RSA-Lloyds report challenges the future role of exports in GDP growth

A report released by the Royal Society for the encouragement of Arts, Manufacture and Commerce, supported by Lloyds Banking Group, predicts that manufacturing trends will mean less reliance on exports for GDP growth in the future.

The report Making at home, owning aboard, tracks decreasing enthusiasm for manufacturing outsourcing and concludes that many kinds of manufacturing have reached a “tipping point” in terms of whether they should be located overseas or in the country where the goods are consumed.

The report argues that large scale global trends, combined with new production technologies, will make global manufacturing uneconomic and unattractive to many businesses.

“This model leads to trade falling,” said Finbarr Livesey, the report’s author, at a launch event hosted at the RSA in London.

“Trade will fall, but growth in terms of GDP will continue as we see ownership replace exports as a route to international markets for manufacturers.”

The manufacturing trends predicted in the report are targeted at mid-sized firms with turnovers of £25m to £500m supporting between 100 and 2000 employees.

The RSA sees these firms as having the greatest potential to leverage growth for the UK. They have already achieved a critical mass, but remain relatively agile and tend to be close to their customers says the report.

Mr Livesey says that the group has been poorly represented in economic and industrial research until very recently. “There has been almost a fetish for supporting small companies and then a jump to focusing on multinationals as anchors for supply chains,” he opined.

The full report is available to download here.

Key requirements that spring off its findings however, are:

  • Finance packages and policies which support the acquisition of foreign assets
  • Government recognition of localised manufacturing trends in the development of future infrastructure and energy supply strategies
  • Development and clarity on future inward investment rules
  • Strengthening of management capability in firms
  • Investment in automation technologies which support the pressures of localised manufacturing
  • New understanding of a disconnect between industry growth and employment growth thanks to the intervention of new production technologies

While the report challenges the current accepted wisdom of increasing exports to achieve growth in the long term, Livesey clarified that he supports focus on exports in the short to medium term.

“This is a report for the long term,” he said. “It is designed to ensure we do not flourish tomorrow but fail in five to ten years time…It does not run away from the fact that we must increase exports in the short term.

Research and production of this report was supported by Lloyds Banking Group. David Oldfield, managing director, SME & Mid Markets at the bank spoke at the report launch and was enthusiastic about its conclusions, despite admitting that it offered some challenging and controversial findings.

“It is in our interests to see that manufacturing grows,” he said. “One of Lloyds first customers over two hundred years ago was Salts Healthcare, one of the UK’s oldest family owned firms, and today the company still banks with us.”

Mr Oldfield concluded that Lloyds is committed to understanding the changing face of manufacturing and developing banking relationships which respond to those changes in a way which supports growth and competitiveness.”

The report launch at the RSA was also attended by Business Secretary Vince Cable and Julie Madigan, CEO of The Manufacturing Institute.