There has been a decline in manufacturing in all major economies, although it is recovering. There has been a reduction in the global demand for manufactured goods. British businesses have had to cope with the relative weakness of the Euro and the low output growth of the 1990s. British manufacturers require investment and innovation to improve its competitiveness as the global economy recovers.

In the long-term, manufacturing is open to technical progress and productivity growth. New technologies will lead to new products, new processes and higher value added manufacturing. However, technology and automation leads to fewer workers being required. This can be overstated, as some functions that have been contracted out, such as software design. 

There is an inter-relationship between the manufacturing and service sectors, as each requires the functions and products of the other. For example, a machine tool factory will require designers, marketing, accountants, software and caterers. Therefore, investment and innovation in the manufacturing sector will benefit the whole economy.

Increased requirements for manufacturers to recycle their components, for example in the automotive and electronics industry, implies new investment in recycling equipment. This short-term cost outlay should be recouped in the long-term and implies growth in the recycling sector.

The customers’ emphasis on high quality products rather than low cost mass production means that productivity needs to improve to pay for customers’ higher expectations. Many businesses will re-position themselves to compete with high volume, low cost products or find alternative niche markets. There has already been growth in niche markets in some sub-sectors, e.g. organic food and specialty foods, to meet consumer behaviour and attitudes.

In the food and drink industry further mergers will result in greater concentration. Further job losses and restructuring are set to continue with further rationalisation and technological improvements. The wood industry expects a continued growth in imports and there are no substantial generation projects for its use as a renewable or sustainable energy resource. There will be a fall in employment in the pharmaceuticals, rubber and petrol industries because of the technological advancements. Also further job losses are expected in the metal and metal goods sector.

Sources: Working Futures 2004a, Proskills 2003 and DTI 2002