Think manufacturing is unimportant? Think again

Posted on 17 Apr 2017 by Jonny Williamson

We are led to believe that UK manufacturing is on the eternal decline, both in terms of the number of people employed and its contribution to the national coffers. The pervasive notion is, in fact, entirely false, as Jonny Williamson explains.

Manufacturing Myths - Infographic 1 - image courtesy of The ManufacturerTime and time again we hear that the UK is a service-led economy, largely reliant on the nation’s status as a global finance & professional services powerhouse, with a high number of column inches and news reports not so subtly reinforcing the fact.

And yet, the total economic contribution of manufacturing (11%) and finance & professional services (12%) is largely the same. The difference in total workforces is also closer than you might think, roughly 2.7 million compared to 2.2 million. [Figures taken from TheCityUK]

An oft-quoted crutch used to support industrial tales of woe is that in the 1970s, manufacturing contributed 25% of the UK GDP, compared to less than half that today.

What is less often discussed is the widespread diversification of the UK economy over the past five decades, with the emergence of many new sectors and industries – gaming, digital, electric vehicles, and renewable energy to highlight a handful.

It’s also of no coincidence that since the 1970s, activities previously handled in-house by manufacturing businesses have been progressively outsourced – everything from catering and security, to HR and IT.

It may be true that the UK economy benefits from a strong service contribution, but it would be foolish to think that these services operate in isolation. Rather, there exists a symbiotic balance, one in which both manufacturers and service providers rely upon each other.

Alongside this outsourcing, modern manufacturers are increasingly becoming service-oriented themselves, transitioning from a traditional product-led business model to a more service or capability focused offering.

If you take this wider impact of manufacturing into account, it’s estimated that the sector could account for 19% of the UK economy – almost double the share implied by national accounts, and drawing close to industry’s 1970s “heyday”.

To learn more about the important role UK manufacturing plays, read our recent article:

Top five manufacturing myths busted