Industry 4.0 is reaching a new phase for manufacturers

Bodo Philipp examines why UK manufacturers are entering a new phase of Industry 4.0, where the priority is shifting from adopting digital tools to integrating systems, data and AI more effectively across operations to improve resilience, responsiveness and competitiveness

It has been a difficult period for UK manufacturers, and few expect things to become much easier in the short term. Costs remain high, supply chains are still vulnerable to disruption and ongoing tensions around the Strait of Hormuz continue to create uncertainty. Businesses are also being pushed to reduce emissions and keep investing for the future, even while day-to-day operational pressure remains high.

Despite the challenges, there are some signs of stability returning. Output picked up slightly in the early part of 2026, according to the Office for National Statistics, but confidence across the sector remains fragile.

In response, some manufacturers have continued investing in digital tools to improve efficiency and get a clearer view of what is happening across production and supply chains. The bigger question, though, is whether those investments are making production easier to adapt when disruption affects other parts of the business. MHP Consulting’s latest Industry 4.0 Barometer points to that tension that is being experienced by many: there are high levels of investment activity, but outcomes do not always carry through across the wider business.

Why manufacturing is becoming software-defined

That gap becomes easier to understand when you look at how manufacturing itself is changing. Manufacturing is becoming more software-driven simply because production is harder to manage than it used to be. Product complexity is increasing, lead times are tightening and disruption often arrives quickly and unexpectedly. Systems built around fixed processes or long planning cycles can still function, but they are less adaptable. This is where software-led production becomes important, making it easier to adapt processes as demand, supply or production conditions shift.

In some regions, that shift is already further along. The 2026 Industry 4.0 Barometer shows the UK making progress, but still lagging behind markets such as China and the US. China reached a digitalisation score of 72% in this year’s study, compared with 62% in the UK. Awareness of software-defined manufacturing remains relatively low among UK respondents though. Many organisations are adopting digital tools without fully changing how operations are structured.

Regulation is adding similar pressure as well. The EU Data Act and cybersecurity requirements such as UNECE R115 in the automotive industry, for example, are forcing manufacturers to pay much closer attention to how connected systems and industrial data are managed. Both are increasing the need for connected systems and more consistent data management.

What is holding organisations back

Data is often where the issue first appears. Most manufacturers have access to large volumes of it, but it rarely sits in one place. It is spread across systems and functions, which makes it harder to build a consistent view when decisions span the business.

Legacy systems play a role here too. Many are stable and reliable, which is why they remain in place. The difficulty is that they were not designed for the level of integration now required. New technology can improve performance, but it can also leave manufacturers managing even more disconnected systems over time.

Skills shortages add another layer to the challenge. The issue is not simply a lack of digital specialists, but a shortage of people who understand how manufacturing operations, data and software-driven systems fit together. The report suggests this is one reason why many organisations make progress in isolated areas, but struggle to turn those improvements into broader operational transformation.

This leads to a broader issue. Many organisations still treat digital transformation as a series of projects. That approach can deliver results, but they often remain limited to individual functions. The wider operating model often changes more slowly, which makes scaling difficult.

Why data is still not delivering value

These challenges lead to a familiar outcome. Most manufacturers already have access to huge amounts of data. The difficulty is getting it into day-to-day decision-making. Dashboards, reports and models are in place, yet the information they provide is not always used within daily workflows. As a result, it sits alongside the business rather than shaping it.

AI provides a clear example. It is delivering value in areas such as maintenance and quality, but extending that impact across the wider operation remains difficult. The Barometer found that 48% of UK manufacturers are already using AI in production environments, pointing to a sector that is moving beyond experimentation but still struggling to scale effectively.

What is missing is not more data. It is the ability to use it effectively. When systems interact more easily and information flows across functions, decision-making begins to change. This also creates the conditions for more advanced uses of AI, where systems support coordination across the business.

Conclusion

Most UK manufacturers are no longer at the starting point of digital transformation. The bigger challenge now is making digital investment translate into operational change across the business. 

The manufacturers likely to move fastest and most effectively over the next few years will not necessarily be the ones investing most heavily in new technology. More likely, they will be the businesses that are able to bring their systems together, and make better use of data across their operations. That is increasingly where resilience, responsiveness and long-term competitiveness will be determined.

Bodo Philipp is CEO, MHP Consulting UK.