Its common knowledge in the U.K that manufacturing has declined over several years but the attached graphic illustrates just how serious that decline is compared to other leading nations. The situation after the credit crunch is likely to paint an even grimmer picture.
But why should anyone care ? Does it reallly matter if we are making things or providing services instead ?
The fact that Japan, Germany, France and most leading nations are emerging from recession before the U.K may give some indication of that importance.
Manufacturing provides highly skilled jobs which are well paid. This leads to more purchasing power for the economy as a whole.
Also, for every job in manufacturing another 10 may be created in support functions and in the supply chain.
But, can we still afford to manufacture in the U.K ?
Anyone who has done a Business Plan for an engineering project should have realised that, when considering modern manufacturing equipment, direct labour cost is virually insignificant. What has a massive effect is the COST OF CAPITAL and therein lies the biggest clue to our problems.
If we want to prosper in the U.K with a fare distribution of wealth and an effective social care structure we need a vibrant, mixed economy of which manufacturing is a major key component.
This can only happen if Goverment has an effective manufacturing strategy with a good supply of reasonably priced Capital investment.
That is the challenge for Government of whatever persuassion.
chris@amberhill.biz
Chris, firstly thanks for asking me to comment on this.
The points I’d bring up here are
1) the dangers of talking %’s
2) continuous improvement have always meant doing more with same (or even less)
3) not all manufacturing is created equal
If I have a pot of 100 counters, 85 red and 15 blue ones, then the split is 85.0%/15.0%. If I add 3 red counters to demonstrate growth then the overall pot has grown by 3% and the split is now 88 red counters to 15 blues and the % change to 85.4% and 14.6%.
Has the blue total shrunk, no, it’s still 15, only it’s share of the total has. Does this mean blues are in decline?
In the next few years don’t be surprised to see manufacturing as a share of GDP “jump” from it’s current 13.5% to 16% and possibly even 18%.
Will we have had a miraculous recovery? No, sorry just that other parts of the economy shrank faster in this last recession.
Taking the real figures of manufacturing it’s no surprise that with many companies taking on lean and continuous improvement projects that we are doing more with the same (or even less).
The UK manufacturing industries improved output per hour by 47% in the period 1996 – 2006, twice the rate of the UK economy in general!
Whilst the numbers employed in this sector declined at a rate of over 100,000 p.a. in the period 1999 – 2006.
When did the peak occur for the value of UK Manufacturing?
During the war, when building tanks, planes, boats, military equiment?
1957, when we’d never had it so good?
1964, when we invaded the US, on the back of Beatlemania?
1988, when we saw the effects of the Lawson Boom and low unemployment rates?
Er no, it’s 2007! and we are still 6th in The Global Manufacturing League.
Why is this? Well the UK has moved away from low value, high volume, “mass” production towards manufacturing higher value and advanced items, so whilst fewer people are in industry, than before, those left are adding more value then ever before.
Is there any more evidence that we can compete? Well UK manufacturing exports to China are up 44%, in the first six months this year.
That is not to say we shouldn’t be complacent and if we really want to improve the economy, manufacturing, job creation etc, then maybe we should study the work being conducted by Andy Grove, former CEO of Intel on whether investing in start-ups is the right thing and after many years in Silicon Valley he has a good view, which you can read here
http://www.businessweek.com/magazine/content/10_28/b4186048358596.htm
Regards,
Mark
http://www.theleanmanager.wordpress.com