How does Manufacturing Contribute to UK Economic Resilience?

I came across this piece of research whilst looking for how resilient the manufacturing industry will be during Coronavirus and even though it was written back in 2013, it raises some interesting points. I thought I would summarise them.

Here are some of the interesting takeaways from this research;

  • Manufacturing retains a distinctively valuable and important role for the UK in economic, political, cultural, technological and cultural terms.
  • A central concern for manufacturing in the UK is its productivity, relative competitiveness and growth potential into the future to 2020-50.

A robust manufacturing sector contributes towards

  • Output: Producing gross domestic product (GDP)
  • Employment: Creating direct and indirect employment and incomes
  • Productivity: Producing value-added and providing the highest potential for productivity growth
  • Innovation, research and development: High levels of expenditure on applied research and innovation generating wider diffusion and spill-over effects to the broader economy
  • Trade: Generating export earnings from overseas sales and maintaining positive trade balances
  • Supply chains: Purchasing goods and services generating direct and indirect multipliers for investment, growth and employment within the wider economy
  • Manufacturing-service linkages: Creating demand for high value-added and specialised services such as accountancy, advertising, legal, marketing and research
  • Training and skills development: Developing a highly skilled workforce and creating training opportunities for new labour market entrants
  • Tax revenue: As a sizeable and productive economic activity producing output and employing people, manufacturing is a substantial contributor to national tax revenue.

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Manufacturing’s role in Economic Resilience

As a result of its pivotal role as a vibrant sector of economic activity, manufacturing makes the following vital contributions to resilience:

  • Recovering lost output, employment and productivity: In the wake of disruptive change, manufacturing can contribute to generating GDP, jobs and value-added as part of regaining previous growth trajectories both directly and indirectly through its wider supply chains for goods and services
  • Generating new and replacement employment: Manufacturing can create new kinds of job opportunities in new and growing activities to replace those lost, for example in recession and economic downturn
  • Innovating for growth: Periods of disruptive change can stimulate what Joseph Schumpeter called ‘creative destruction’ with manufacturing demonstrating high innovation potential for product and process advances
  • Motor of recovery especially in export-led sectors: As UK economic growth has stuttered and fallen into a double-dip recession, the export orientation of manufacturing has meant it has outperformed the national economy in making a positive contribution to economic recovery
  • Upgrading the workforce: The role and position of manufacturing in training and skills development is vital in upgrading the existing workforce for example in learning new skills as well as producing portable transferable skills of use in different activities, enhancing the flexibility of the labour market in response to shocks
  • Focus of sectoral rebalancing: As part of the UK government’s policy of ‘rebalancing’ the sectoral and spatial structure of the UK economy it aims to grow manufacturing rather than reduce the size and contribution of the services sector, especially financial services. This policy suggests a future role for manufacturing and its contribution to UK resilience.

5 Ways Manufacturing can Contribute towards Economic Resilience

1 ‘Smart’ industrial strategy – proactively creating, shaping and nurturing business activity rather than leaving its development to purely market-led outcomes

2. Ensuring that investment is made into technology

3. Local, collaborative and supportive production networks

4. Manu-services – Where firms combine goods and services into packages.

5. Adaptive capacity – the ability to adapt and change in the face of disruptive change.

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