Automation: Poised to transform UK industries

Automation is driving a revolution in the way many labour intensive industries operate, offering greater efficiency, improved productivity and, crucially, the potential to significantly cut costs by performing tasks that would otherwise be performed by humans.

Naturally, this is having repercussions for M&A activity across many sectors, as companies look to acquisitions to help them tap into the latest advancements and keep pace with rapid changes.

However, the slow pace of adoption of automation by UK companies, particularly in manufacturing, is a cause for concern, as we lag behind nearly all our major trading partners.

The good news is that a wave of forward-thinking UK companies are rapidly enhancing their capabilities by strategically acquiring automation specialists. We’ll illustrate a few examples later that demonstrate a pragmatic pathway to addressing the automation gap.

To some degree, the nation’s automation gap can be blamed on a naive executive-level mindset - as automation has actually become more affordable and accessible for businesses of all sizes.

Industrial companies simply must cut costs in the face of growing competitive pressure. The decision is simple - quickly develop your own automation capability or acquire it.

Automation is advancing rapidly. Whereas previously, robots could be programmed to perform simple, repetitive tasks (which is of no small value to many companies), the development of AI is making robotics increasingly sophisticated.

Outlining the key developments in AI and robotics for 2025, robotics manufacturer Robotnik named enhanced autonomy, real-time adaptation and improved connectivity as crucial innovations.

For companies in industries such as manufacturing, packaging, warehousing and logistics (among many others), such technological developments can deliver major returns and, if they are incorporated through M&A, these returns can be generated rapidly.

As a result, automation is becoming a central consideration for companies undertaking M&A activity across these industries.

Major developments: Innovations and trends
Robotnik’s key developments for 2025 highlight some of the crucial innovations that could come to shape labour intensive industries over the coming years and may prove to be major motivating factors for M&A activity across these sectors.

The key developments, in detail, are outlined as:
Enhanced autonomy – Robots increasingly performing complex tasks such as pattern recognition, fault prediction and advanced planning through the integration of more advanced technology.

Real-time adaptation – The growing incorporation of AI will mean that robots are able to respond dynamically and in real-time to environmental changes, drastically improving their functionality.

Improved connectivity – Specialised AI is helping interaction between humans and robots to evolve, facilitating improved communication and helping to make task execution more efficient.

While much automated work in sectors such as manufacturing and packaging involves repetitive tasks, such advanced machine learning and AI-driven features can be invaluable in improving efficiency, boosting the value of investing in automation and in helping companies to effectively incorporate automation into their workflow.

This last point could prove to be crucial during 2025, as, not only is automation becoming more sophisticated, it is becoming more accessible (more suppliers, costs reducing) and more useful across a wider array of applications. This could prove to be invaluable in helping to overcome the problem of adoption that has proven so challenging for UK businesses so far.

The appetite for automation has resulted in strong M&A activity, with the importance of automation in key sectors such as manufacturing perhaps best highlighted by the resilience in dealmaking despite adverse economic conditions since 2022.

Looking at deals involving industrial automation in the manufacturing sector, recent research from BDO and Mergermarket showed that, despite a dip from the post-pandemic surge in activity seen during 2022, activity remained strong, with 2023 and 2024’s deal volume standing at close to double that seen pre-pandemic in 2019.

Valuations have also remained strong, with BDO’s Industrial Automation index showing that average EBITDA multiples stood at slightly more than 12x at the end of 2024.

Reflecting on the key trends fuelling this activity, BDO wrote: “M&A activity is being driven by consolidation among strategic players seeking geographic and vertical integration, significant private equity interest, as well as the acquisition of new advanced technologies such as AI and big data.”

Looking ahead to the remainder of 2025 and beyond, the signs are that this trend will continue and likely accelerate. While economic headwinds remain, particularly amid the ongoing uncertainty over tariffs, interest rates are expected to continue falling (albeit at a slower rate) and companies in numerous sectors are likely to face growing pressure to invest in automation in order to maintain their competitive position.

Manufacturing – will the problem of adoption be overcome?
In a recent report, BDO stated that adopting automation has been a major challenge for many companies – particularly within the UK manufacturing sector. BDO cites rankings from the International Federation of Robotics which show that the UK currently lags behind all of its major competitors, ranking 25th worldwide for robot density (number of robots per 10,000 workers).

BDO asserts that rapid technological advancement could ease adoption challenges, particularly those surrounding integration and a lack of technical knowledge at SMEs relating to implementing and maintaining automation systems.

The report cites developments such as Large Language Model (LLM) frameworks that use generative AI to empower engineers of any experience level to quickly write accurate code and “teach-less robotics”, a method in which robots are programmed to perform tasks without requiring manual teaching or programming and are more able to adapt to environment changes and new tasks without extensive reprogramming.

According to BDO, some manufacturers have introduced automation and machine learning in areas of their business outside of the manufacturing process, potentially reducing the hurdles they face when implementing automation within their core business.

BDO’s findings would seem to bear out the idea that UK companies are preparing to close the automation gaps to their international rivals. According to the firm’s latest Economic Engine survey, 87 per cent of UK manufacturers polled say that they are planning investments within the next 2-5 years, with 37 per cent of these manufacturers saying they will focus these investments on advanced equipment or machinery.

Respondents cited running supply chains more efficiently, developing new products or services in-house and machine learning for product and/or service recommendations as planned areas of investment in automation and AI.

Currently, the most common uses of AI and machine learning in the sector are machinery maintenance (33 per cent), supply chain optimisations (31 per cent), demand forecasting, pricing optimisation (both 27 per cent), root cause analysis (21 per cent) and product recommendation (20 per cent).

Many companies looking to add or further develop these capabilities in a timely and efficient manner, will turn to acquisitions. This will turn innovative small and medium-sized automation, AI and robotics firms, as well as tech-enabled existing companies in the respective sectors into sought-after acquisition targets.

This will become more apparent as highly-capitalised groups seek to rapidly build end-to-end automation solutions through M&A-led growth strategies and as overseas buyers continue to take advantage of favourable M&A conditions and lower UK multiples.

In August 2024, Los Angeles-based industrial automation group Automated Industrial Robotics Inc (AIR) acquired UK-based industrial automation firm Sewtec Automation.

Founded in 1983, Sewtec seeks to utilise engineering innovation to help clients solve complex problems. The firm serves a wide array of companies across sectors such as e-commerce, pharmaceutical, food and beverage and medical devices, providing industrial automation systems and solutions that help improve manufacturing processes.

The company operates from a 75,000 sq ft design and manufacturing facility in Wakefield and, to date, has invented more than 7,000 industrial automation systems. The deal was described as delivering numerous upsides for AIR, including expanding its geographic footprint, strengthening its engineering capabilities and positioning it to more effectively capitalise on growing global demand for manufacturing automation solutions.

AIR is backed by private equity fund Ares Management, which has helped it to amass an automation footprint of around 275,000 sq ft across the United States, Ireland and the United Kingdom as it seeks to deliver differentiated industrial automation solutions to a global customer base.

Describing the acquisition of Sewtec as “a significant milestone” for the group, AIR Executive Chairman Brian Klos and CEO Darragh de Stonndun said that adding the company to its existing industrial automation portfolio “will help accelerate our businesses’ abilities to enhance efficiencies, drive technological innovation and deliver industry-leading automation solutions to our partners.”

The group expects to complement its organic growth through additional strategic acquisitions of industrial automation companies, targeting firms with strong operational histories and well-established management teams.

Automation and M&A can be transformative for manufacturers
UK manufacturing firms are currently at a crossroads. The highly energy intensive industry has been among the worst impacted by soaring energy costs, pushing many businesses into administration and many more to the point of insolvency.

In order to survive, let alone grow, in such an unforgiving economic environment, the majority of manufacturers will need to both cut costs and increase their revenues and profits.

While it certainly requires significant investment, automation provides perhaps the best route for manufacturers to cut costs by improving efficiency, eliminating waste and reducing human error.

By seeking to add such capabilities via M&A activity, companies can unlock the benefits of automation more rapidly and more effectively. Furthermore, this can enable manufacturers to expand their services and products into adjacent and/or new markets, tapping into new revenue streams and building a more diversified, resilient and profitable business.

Formed in 1857, Ash & Lacy is a Birmingham-based manufacturer and a market leading provider of engineered facade and roofing systems for the architectural and industrial sector.

Outside of this core business, the company also manufactures products for a diverse range of industries including aerospace and automotive. In April 2025, Ash & Lacy sought to further expand their automotive business and secure its position as a market leader with the acquisition of automotive interior trim specialist Vestatec.

Vestatec’s flagship product is its Physical Vapour Deposition (PVD) coating technology, which enables the manufacture of durable, high-performance coatings. The company’s 20,000 sq ft manufacturing facility in Nottingham provides capabilities including automation, robotics, PVD coating and laser cutting.

Following the acquisition, Ash & Lacy Chief Executive Dr Jonathan Evans commented: "With unrivalled in-house capabilities in machining, pressing, perforating, expanding, and coating, we are now able to offer our clients even more comprehensive, cost-effective, and sustainable solutions.”

Warehouse automation set for huge growth
Amid the rapid growth of e-commerce and hybrid retail models during and after the COVID-19 pandemic, warehousing has become one of the most important phases of the retail supply chain.

The growing demand for online shopping, more efficient logistics, better inventory management and, overall, a more streamlined warehousing process, has led to smart solutions and automation becoming core parts of the industry.

Earlier this year, Rueben Scriven, a Research Manager at Interact Analysis and one of the world’s leading analysts on warehouse automation, predicted that more than a quarter of warehouses (26 per cent) would be automated by 2027, up from just 14 per cent in 2017.

It hasn’t been a case of constant, uninterrupted automation. Economic turmoil during 2022 and 2023 led to investment in warehouse automation dipping during 2023 – but 2025 is expected to bring a concerted recovery as warehouse operators seek to improve efficiency and cut costs.

Technologies such as AI, large language models (LLMs) and robotic automated storage and retrieval systems (AS/RS) are growing rapidly, helping owners to improve operations both within their warehouses and across their wider supply chain planning.

In fact, investment in warehouse automation adoption in 2025 has been compared to an arms race, with warehouse owners competing to institute the best systems amid a rapid influx of new, innovative market entrants.

In the UK, the warehouse automation market was valued at $2.2 billion (£1.6 billion) last year, according to imarc Group. By 2033, this is forecast to grow to $5.3 billion (£4 billion) at a CAGR of 10.3 per cent, driven by factors including labour shortages, an increasing focus on cost-efficiency, rapid technological advancements and the intensifying demand for faster e-commerce fulfilment.

While the UK may be lagging behind in certain areas of automation (e.g. the uptake of technology within the manufacturing sector, as per BDO) it seems to be a clear market leader in the warehouse automation space.

As this grows over the coming decade, it seems inevitable that there will be growing interest from large strategic and financial buyers seeking to tap into the rapidly-growing sector – building on a trend that has already been evident in some recent M&A deals.

MotionTech is an industrial group based in Sweden that has outlined its aim of building an automation powerhouse through acquisitions in the intralogistics and warehouse automation industries. The group aims to cover the entire life-cycle of projects, from R&D and planning and design, to manufacturing and hardware and software implementation to dedicated aftermarket services.

Since it was founded in 2021, the group has grown to encompass six companies, with more acquisitions reportedly on the horizon. The group’s acquisitions over the past few years include a number of UK businesses in the manufacturing and automation spaces.

In April 2024, the group made a double acquisition with strategic deals for two UK companies: LAC Conveyor Systems Limited and Holloway Control Systems. LAC Conveyor Systems is a manufacturer of modular conveyor systems, automation solutions and bespoke robotic systems for material handling requirements in the warehouse automation field.

Holloway Control Systems, meanwhile, is an expert in the field of advanced control and software systems, having established itself as a leader in industrial automation since it was founded in 2008.

MotionTech CEO Louise Ringström Grandinson said that the reasoning behind the deals was twofold: expanding the enterprise capabilities and moving closer towards the group vision of being a full-service partner for customers in the automation market.

Packaging: Automation transforming range of sectors
As in manufacturing and warehouse management, automation is helping to revolutionise how the packaging industry operates, improving efficiency and productivity, lowering costs, boosting quality and reducing errors and inconsistencies.

Robotics are being used within the packaging industry to handle a wide range of processes, from conveyor systems, packing and palletising, labelling and sealing, to box forming and weighing.

Beyond these relatively simple functions, technologies such as AI and machine learning are able to analyse data in order to optimise processes, sensors and control systems are able to detect product characteristics and ensure accurate and consistent packaging, while programmable logic controllers (PLCs) are able to process inputs from sensors and control outputs using programmed logic.

Such a breadth of innovative technology is helping to transform, not just the packaging industry itself, but also the wide range of sectors that rely on it, from e-commerce and food and beverage to pharmaceuticals and cosmetics.

In the food and beverage sector, automation is not only helping to make the packaging process quicker and more efficient, but also safer and more hygienic by reducing the risk of human error and contamination.

Robotics are used for an extremely wide array of uses in food packaging, including accurately cutting raw meat by weight, picking and placing food products into packaging and using depanning technology to remove frozen food items from surfaces or baked goods from containers without damaging the food’s integrity.

In consumer goods and cosmetics, AI is being used to help drive greater sustainability and efficiency, both during packaging and after the process, when the packaging has reached the end of its use.

Advanced printing methods such as inkjet coding are enabling cosmetics giants to bring the process of printing in-house and incorporating it into their packaging process itself, rather than relying on packaging that is pre-printed by a third-party supplier.

Meanwhile, in a major advancement for packaging sustainability, UK giant Unilever recently teamed up with e-commerce leader Alibaba to create smart recycling machines that are capable of identifying and sorting waste packaging for recycling.

Naturally, such a broad array of use cases are driving huge value within the packaging automation market. According to a November 2024 report from Dimension Market Research, the global packaging automation market is expected to grow from $76.7 billion (approx. £57.9 billion) in 2024 to $145.8 billion (approx. £110 billion) by 2033 – a CAGR of 7.4 per cent.

According to the report, this rapid growth is being driven by rising demand from key sectors including healthcare, logistics and food and beverage, as well as technical developments including automated packaging systems, smart packaging and robotics.

This rapid growth is also driving M&A activity in the sector, as companies seek to solidify and bolster their market position by using acquisitions to add the latest innovations and technologies in packaging automation.

In August 2024, SIGA Vision – an Axminster-based provider of machine vision solutions for the food and beverage and healthcare sector – was acquired by global high-speed packaging and automation solutions group Mpac Group.

SIGA was founded in 2007 and has established itself as a leading designer of automated visual inspection systems. The firm’s systems provide customers with automated solutions covering functions including production line control, material handling, quality control and defect detection.

Systems utilise robotic guidance cameras and image processors to design solutions that reduce and prevent human error, streamline processes and cut costs and waste.

Prior to the acquisition, the firm had a longstanding working relationship with Mpac, providing vision solutions for Mpac’s packaging machines, along with aftermarket care to the group’s supporters.

The deal was described as providing a platform for Mpac to provide fully-integrated support for customers using vision-related solutions, which the group described as “a key component in full line packaging automation.”

While the UK’s economic state may mean that UK companies are not as primed for investment in 2025 as they might have previously hoped, automation seems certain to be a key focus of investment for companies that are able to do so.

Although the initial outlay on either developing new capabilities or acquiring them through M&A may be steep, automating processes can result in significant cost-savings, greater efficiency and, ultimately, stronger revenues and higher profits.

Furthermore, at a time when remaining competitive, building resilience and achieving growth is tough work, staying on top of emerging trends and innovations in automation can enable companies to establish themselves as market leaders.

It should not be forgotten that increased automation will accelerate the need for workers with the skills to install and work with robotics, such as programming, systems design, engineering and maintenance, all of which are in global shortage.

While several UK industries are still in the early stages of automation (particularly when it comes to embracing new technologies), the rate at which automation is growing and the forecasts for its adoption over the coming years indicate that it will soon be a necessity for companies to invest in it if they hope to remain competitive.

Companies that fail to do so may quickly find themselves left behind, while those that do the hard work of investing and incorporating automation today are likely to reap the benefits in the long-term.

As automation and robotics continue to transform global manufacturing, acquisitions will position UK companies to compete more effectively in increasingly technology-driven markets.

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