had from Industry 4.0 technology being deployed more broadly by manufacturers.

To overcome the obstacle of investing in Industry 4.0 technology, specialist financiers have developed a set of financing tools – ‘Finance 4.0’ – 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.

The paper explores these financing methods, including pay-to-access/use equipment and technology finance, technology upgrade and update, software finance, pay for outcomes, transition finance and working capital solutions.

Neli Ivanova, sales manager at Siemens Financial Services, said: “The manufacturing sector in the North East is growing faster than other UK regions. Global companies continue to invest here despite uncertainties surrounding the UK’s future relationship with the EU.

“For the North East to continue to compete at this level, investment in Industry 4.0 is essential.

“Understanding increased productivity as a measurable value from digitalisation can help manufacturers to make the business case for sustainable investment in equipment and technology upgrade.”

The report can be accessed here: