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When the government merged two departments last year to create the Department for Business, Energy and Industrial Strategy, it was a sign that it wanted to highlight the importance of industry to the UK economy. And its recently published green paper, ‘Building our Industrial Strategy does just that – placing industry and manufacturing at the heart of government’s priorities over the coming decade.  

One of the criticisms of the economy has long been that it is unbalanced and skewed towards London, in particular the financial services sector in the City. Although this is undeniably an important area for the UK, and one that gives much prominence to the country globally, our manufacturing prowess also deserves to be recognised.

In some areas of this we are considered to be global leaders. The aerospace industry, with its advanced manufacturing capabilities, has made the UK home to Airbus, Rolls Royce and BAE. The automotive sector is also performing very well.

The government has recognised the strengths and weaknesses of the manufacturing sector, and is supporting its growth. Last November, the Prime Minister announced the Industrial Strategy Fund to back leading-edge technologies such as robotics, advanced materials manufacturing and satellites.

The fund is run by UK Research and Innovation (UKRI), which took over from various existing research bodies last summer to create a more joined-up approach to innovation. It is not only concerned with new developments, but with creating the means to successfully commercialise them. Ensuring that British manufacturing capabilities remain successful long after their initial development must be a priority.

 

Solving the Productivity Puzzle

We’re all aware of this long-standing industrial conundrum. Regions outside London lag behind the national average and, as a country, our productivity overall is 20% behind that of both France and Germany. It is estimated that if rural economies were boosted, an additional £28bn a year could be added to output.

Various factors contribute to this slow economic growth, and EEF’s report, ‘Manufacturing a Solution to the Productivity Crisis’, points to a number of them. Long-term underinvestment and considerable growth in self-employment are two factors that are clear to see, as is the fact that we are still dealing with the fallout from the financial crisis.

The investment in manufacturing that has been laid out by the government promises to reverse these trends. Manufacturing has a good track record in productivity levels compared to the national average, and developments in manufacturing have a positive knock-on effect on the economy as a whole. The sector supports the development of new technologies, modern machinery and computer systems that are later taken up by other industries.

The split in growth across different areas of the country is well documented, and it’s not only about the South East versus the North. Cardiff, Aberdeen and Edinburgh are all in many senses thriving but the Scottish and Welsh economies are performing below the national average. And where many city centres across Britain are prospering, their outlying areas often lag behind.

An integrated strategy for stimulating the economy is needed, one that encourages companies, universities and regions to operate as local ecosystems. The government has introduced a number of ways to boost regional initiatives, including fostering expertise through Local Enterprise Partnerships, introducing City Deals and devolving power to mayors. These measures all enable the people who most understand the needs of different areas to make key decisions.


Investing in skills and training

The government is also investing in education, which is critical to boosting the country’s manufacturing capabilities. New institutes of technology will be established to deliver training in STEM subjects (science, technology, engineering and mathematics) and boost opportunities for young people who don’t go to university. The government also wants to link regional businesses, financial institutions and local authorities to provide the training, employment and funding needed to spearhead regional centres of manufacturing.

If the country succeeds with this integrated approach, we can look forward to the continued success of a robust manufacturing sector.

 

This and other topics of business interest to UK manufacturers will be discussed at the National Manufacturing Conference on 22 February 2017. Follow the events of the day on Twitter with #EEF2017.

Author

Managing Director of Lombard

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