Britain needs a concerted effort to boost manufacturing. The credit crunch has driven home the country's overdependence on fragile financial services. At the same time, fast-growing developing countries such as China and India offer huge new export markets. But the government's new manufacturing strategy, published in early September, does not go far enough to right the balance of the British economy.
The strategy paper, which has the dreary title "Manufacturing: New Challenges, New Opportunities," is the joint work of the department for business, enterprise and regulatory reform and the department for innovation, universities and skills. It is the first attempt in five years to set a direction for manufacturing. The paper argues, with some reason, that British manufacturing is a success story. Contrary to fashionable chatter about Britain becoming a "post-industrial" society, the country has the sixth highest manufacturing output in the world.
Manufacturing accounts for half of exports, three-quarters of investment in research and development (R&D), and nearly all the productivity gain in the British economy over the last decade. And in 2006, 25 per cent of British manufactured exports were high technology, more than in major competitors such as France, Germany or even the US. On the whole, British manufacturing is in better competitive and financial shape than for a generation.
But the cost has been high. Only a decade ago, manufacturing's share of national output was 21 per cent and its share of employment 18 per cent. Today it accounts for about 13 per cent of output and around the same proportion of employment—barely 3m jobs. More than 1m manufacturing jobs have evaporated since New Labour came to power, often with devastating social consequences for entire communities. The fear is that a further decline in British manufacturing will rob society of the variety and balance it needs.
As the strategy paper tacitly admits, British manufacturing has problems. Despite improvements, it still suffers from? investment, R&D spending, innovation and inadequate skills (in the management suite as well as on the shop floor),. Combined, these amount to a chronic productivity problem, of which R&D is a telling indicator. Britain's R&D manufacturing spending has fallen from about 2.5 per cent of national output in 1982 to about 1.75 per cent now—noticeably lower than major competitors and well below the government's target of 2.5 per cent by 2014.
The strategy paper identifies five factors shaping manufacturing worldwide: global value chains; technology exploitation, intangibles (such as design, branding and R&D); people and skills; and the low carbon economy. It believes that the latter—consisting of environmental efficiency within companies and development of industries such as nuclear power, alternative energy sources and electric vehicles—could create up to 1m jobs by 2020.
A series of initiatives is intended to help British manufacturing compete in this new world. A new Office of Renewable Energy Deployment will try to remove barriers to rolling out alternative energy sources. There will be more apprenticeships and access to skills and training will be simplified. More help will be available for British companies selling overseas and better advice on protecting intellectual property rights in these markets will be provided.
The government has embraced the new Advanced Manufacturing Centre model, which Rolls-Royce and Boeing originated, to bring together the public and private sectors to develop new manufacturing technologies and practices. It has even proposed a new body, Manufacturing Insight, to help improve the industry's image and will launch a campaign called Manufacturing the Future in schools.
In the end, however, the strategy fits within a familiar New Labour framework. The government's strategy has been to provide an "enabling environment": infrastructure, education, regulation and economic stability. The main financial exception has been £2.5bn of grants for R&D since 1997. But many companies feel that support has been too limited. They believe other governments—from Germany to Singapore—are prepared to help and defend their manufacturing more actively. And they note the government support for banks in several countries, including Britain.
Short on vision, the government's manufacturing strategy is far from being the "routemap" for which some industrialists have called. A vital opportunity to restore British manufacturing as an essential part of our economic and social life is in danger of being lost.
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