Manufacturing is valuable…

 

Despite much commentary about its demise, manufacturing remains very important to the UK. The recently published, “Made Smarter,” review estimated that manufacturing supports around 5.1 million jobs in the UK directly and indirectly, this could be heading to over a fifth of the UK workforce. The sector is even more important in relative terms in many areas of the UK, accounting for 22 per cent of economic output in Sunderland and 25 per cent in Hull.

Its importance goes beyond its contribution to manufacturing sector jobs and output. According to the work for Made Smarter, the sector accounts for 70 per cent of UK business research and development (R&D) spend and 14 per cent of all business investment.

 

…and increasingly available…

 

Since the 1980s, UK manufacturing has been under pressure from increased competition and the shift of production to low wage economies.

We now find ourselves at a defining point in the evolution of manufacturing globally. Businesses in developed markets had begun questioning their moves to offshore production to low wage economies as the impacts on innovation, quality and time to market started to detract from performance. Technological change is now increasing this move, offering the potential to reduce the importance of labour costs as a share of total production and tilting the balance back towards location in developed markets, especially for high value goods that appeal to western consumers.

 

…and the UK needs to act…

 

With technological change creating opportunities at the same time as Brexit is challenging UK manufacturers to improve their competitiveness, now is the time for action. The UK requires an integrated approach to manufacturing that includes trade and domestic policies and that is designed to operate at both national and local levels.

At the heart of any programme has to be a higher level of co-operation between business and Government at all levels. This will ensure policy is designed to have the right impacts, build the confidence necessary to encourage investment and allow integrated policy making. The key components will be infrastructure, skills, innovation and institutions.

 

…with a clear strategy…

 

Just like any business would do, the starting point should be the articulation of a clear vision and strategy. This will require that choices are made, especially around the sectors to be given priority and the role the UK believes our businesses can play in these sectors. This is not “picking winners” in the sense of identifying national champion companies but it does require taking a view on where to focus resources.

At a macro level there are already obvious candidates. Health, construction and energy are sectors in which changes in the economy and society are already creating opportunity and the ones from which additional benefits will flow to the domestic economy in terms of better and more efficient provision. Automotive is a sector in the midst of major disruption and food and drink will need to transform after Brexit. There are more candidates but the potential is clearly there.

 

…and a plan.

 

With a clear strategy and framework, the individual components of policy become easier to design. Potential investment and spend on infrastructure, skills and R&D can be evaluated against the priorities. If the UK decides renewables are a target sector than infrastructure investment should reflect this and skills development should take into account the level and type of skills required. Equally, support for R&D in universities and businesses should be weighted towards potential deployment in the target sectors.

This will also require more devolution of powers to the local level. While some of the activity, such as major infrastructure provision and incentives for investment, will remain national in nature, the provision of the right infrastructure and skills development locally will be vital to ensure a match to sector demand. The largest cluster of automotive manufacturing is likely to remain in the Midlands, while the strength of the food sector in the North East will continue and so skills need to match the demand locally.

 

 


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