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The myth of Britain's manufacturing decline
Freitag, den 19. August 2011 um 09:49 Uhr
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The daily news would have us believe that manufacturing is troubled, once again. Nice soundbite, but the reality doesn't stack up with the data.

We came across an article written by Tim Worstall recently which expands the theme of manufacturing output nicely.We credit Tim with much of this observation, however, the fact is, "manufacturing decline" is a mantra that is repeated so often that is has become received wisdom. The simple fact is though, it isn't true.

The facts that lie behind the numbers are somewhat different, as indicated by the Index of Production.


This is a chart of the value of manufacturing output in the UK just after WWII. As you can clearly see from the graph, the UK produces 2.5 times what we did in the 1940's. Clearly there has been oscillation in the late noughties, however, the graph suggests a very different picture to the one discussed in popular media.

So why the disparity?

Firstly, the index measures the value of what we make, not the volume. Clearly it is value that creates wealth, not volume. And it is the value-proposition that has fundamentally changed in the UK. So what is 'value'?

Well, this is you. Yes, you. It is those of you who add value to manufacturing through the clever stuff - writing software, designing, automating,in fact all those activities that create products that are innovative, clever, or simply bespoke.

We've moved up the value chain, from simple products to complex and bespoke products that companies value higher, and pay a little more for. Alongside this, our manufacturing has become far more efficient than past times. Production is rising, yet fewer workers are needed to do this. Lean manufacturing, automation and just simple smart thinking has meant that fewer people are needed to make more products.

One final question remains: if UK production has increased, why has the value of manufacturing GDP fallen, from 50% to roughly 12%? The answer lies in the fact that other areas of the economy have grown faster. For example, way back when, agriculture represented 80% of the economy, yet is now only 2%. The service industry has witnessed the opposite trend, with exponential growth. It is the relative movement that has caused this illusion.

The final point here is clear: manufacturing in the UK has not shrunk. What has actually happened is that manufacturing has become more productive and moved up the value chain. This is mirrored here at Parvalux for example, where much of our design capability is focussed on producing highly bespoke geared motors that are designed for very specific applications - these often use bespoke materials and are engineered to minimise direct labour cost. Both our design capability (which is substantial) and our manufacturing capability add value. And thus add value.