The role of the manufacturing sector in Britain

The past fifty years has brought a lot of turbulence to the manufacturing sector in Britain. Going from an industrial powerhouse to sector of political contention and then a perceived junior role within a financial sector-biased economy, the role of manufacturing has been much debated. Is now the time to revive this sector to drive Britain’s growth in the years to come?

Since the recession (read the financial sector’s role in the crisis) the manufacturing sector has started to show up on the radar once more. According to the ONS, manufacturing output increased by 0.3% in August which is an increase of 6% from the previous year.

The second quarter of 2010 also brought an increase in productivity – the holy grail for economists. Output per job increased by 7.9% compared to the same quarter in the previous year and up from 7.3% in quarter one.

The Quarterly Economic Survey published by The British Chambers of Commerce showed that there were improvements in the manufacturing balances for investment employment and turnover confidence but did see a slowing in domestic and export balances (all in quarter three). Nonetheless, manufacturing was shown to be a brighter sector than the services sector.

This is not to say this sector and many others will not face challenges in the near future. Tough austerity measures have swept the political landscape across Europe which could hurt our exports. Domestic inflation may also offset the advantage of the relatively weaker currency.

There is also the issue of domestic austerity measures. Cuts in public spending to sectors such as defence could severely hamper the growth of the manufacturing sector in Britain. Also, knock-on effects of cutting scientific research will hamper innovation and technological advancement and will therefore decrease the growth of high-tech manufacturing.

The manufacturing sector has improved its growth and it and the government has seen the recession as an opportunity. While there are rays of light there are still some key challenges it faces both domestically and internationally. Not only are there domestic austerity measures and inflation, there are also significant issues facing our key exporter, the euro-zone. Can Britain compete with the new economic super powers of the East? Or perhaps does Britain need to differentiate itself from low-cost production?

The role of the financial sector has been exaggerated and a shift towards manufacturing is crucial for economic growth. Will the British government agree with Steve Jurvetson (of Draper Fisher Jurvetson, a venture-capital firm) that “Engineers contribute to the economy, lawyers and bankers…subtract”?



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