UK manufacturing in 2012

This policy statement looks at how attention and investment of resources in four key areas could stimulate growth in the UK’s manufacturing sector.

Manufacturing is more than just the process of making things. Currently generating between 11% and 12% of the UK’s overall wealth, 60% of its exports and 2.6 million jobs, it plays a vital role in the UK economy.

Over the last 20 years manufacturing has changed significantly, becoming leaner and more agile, improving its competitiveness and reducing costs. This has led to a change in the way in which manufacturers described their processes and approach. Previously it was the conversion of raw materials into finished goods. Today, manufacturing is defined as the process for turning ideas into saleable products realising the economic benefit of technology and research. It creates future value from investments made today.

In comparison to many other nations, the UK has one of the leanest and most efficient manufacturing sectors in the world. However, between 1984 and 2009, the UK has seen the lowest growth out of the top 25 global manufacturing nations at 13%.

The UK’s manufacturing output recently slipped to ninth in the world rankings, just ahead of India. To ensure we remain within the top 10, the UK needs to reinvigorate and exploit its manufacturing potential. No nation in the top 10 has maintained its position as a leading economy solely on the basis of its financial or service sectors.

Key recommendations

1. The government should set out a clear national industrial strategy to provide industry and academia with a framework to deliver growth in the manufacturing sector. This industrial strategy needs to be developed with a cross-party consensus to ensure UK industry has long-term political commitment.
2. The government and the financial sector should work together to deliver greater capital investment in new production plants and machinery along with training. An industrial bank is one option that can assist manufacturers with access to funds for investment, providing options such as asset management loans.
3. Industry, academia and the government need to support and publicise the work of the UK Commission for Employment and Skills to increase the number of people and the skill levels required to meet the future requirements of manufacturing. Only then can we develop programmes to deliver an expanded manufacturing sector and increase its contribution to the economy.
4. The new High Value Manufacturing Catapult Centre should expand its role across all manufacturing sectors rather than be restricted to its own research programmes.