23116_FOC _Robotics_Report

ROBOTICS

BASELINE Automation is the substitution of human labour with capital and technology. In real estate discussions, ‘the future of work’ is often the construct of white-collar commentators who unhelpfully substitute ‘work’ for ‘office work’. However, the majority of UK residents don’t work in an office, nor will they in the future.

When we have talked about automation historically, we think primarily of manufacturing, where physical robots and factory lines have replaced manual workers. This trend started in the first industrial revolution with the Spinning Jenny and Looms, causing significant disruption to society, to the geography of the UK and to the economy. In the long run, the Luddites were wrong about the threat of machines to the economy; automation facilitates progress for all. However, in the short run and on a personal basis there were indeed winners and losers. Value was shifted from the artisans to the industrialists, people were shifted from rural settlements to cities such as Manchester and Birmingham and the economy shifted from agriculture to manufacturing. In this process, a whole new category of building, the factory, was created.

Progress on automation in the 20th century led to the removal of traditional roles and the creation of new ones. Generally, it has moved the economy up the value curve, and made it uneconomic to perform certain tasks in the UK, which when combined with globalisation has led to the de-industrialisation and the shrinking of the manufacturing sector in the UK. This is not a bad thing; it means that our economy has risen to more valuable activities. However, that is a difficult message to sell to those who have lost their job, or cities that have lost their ‘raison d’etre’ and not yet found an alternative.

What is likely to change?

The big shift looking forwards is that the ‘robots’ of the next 20 years are in many cases formless algorithms, and the workers that they will displace include white collar professionals. Even within the last year, improvements in assisted, augmented and autonomous Intelligence have seen a step forward in the level of tasks that can be automated through systems such as OpenAI, highlighting the fact that those roles at highest risk of computerisation are the ones which are devoid of the need for dexterity, creativity or empathy. These include a significant percentage of industrial and manufacturing roles, with a large step forward in automation already taking place in warehouses and factories – and across the supply chains in our cities.

Likelihood of automation adoption, by use case, % of respondents The key use cases for automation in industrial companies include material, handling, palletization, and sorting.

17

83

Palletization and packaging

82

18

Material handling, ground movement

20

80

Goods receiving, unloading, and storage

77

23

Material handling, forklifts

25

75

Sorting

72

28

Quality Assurance

71

29

Picking

62

38

Lifting

58

42

Machine tending

54

46

General cleaning and janitorial services

52

48

Assembly

51

49

Clean-room applications

43

57

Surface treatment

57

43

Stamping

72

28

Welding and soldering

Already implemented Currently piloting Highly likely Likely Not sure Unlikely Highly unlikely Not applicable

Source: McKinsey Global Industrial Robotics Survey, 65 senior leaders and executives in automotive; food and beverage; life sciences, healthcare, and pharmaceuticals; logistics and fulfillment; and retail and consumer goods sectors, August 2022

However, there will also be a huge shift in the activities and requirements of previously office - based workers. Those whose roles are relatively programmatic – even if highly skilled are likely to see a significant impact in the way they work.

In total, up to half of all existing roles are predicted to be automated by 2040, with all employers expecting a structural labour market churn of 23% of jobs in the next five years with that even higher in Supply Chain, Media, Entertainment and Sports Industries.

Labour Market Churn by Industry

Media, entertainment and sports Government and public sector Information technology and digital communications Real estate

32%

29%

29%

27%

32% 29% 29% 27% 26% 25% 24% 23% 23% 23% 23% 22% 22% 21% 19% 19% 19% 16%

Financial services

26%

25%

Supply chain and transportation

Education and training Non-governmental and membership organisations

24%

23%

Care, personal services and wellbeing

23%

Agriculture and natural resources

23%

Professional services

23%

2 %

Infrastructure

22%

Health and healthcare

21%

Retail and wholesale of consumer goods

19%

Energy and materials

19%

Manufacturing

19%

Automotive and aerospace

16%

Accomodation, food and leisure

0

10

20

30

40

Source: World Economic Forum Future of Jobs

In the same way that the Luddities, the coal miners and the factory workers needed to reskill and find new roles, so too will there be a broad reskilling requirement in the next 20 years. The challenge this time is that the technology has become so effective that for a significant minority there may be no job that cannot be done more effectively at lower cost by a machine. This poses significant societal questions about how we will pay for and give purpose to these people.

In the meantime, humans will need to learn to work alongside machines and find a new balance in the workplace and economy. Optimistically, this might for instance lead to the introduction of a 4 day week. Less optimistically, it will serve to exacerbate the existing division of wealth between capitalists and workers.

Finally, as functional tasks are stripped out of the human elements of work, the kind of activities carried out by our UK workforce are going to look different by 2040. Logically, these will focus on more creative, empathetic, analytical and STEM subjects that are more challenging to robotise. In the context of significant change to work activities, the offices of today are likely to feel as outmoded in the same manner as the factories of the last century. New venues to support collaboration, engagement and creativity will emerge from their ashes. Takeaways » Waves of automation have triggered radical changes to society over the course of history. » A new digital wave will drive significant change to the nature and focus of existing work. » Automation will impact some industries more than others, but this includes many office workers. » There will be a transitionary stage when humans work alongside machines. » A significant minority are likely to become left behind by this change; solutions are needed. » New buildings are needed to respond to new forms of work that will emerge.

Black Swan Risks » Tech progress leads to wide-scale permanent redundancy. » Civil unrest as automation exacerbates existing inequalities.