Manufacturing makes up a sixth of the economy, and accounts for over half of our exports, and around 80% of all business research and development. It is also a significant contributor to employment – generating around 3.5 million jobs directly – and millions more through the supply chain and related services.

Source: DTI website 2004

Despite a general decline in the output of the manufacturing industry across the world over a number of years, it rose last year and is set to rise further this year. However, according to the Office for National Statistics (ONS), manufacturing output fell by 0.5% in the first quarter of 2004 compared to the last quarter of 2003. Most significant decreases were found in:

• paper, printing and publishing industries 1.4%
• electrical and optical equipment industries (which includes computer hardware) 1.5%
• machinery and equipment industries 1.7%
• other manufacturing industries 3.2%

In the chemicals and man-made fibres industries, output increased by 1.8%, and in the transport equipment industries it was up 1.3%. The CBI do expect manufacturing outputs to rise, as their survey revealed that orders had risen in most UK regions, which perhaps the ONS statistics do not reflect yet. The short-term challenges that UK manufacturers have recently faced include:

• falling manufacturing output
• low global demand for products
• the relative weakness of the euro

These challenges have resulted in job losses and profits have fallen to significant lows. Demand and output are increasingly picking up, though, and the productivity gap may narrow. The increasing pace of globalisation also presents many opportunities for increasing trade as barriers come down and capital becomes more mobile, although it also means that companies face increasing competition from goods and services produced in lower-wage economies. Companies that rely on labour-intensive products and processes will find it ever more difficult unless they evolve to meet the challenges. The evidence is clear that more innovative and knowledge-intensive products, processes and management are vital.

Sources: Foresight Manufacturing 2020 Panel, The Manufacturer and DTI website 2004

Manufacturing sub-sectors

The wider picture of decline in manufacturing hides the growth in some sub-sectors. For example, the UK is has a strong position in the global market in electronics areas, such as design, mobile networks and broadcast technologies, attracting global companies and creating a sector with a turnover of £45 billion. In addition, the pharmaceutical sector is the largest R&D investor in the UK. In the 1990s the UK was the most successful country in Europe attracting new research and development investment projects.

There are lots of small and medium sized enterprises (SMEs) in the sector, although some sub-sectors have experienced consolidation, with mergers of many firms.

Source: Government Manufacturing Strategy 2002

For more information on the manufacturing sub-sectors click here.