"There’s lots we’re yet to learn, but I believe these four principles – when fully embedded in our decisions and processes – can provide strong foundations for our recovery and a clear direction of travel for our businesses."

Robin Budenberg
Group Chair
19 March 2021
6 min read

Long before coronavirus hit, many in the manufacturing industry knew technology and environmental sustainability would fundamentally change the way we do business.

But few could have predicted just how much the pace of change would increase with the outbreak of a global pandemic. Coronavirus has advanced many of these trends years ahead of their original schedules.

As we face into the economic fallout of that pandemic, I believe there are four principles that will determine whether we recover from the effects of the past year in a way that creates long-term prosperity for Britain. They are technology-led innovation; supporting local economies; environmental sustainability; and social purpose.

These principles underpin Lloyds Banking Group’s mission to help Britain recover.

They are also principles close to my own heart, because they were key attributes of the family engineering business run by my father and his two brothers. The firm started with the invention of the pressure gauge in the 1840s, becoming a vital part of the industrial city of Manchester – the ‘Silicon Valley’ of the steam revolution – and continuing through two world wars, based on a mutual covenant of trust between the company, its workforce and its customers.

But the reason these four principles are so important is that they will form the foundations of our future economy. This is about building businesses to last.

Technology-led innovation

So starting with the first principle, innovation.

There has been a dramatic change of gear in the past 12 months. Our strategic partner, Be the Business, found Britain’s smaller firms underwent three years’ worth of technological innovation in just three months over the first lockdown period.

At Lloyds Banking Group, we saw cash withdrawals fall 60% in the first month of lockdown, compared to an almost 20% increase in customers using our mobile app.

And our Transformation with Tech research found almost three in ten manufacturers created an online presence for the first time.

Britain's smaller firms underwent

3 years' worth

of technological innovation in just three months over the first lockdown period.

These changes represent a seismic shift for banking and the manufacturing sector – and many of them we’re still working through.

For example, artificial intelligence has become a powerful tool in fighting fraud, allowing us to identify fraudsters just by the way they click, type and scan on the page. But now fraudsters are using that same technology to simulate facial expressions and impersonate human behaviour.

In the same way, robotics and 3D printing have transformed production lines, enabling outputs that were previously off-limits to traditional manufacturing methods. NASA has said it plans to 3D print over 80% of its rocket engines. As someone who worked on basic production lines in my youth, I find this hard to grasp.

But where do these machines’ limits end, and the work of our skilled people begin?

The simple answer is that technology needs people. The people guiding it, and the people who will benefit from it. Those people need to be armed with the skills to drive us into a tech-focused future – and crucially, they need to be representative of the customers and the communities that we’re serving.

Investing in technology has always been risky and expensive. It can feel like stepping into the unknown.

We are the biggest digital bank in the UK, with more than 17 million customers using our digital channels, yet our strategy commits us to spending billions of pounds moving our organisation across to cloud systems, something we know will come with significant risk and uncertainty.

Innovating through technology has never been optional, but now it’s essential. Our customers expect it, our investors demand it, and the British economy needs it if we are to recover and grow for the long-term.

No business can afford to ignore it.

The importance of local economies

The pandemic has also laid bare the variation in opportunities and outcomes for people across the UK.

One illustration of the scale of the challenge is a comparison of output per hour, or productivity. At its starkest, there is a 40% gap between the highest and lowest output regions.

The potential prize here is substantial. Our research with the CBI estimates closing the gap for the eight largest cities outside London could deliver a £47 billion boost to the nation’s wealth. Addressing this opportunity will require investment to flow to the regions and nations of the UK.

The Treasury’s ‘super-deduction’ measure in this month’s Budget will help. It offers a narrow window for businesses to invest in their future growth – particularly those in capital-intensive industries which are typically located outside London and the South East. Banks must support this initiative.

Technology also has a role: the CBI estimates that greater adoption of technology could reduce income inequality across the UK by 5%.

But at its core, this is about the mindset of business leaders across Britain – most importantly, those in the more advantaged areas.

A boost to the nation's wealth of

£47 billion

could be delivered by closing the productivity gap for the eight largest cities outside London.

I was interested to find out that in 1947, Lloyds Bank’s then General Manager, Ernest Whitley-Jones, said:

“We are convinced that the expansion of [our business] has been accelerated by taking our service to the customer, rather than leaving the customer to find their way to London.”

Some say banks have forgotten this message. But we’re present in communities up and down the country – for example, 85% of our colleagues supporting SMEs are located outside London.

I am particularly proud of our regional ambassadors – senior members of our management team who engage closely with their local business and community leaders to support social and economic prosperity in all nations and regions of the UK.

But there is more we need to do. We need to empower our people on the ground to make decisions for the benefit of local economies and customers.

We’ve learned a huge amount from the pandemic. The required speed of decision-making has forced us to devolve decisions to managers closer to the customer. They are the best people to make those calls based on their in-depth knowledge of local factors.

So we need to embed what we’ve learnt, and make sure that the historic London focus of the finance industry does not distract from the imperative of investing in all parts of the UK.

A sustainable recovery

There’s a clear business case for investing in a low carbon future. The green economy is expected to grow four times faster than the UK economy as a whole. And investment going into the green economy is growing at more than 30% a year.

As an example, we’ve seen demand for electric vehicles grow by some 2½ times in our vehicle leasing business.

Manufacturers are ahead of the game here – our research suggests seven in ten have a plan already in place to reduce their carbon footprint, and almost half have actually used the pandemic as an opportunity to review or to accelerate their plans.

At Lloyds Banking Group, we’ve committed to making our own operations net zero by 2030 and to helping our customers and clients cut their carbon emissions in half by the same date.

It’s an ambitious target and not without its challenges – but a vital one. We want to be equally ambitious in working with our business customers to develop ideas on how to achieve this.

The green economy is expected to grow

four times faster

than the UK economy as a whole.

Towards the end of last year, we undertook a national initiative called The Big Conversation to find out from businesses the challenges they face in recovering from the pandemic.

One of the key messages that emerged was the pressing need to support manufacturing’s transition to a lower carbon world.

We know the up-front investment required for this shift creates challenges for many businesses. Particularly for those still getting to grips with the financial consequences of lockdown.

So as a follow-up to The Big Conversation, we are launching an initiative together with the Manufacturing Technology Centre (MTC) to help manufacturers embrace new sustainable business models.

This will be about practical solutions and concrete actions. We will bring together experts to share ideas and experiences. We will seek to develop new tools to address the challenge, and improve awareness of the existing tools and sources of advice that are already available.

And we’ll work together to identify any public policy barriers and incentives that we can champion with the sector.

Our intention is, that by using our combined convening power with the MTC, this initiative will help make a tangible difference to the many manufacturers who are grappling with this shared challenge.

Fundamentally, this is about preserving a healthy economy and environment for the generations that follow. We can no longer trim around the edges – we have to embed green principles into our industries, investments and business models.

Acting with purpose

That brings me to the fourth and final principle, which underpins all the others.

Our research suggests two in three consumers think that businesses should be doing more to help society and the environment. That figure is even higher for younger generations, particularly when it comes to their expectations of their own employers. If we want to recruit great young people then we have to show that we are contributing to society.

At Lloyds Banking Group, we’re working to put our own purpose, Helping Britain Prosper, into practice, with an immediate focus on helping Britain recover from the pandemic.

First and foremost that’s about helping households and businesses across the UK to recover and grow – but it’s also about building the kind of economy we all want to be a part of.

There’s lots we’re yet to learn, but I believe these four principles – when fully embedded in our decisions and processes – can provide strong foundations for our recovery and a clear direction of travel for our businesses.


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