May 15, 2015
U.K. Manufacturing: From Underdog to Top Dog
Despite a rocky history and losing almost two-thirds of the market in just 30 years, manufacturing in the U.K. is making a steady comeback. In fact, the industry grew by 2.5 percent or more in 2014, and is expected to build upon that growth over the next few years. However, marked by its unstable past, manufacturing continues to go unrecognized for its importance in the U.K.’s economy and society. Now, with renewed determination from the country to reinstate manufacturing as a leading source of revenue and value, it is glaringly apparent that the sector needs investment to ensure continued success.
In the early 70s, manufacturing contributed 25 percent of the U.K. gross domestic product (GDP). However, the following years were defined by strikes, mass privatisation, job losses and business failures. A decade later, it was clear that the degeneration of the sector was largely due to lack of investment and attention to quality. Germany, seen as a centre of excellence, was producing high-quality products, especially cars. But in Britain, metrology and gauging were the last items considered, and economic difficulties garnered the label of “sick man of Europe” for the region.
The 80s welcomed a change in the approach to U.K. manufacturing due to investment from European, American and Asian companies. Nissan opened its first European manufacturing plant in Sunderland—later recognized as the most efficient automotive manufacturing plant in the world—and introduced an approach to manufacturing that was underpinned by quality.
During this time, there was also emphasis on building the Knowledge Economy. Unfortunately, this strategy shifted focus away from manufacturing. Becoming London-centric, the Knowledge Economy created a huge divide between the South East of England and the rest of the country, largely due to the demise of the manufacturing sector in some areas. In Newcastle, an area once considered a centre for U.K. manufacturing, manufacturing jobs have halved since 1997. When manufacturing left the area, there was nothing to replace it. Even today, The House of Commons reports that from November 2014 to January 2015, the North East had the highest unemployment rate at 7.7 percent, with the U.K. average being 5.7 percent.
Manufacturing Rises Again
As the “sick man,” Britain lost pride in its own products and the country was left behind by others that focused on quality, like Germany. However, it became apparent that quality is an important and recurring theme in prosperous manufacturing sectors, and businesses cannot compete in the global marketplace without an enterprise quality solution.
In March 2015, the U.K. budget committed to provide greater support for the manufacturing industry through skills, infrastructure and improved access to funding, in particular for export. Chancellor George Osborne identified manufacturing as one of the U.K.’s regional strengths that would contribute to “a truly national recovery” from recession. He outlined support for manufacturing companies in the North East, and highlighted the Midlands as an engine of manufacturing growth that will benefit from investment. The Midlands, according to manufacturing expert at PWC, David Martin, “continue to develop innovative products that lead the manufacturing sector in terms of quality and reliability.”
According to the House of Commons, manufacturing now makes up 11 percent of the U.K. Gross Value Added (GVA), 54 percent of U.K. exports and directly employs 2.6 million people. The U.K. ranks second globally in aerospace manufacturing and British-made cars are once again desirable, with four out of five exported. Two years ago, the British car industry became the third largest in Europe, after Germany and Spain.
The greatest challenge now for many U.K. manufacturers is moving their 19th century factories into a 21st century infrastructure. The Knowledge Economy has converged on the manufacturing sector, but has not yet fully integrated, as information technology has a greater involvement in decisions around systems and solutions—it is no longer just another piece of the installation and maintenance process. Data collection and monitoring is vital for compliance with the growing number of strict industry regulations and to ensure product quality. Sadly, many U.K. manufacturers are using archaic systems that cannot manage modern processes, usually for want of investment.
U.K. manufacturing is an industry that should, and does, elicit pride. It came through hard times and rose out of a negative reputation – going from underdog to top dog. It has embraced quality, but needs to move out of its archaic ways and integrate with the Knowledge Economy. Therefore, the British government must seriously commit further to manufacturing so that venture capitalists, holding companies and private equity firms can get involved. The sector holds an important role in a developed country and demands recognition from the government of its rightful place at the centre of a well-balanced economy.
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