Brighter future as manufacturers battle for sustained growth

Efforts to strengthen the UK’s manufacturing base are boosting exports and aiding economic recovery, writes Mark Milner

In the wake of the near meltdown in the global banking system in 2008, the government determined it would redress the balance of the UK economy, making it less reliant on financial services and boosting manufacturing.

It’s a tough ask. Manufacturing’s share of the UK economy has been in decline for years and now accounts for some 11 per cent of the economy in 2009 – down from 18 per cent two decades earlier. Over the longer term, and excluding the post 2008-9 trauma, however, the decline has been relative. In 2007 the manufacturing sector’s output was actually around 30 per cent higher than in 1980.

Marek Szwejczewski, reader in operations management at Cranfield School of Management, says Britain has been quicker to respond to the opportunities offered by “smarter” manufacturing techniques than some of its main rivals.

UK companies are focusing on the service side of their business alongside their investment in products, productivity and people, helping customers install their new products and working with them to get best effect. Many are also working closely with their suppliers, sharing their experiences to improve the effectiveness of their relationships, he adds.

The UK has an industrial base which many would envy and ranks within the top ten manufacturing nations

What is needed, though, are the right conditions in which such industries can thrive, and it is here that the government can play a part. “We need that climate where manufacturing is considered important,” Dr Szwejczewski says.

The immediate outlook does not appear promising. Recent surveys suggest the short-term prospects for the economy are far from appealing. Earlier this month the UK manufacturers’ organisation EEF and business advisory firm BDO reported UK manufacturers were facing the toughest trading conditions for almost three years on the back of slowing demand at home and abroad. Earlier, the CBI had cautioned growth expectations in the manufacturing sector had flattened, with a downturn in both total and export orders.

However, in the medium to longer-term, the UK does have its strengths. It has an industrial base which many would envy. The UK ranks within the top ten manufacturing nations. Pharmaceuticals, medical equipment and food are all areas where the UK has a strong presence, the latter employing around 400,000 people. In many areas UK manufacturing is world-class – aerospace is second behind the United States, for example.

Dr Szwejczewski, too, refuses to be downbeat. “We still make things in the UK,” he says. “We still have 2.5 million people making stuff which we export all round the world.”

The success of Jaguar Land Rover is one example. In March 2008, the global car giant Ford announced it was selling its Jaguar and Land Rover brands to the Indian conglomerate Tata for some £1.15 billion. It was the latest in a series of ownership changes which had, over the years, affected – some would say bedevilled – two of Britain’s most prestigious car marques.

Tata’s early days of ownership were problematic as Jaguar Land Rover, along with the rest of the industry, struggled with the global downturn. Contrast that with the position today. In its last fiscal year Jaguar Land Rover made a profit of more than £1.5 billion. Over the last 18 months Jaguar Land Rover has created 4,000 new jobs as it ramps up production to meet increasing demand. Last year sales in the US rose 12 per cent, but soared 60 per cent in China and are up by almost 90 per cent so far this year. Other emerging markets, including Russia and India (the latter albeit from a low base), are demonstrating strong demand.