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UK continues to be a manufacturing nation, says ONS

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Despite the number of workers employed falling significantly since the late 1970s, total manufacturing output is now actually slightly higher. It has declined in relative size, though, as other sectors have grown more quickly. Its share has fallen from 36 per cent of the economy in 1948 to around 10 per cent in 2013.

Manufacturing’s important – nay, vital – role within the UK economy is further highlighted in Real Business’s Hot 100. A key trend from the Hot 100 is that manufacturers continue to grow, fast.

Manufacturing productivity is up

Speaking at an event in London yesterday, ONS chief economist Joe Grice showed that productivity in the manufacturing industry has risen by around 2.8 per cent a year since 1948, compared with 1.5 per cent in the service industry. 

While just 8 per cent of UK jobs are now in manufacturing, compared with 25 per cent in 1978, today’s workers are significantly better skilled and more experienced.

“The manufacturing industry has changed markedly over the past sixty years,” said Grice. “It is becoming more productive, despite a steady fall in the number of people employed and broadly stable capital stock, and economic downturns in the 1970s, early 1990s, and notably 2008-9.

“There are several factors at work: a better quality and more skilled workforce; a shift from the production of low to high productivity goods; an improvement in the information technology base; more investment in research and development and a more integrated global economy. Exporting firms generally are associated with higher productivity and foreign-owned firms in the UK generally experience higher productivity than domestic firms.”

The key findings from the ONS’s research presented yesterday show that:

  • Manufacturing productivity has grown by 2.8 per cent on average per annum since 1948 – compared to 1.5 per cent in the services industry.
  • The number of jobs have reduced across all manufacturing sub-industries since 1978, a portion of which could be attributed to outsourcing. The fall in jobs in textiles have been particularly strong – with a reduction of over 80 per cent between 1979 and 2013. 
  • Despite falling jobs, the quality of labour utilised has improved.

It is possible that manufacturing firms previously provided support services such as transport and wholesale in-house – but are now sub-contracting these functions.

Therefore activities that would traditionally be classified as manufacturing and are generally associated with lower productivity are now classified in the services industry.

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