Manufacturing must be at forefront of economy

UK economic recovery needs to be centred on a resurgence in manufacturing, the CBI has argued.

Launching a new paper, entitled Vision and Ambitions for UK Manufacturing, the employers’ group called for a new focus on industrial production in an effort to re-balance the economy away from an over-reliance on services and debt-fuelled consumer spending.

The CBI manifesto was published ahead of the Government’s anticipated review of the UK’s advanced manufacturing capacity.

Although manufacturing has been one the economy’s success stories since the end of the recession a year ago, overall it accounts for just 20 per cent of GDP, lagging behind that of many of the UK’s major competitors.

According to CBI figures, productivity in UK manufacturing has risen by 50 per cent since 1997, roughly double the growth in productivity for the economy as a whole.

Manufacturing represents 46 per cent of UK exports and 74 per cent of research and development.

But despite the strong performance of UK manufacturing, exports of manufactured goods from the UK climbed by only 4 per cent between 1997 and 2007, compared with an average of the 8 per cent achieved by other OECD countries.

To help promote advanced manufacturing in the UK, the CBI identified three key aims: to maintain a target productivity growth rate of 5 per cent a year; to demonstrate leadership in innovation and to develop new markets, such as low carbon, by building on the country’s world class reputation for research, design and creativity; and to double the growth rate for UK manufactured goods exports to at least match the OECD average by 2020.

The CBI wants to see the Government offer tax breaks and to create a regulatory regime that will harness innovation to productivity.

John Cridland, the CBI’s director-general designate, said: “UK manufacturing is in many ways the unsung hero of our economy. Big productivity gains in the past ten years have made it leaner than ever before, and it’s now well placed to lead the country’s economic recovery.

“To achieve this, however, the Government must act fast. It should build on the sector’s strengths, work with business to harness its innovation, and create a tax and regulatory environment that helps UK manufacturers drive up growth in productivity and exports.

“We want the Government to be ambitious: focus its support on the sectors with most export growth potential, and improve the UK’s competitiveness as a place to invest.”

Andy Reynolds Smith, chairman of the CBI’s manufacturing council, added:
”The UK will need to develop its industrial capability to drive sustainable growth at home and internationally if UK manufacturing is to remain a world leader.

“The rise of emerging economies, such as India and China, is creating a new generation of consumers eager to buy goods and enjoy a better lifestyle. But competition for these markets will be fierce, as will the fight to attract and retain manufacturing investment to strengthen the base at home.”

But Mr Reynolds Smith argued that, in order for the UK to stay ahead of the game, there must be strong connections between businesses and universities, and the focus must be on helping manufacturers to access new markets such as Brazil, China and Africa.

He concluded: “We need integrated thinking across all aspects of manufacturing, including technology, infrastructure, procurement and skills. Ensuring the UK builds a healthy skills base is vital in securing the future of our manufacturing industries.”

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