The UK manufacturing sector needs a supply side revolution to continue to occupy a competitive position on the world stage, according to a new report by Daniel Mahoney and James Pilditch, UK Manufacturing: How to Fuel the Engine published by the Centre for Policy Studies. There is a continuing need for UK manufacturing, particularly in boosting productivity and exports.
Even with the proportion of output from manufacturing falling from 18 percent of GDP in 1997 to 10 percent currently, the sector still employs 2.7 million people and the UK is still the ninth largest manufacturing nation. UK manufacturing is crucial to future economic success and with Brexit approaching there have been calls for a renewed industrial strategy to boost the sector. However, a Government report from the former Department of Business, Innovations & Skills suggested that aggressive industrial strategies have not been helpful. The CPS paper sets out several proposals to improve the competitiveness of the UK’s manufacturing sector:
Bring in new manufacturing. The UK already performs competitively but there is scope to re-shore more manufacturing to the UK, closing the productivity gap and boosting exports. Avoid a government-led industrial strategy. There is evidence to suggest significant expansion of government support and intervention will not equate to a successful strategy. Intervention should be limited to specific circumstances, such as where government purchasing is important or in the promotion of better skills. Boost skills, especially in young people. The government and industry should assess the success of University Technical Colleges – which combine academic, technical, and practical learning – and consider expanding the programme. The government should work with businesses in different manufacturing sectors. Connect the NHS and the Pharmaceutical Sector. Slow up take of innovative medicines is a major problem for the UK healthcare system, threatening the future of the pharmaceutical sector as well as patients. Connecting the pharma sector and the NHS would spur the adoption of innovation.
Review electricity policy. High electricity costs have an impact on manufacturing firms, especially for the UK’s energy intensive firms. It is important UK manufacturers are not penalised compared to their EU counterparts. Give certainty on airports. Manufacturing firms, and other businesses, need certainty on Heathrow expansion and airport capacity in the South-East of England. Create Free Ports, which will help promote growth in areas of high socio-economic deprivation. Post-Brexit, Free Ports could provide a massive boost in jobs to coastal industries. Open up the banking sector. Greater competition could encourage banks to more accurately meet the needs of SMEs. Improve bankruptcy law. Unincorporated SMEs are left vulnerable to high management fees and high interest rates if they run into difficulty. A new Enterprise Bill could be introduced to remedy this. Secure international trade deals. A bi-lateral trade deal with the United States should be a top priority. The new administration is likely to be more accommodating to the UK and other developed nations relative to lower wage economies.