Yesterday in the Guardian Katie Allen wrote an article headed “the engine of growth has shrunk”. In it she notes that recent changes to the statistical definition of manufacturing now mean that officially the sector accounts for about 10.2%, rather than 12.8%, of the economy. She argues that this means
“the sector is a far cry from the engine that drove the UK out of previous recessions.”
Allen does go on to say that we shouldn't dismiss manufacturing too quickly, quoting my colleague Jeegar who notes that manufacturing
“has accounted for around a quarter of the recovery since the recession ended in the second quarter of 2010”
Not only this, though, but manufacturing growth contributes to a better balanced economy. For example, over half of all of the UK's exports are from manufacturers; investment by manufacturers rose 13.8% in the second quarter of 2011; and the sector accounts for three quarters of R&D spend by British companies. Manufacturers are also taking advantage of opportunities in new markets, with goods exports to BRIC economies having risen 30% since the recession ended.
Allen's article asks: “with such a small engine what are the chances of recovery?” I would say that if manufacturing is a small engine, it's a pretty powerful one.