There is much hand wringing about the manufacturing sector, mainly because its decline has meant that the economy is perceived to be imbalanced with too much emphasis on service industries. Having said all that, whilst manufacturing is often thought of as the Cinderella sector, but it is still a significant part of the UK economy and it is an area where there is a potential for growth in the future.
Manufacturing past and present
In 1948 industry in Britain was responsible for 41% of the economy, which by 2013 has shrunk to just 14% (over the same period the service sector contribution rose from 46% to 79%). Beyond the statistics there is a more human story in that the number of people employed in manufacturing had fallen to below 3 million in 2011 from 9 million in 1966. It is interesting to note that since 1978 the labour productivity has been rising by 2.8% per year (the service sector rise is just 1.5%), which indicates more efficient and productive businesses, although fewer of them.
The decline in manufacturing as a proportion of GDP is not unique to the UK, but is replicated to a greater or lesser degree across all developed economies. The UK along with France are among the countries with the lowest proportion of manufacturing in their economy, with Germany at 22% and Japan at 19% among the highest. It will doubtless be argued that investment played a significant part in these disparities, and it is an area where the UK is trying to catch up.
The future of manufacturing
The future isn’t as bleak as it might appear. For instance, of the £40 billion worth of goods exported to the United States in 2013, over 80% were manufactured goods (the UK also exported nearly £25 billion worth of manufactured goods to Germany!). Although the UK’s share of global manufactured goods has fallen from 7.2% in 1980 to just 2.9% in 2012, the amount of manufactured output being sent for export has risen from about 30% in 1980 to around 47% in 2011 which is a higher figure than the US achieves.
Research and development is vital to all industries and of the R & D spend in 2012, 72% (£12.2 billion) was on manufacturing. This spending is crucial for the future of manufacturing but the sector will face changes in structure in the future, encompassing a different business model as outlined in the government publication “Future of manufacturing: a new era of opportunity and challenge for the UK”.
The main theme of the document is that flexibility that will be required for manufacturing to be successful. The ability to respond to customer requirements to the extent that customers have direct input into a product, will become more common. New materials and digitised processes will be used to reimagine existing products and create new ones. Site facilities will be more innovative and flexible allowing businesses to locate in a variety of areas instead of a centralised location which may be some way distant from customers and suppliers.
A new type of manufacturing building
The sight of a huge brick building with towering chimneys belching out black smoke is an image of a factory that is now long gone. New, lighter, airy buildings have broadly replaced the old factories and buildings can also be part of the new flexibility required in the new ways of making things. For example a lightweight temporary building can be installed on a site in a matter of days to take advantage of a requirement for extra manufacturing or storage space. Having a building close to suppliers or markets allows for a streamlined supply chain and provides the space for more efficiency.
The future of manufacturing is going to be markedly different from its past. The ongoing investment in research and development and the flexibility in bringing new products to market will be hugely important. It is to be hoped that the sector’s future success will go some way to rebalancing the economy and make the UK a success story.