the decline of UK manufacturing

Mistermeaner

Jim ratcliffe writing in the telegraph. Tablet won't let me copy link for some reason so here's text:

Last November, the World Bank released its latest manufacturing data. It showed that UK manufacturing had fallen below 10pc of GDP. For the first time ever, manufacturing accounts for just 9.4pc of output. That’s the lowest point on record. A tipping point has been reached.

Just 20 years ago, UK manufacturing represented 22pc of GDP while German manufacturing represented 23pc of GDP. Almost identical. The really shocking statistic though is that Germany today is little different from 20 years ago whereas the UK has collapsed spectacularly. That’s a loss of half of the country’s manufacturing capacity in a generation. Whereas this seismic shift in UK manufacturing may seem like a minor tremor in “services rich” London and many southern counties, it is a catastrophe in slow motion in many parts of the north of England, Wales and Scotland, as quality employment prospects either degrade or disappear.

The sheer scale of the problem is obscured by our own Office for National Statistics (ONS) which collates the data in a confusing manner. The World Bank is very clear. It shows UK manufacturing as a standalone figure, as it does, and has done consistently for many years, for all parts of the world.

We choose to blend manufacturing with a number of other things, including sewage, which the cynic in me might suggest is obfuscatory, and hence the dramatic decline is camouflaged.

It may well be that this poor data reporting by the ONS has failed to alert our Government to this startling collapse as it appears not to have noticed. On the other hand the World Bank has sounded the alarm bell.

A lesson I learnt many years ago in business is that, if you do not have crystal clear data and financials, you are running blind. You make poor investment decisions, you get left behind, you miss the boat.

So why is it that the country which blazed the path to industrialisation and mass production in the 18th and 19th centuries has fallen so woefully behind the pack? And should we be concerned about it given that our services sector is unquestionably performing strongly?

It would be nice if there was a simple crisp answer but there is not. To maintain, or grow manufacturing, one needs a constant stream of investment as plants grow old and products grow old. New plants and new products need investment.

In today’s globalised world, investment decisions are always compared and contrasted with alternative locations abroad – should we invest in the UK, or alternatively in Germany or the US or the Far East for instance?

So we have to look at what the UK has to offer that will make it competitive and therefore fare favourably in the investment decision process.

Can we offer cheap or competitive energy? A resounding “No” on this one at the moment. And, with the North Sea running out, the position is likely to get worse. Of course the UK is sitting on huge shale gas deposits which could change everything. Interestingly, in the 18th and 19th centuries Britain built its wealth on its coal reserves but there were no Nimbys then.

Can we offer skilled labour? Well, sad to say, not on the level of Germany, Belgium, the US and quite a few others. Remember we used to have excellent apprenticeship schemes, polytechnics and technical colleges. But government decided all young people needed to become graduates. Sadly, and I can speak from experience, we do not stack up well on skills.

Union relationships in the UK have a “notorious” image abroad. In Germany discussions with unions often centre on investment, whereas in the UK it is always about reward. Interestingly the UK unions have not been outspoken about falling below the 10pc manufacturing milestone. In Germany they would have been clamouring at Merkel’s door. Taxes are improving in the UK but they are not highly differentiated. And on top of that we have green taxes and apprenticeship levies to pay.

As for the “is it important?” issue, yes it clearly is. Very much so if you live in a manufacturing town of which there are many in the North, Wales and Scotland. And, furthermore, a robust balanced economy needs to make things. If the inhabitants buy “things” with their earnings, we need to make “things” in our domestic economy. If not, we have to bring all manufactured goods in from overseas and pay for them in foreign currency.

We are watching the slow death of manufacturing in this country. We have lost half of it in a single generation and are down to less than 10pc of GDP.

If we wish to arrest the decline, or even return to growth, we need to give corporations reasons to invest in Britain. This requires competitive energy, a skilled workforce, attractive taxes and a government that wants to make it happen. We need USPs – unique selling points.

Germany has them. It has a highly skilled workforce, is seated in the heart of Europe and has great manufacturing infrastructure and competent suppliers. America has cheap energy (shale has made an enormous impact), a skilled workforce and the world’s largest market. China has growth, cheap labour and a huge market.

The current Government is the most pro-manufacturing government that we have had for many years and it is uplifting to hear talk of a Northern Powerhouse. But to actually make a difference, Britain needs to attract investors. Investors who have choices to make and who can afford to be very “picky” in today’s highly competitive world. Ineos has chosen to invest much of its capital in the US. Many other companies have chosen the Far East.

The UK is not currently a target for manufacturing investment because it lacks USPs. We need some quickly! For instance, why not a single-digit tax rate for manufacturing?

Mistermeaner

For what it's worth I agree. We are over reliant on London and its services. We have the opportunity to do much much better if we stop pandering to nimbys and tree huggers and get on with fracking

It's easy for the already well off / retired to say no but I fear for the youth and future of this country. Who is going to pay the taxes to fund the wiping of my drool?

wymondham

This is the new Britain, we export aid and import people!

michaels

We can always sell off a few houses to foreigners to balance the books....

cells

And in other news, farming is now 1-2% of GDP while chad still maintains a strong and vibrant farming industry of 50% of GDP. We could learn a lot from Chad...

Mistermeaner

cells wrote: »

And in other news, farming is now 1-2% of GDP while chad still maintains a strong and vibrant farming industry of 50% of GDP. We could learn a lot from Chad...

Well we subsidise farmers to sit on land that could be used for housing so maybe not

Farming also does not produce GDP like manufacturing does.

mwpt

Mistermeaner wrote: »

For what it's worth I agree. We are over reliant on London and its services. We have the opportunity to do much much better if we stop pandering to nimbys and tree huggers and get on with fracking

Would fracking be economically worthwhile for us if oil never rises above $50?

Mistermeaner

IMO yes it would be more economical than north sea extraction

It would also give us energy independence from politically unstable regions like Russia.

Mistermeaner

Nb fracking is done for the equivalent of $40bbl in US and will only get cheaper

kinger101

Are manufacturing jobs better than those in say banking or the service industries. We have one of the lowest unemployment rates in the developed world.

DiggerUK

Wealth can only be produced from making 'stuff', profits can be accrued from servicing manufacturing, but that's all the service sector can do..._