Wednesday 21 August 2013

Wednesday, August 21, 2013 Posted by Jake 7 comments Labels: , , ,
Posted by Jake on Wednesday, August 21, 2013 with 7 comments | Labels: , , ,

This fascinating graph from a report by the Open University and Manchester University, Rebalancing the Economy (Or Buyer's Remorse), illustrates the decline of manufacturing in Britain:

More interesting than the 24% coming from "low-cost" countries (India, Turkey, Eastern Europe) in 2010, is the 40% coming from "high-cost" Western Europe. It is this 40%, not captured by cheaper labour costs,  that shows Britain's decision to voluntarily withdraw from manufacturing. When banks are in trouble the government pours out limitless rescue money - when manufacturing needs support the public purse is tightly shut. Using goods and services from overseas is an inevitable and generally positive result of globalisation. But, as the report observes: 

"It is of course true that we live in a world in which the manufacturing sectors of all high income countries are increasingly dependent on imported components and assemblies. But in the UK, the propensity to import is much higher, no doubt because of the reliance on foreign owned assemblers operating in global systems: in British machinery and vehicles 50% of intermediate purchases are imported as against just 30% in Germany where the propensity to import is much lower"

For those lefties who want to blame the Tories for the withering of manufacturing, the following graph from the same report exposes the Labour governments dismal record under Tony Blair. As the report states: 

"the British economy boomed from 2002-07 but there was no cyclical upturn in British manufacturing output as there had been in the general economic recoveries of the late 80s and 90s."
OECD Figures

The impact is evident in this graph from a TUC report of Gross Value Add (GVA), which shows:

"trends in the share of each industry in total gross value added (GVA) between 1997 and 2009. The largest shifts over this period are the share of production industries (basically manufacturing plus the extractive industries), which falls from around 23 per cent to 15 per cent of GVA over the period, and financial and insurance (which rises from five per cent in 2001 to 10 per cent in 2009)"

And for those righties who claim Britain's financial services, with its stonking growth in profits, grew to take up the slack from declining manufacturing employment, this data from the Rebalancing the Economy (Or Buyer's Remorse) report exposes the lie. Financial Services employment has grown very little. 


  1. Great site - only recently discovered it. Hugely imaginative approach deserving audiences on a par with those for the Horrible Histories.

    Specifically to this topic: for centuries, in any clash between UK capitalism's finance and industrial wings, the latter has always had a right duffing over. (Anyone old enough to remember CBI chief Terrence Becket threatening Thatcher with a "bare knuckle fight"? What a non event that proved!)

    Hugely revealing that manufacturing has gone, not to China or Asia in general, but to European countries where laissez-faire - single biggest indicator of the dominance of finance capital - isn't the only game in town.

    Thanks guys.

    1. Your reference to Horrible Histories spot on. Sadly we are in a horrible present, living the nightmare. No limits to growth, ever greater equality.

  2. The rot set in following the 3 day week and rolling power cuts in the government's vain attempt at defeating the miners.
    Manufacturing bosses realized their factories and yards could be streamlined easily and maintain output. Large companies were trimmed down. Any slack production cover was contracted out. As shipping became containerized so contracting became international. Eventually British factories closed and tooling, drawings etc set up in non EU countries.
    By the time of the Thatcher years, with pension fund rules changed and the "free" market, all was in place to sell up and forget.

  3. The Oncoming Storm26 March 2014 at 07:46

    There is a narrative among some on the left that up until May 4th 1979 Britain was a land of milk and honey with no economic problems only for nasty, horrible Thatcher to get in and ruin everything. The truth is that our manufacturing industries had been declining for decades before that due to inefficient and outmoded working practices and incompetent management. Check out the site about the history of BL and its predecessors, some of the cock ups are jaw dropping.

    Thatcher actually had the most successful industrial policy of any post war government, large foreign investments in motor vehicles and electronics were attracted and transformed those industries, it was under Blair and Brown that it was allowed to fall apart.

    There's one question that sums up the reasons for the decline of British manufacturing, "Why is it that Nissan, Honda and Toyota can make high quality cars in British factories that are among the most efficient and productive in the World but BL couldn't?"

  4. 3 elements to this .... lack of private business (as opposed to PLC) with a long term view, strategic miscalculation & owners who were sick of picket unions resistant to change. I have to agree with the oncoming storm about the outdated working practices and incompetent management. How else are you going to complete with the low wage economies without change and the flexibility to learn new productive practices.....

  5. This report is spot on. For too many years we have become a nation hooked on manufactured imports, all too often unfairly subsidised by the government of the country of origin and with the our own government(s) complicit in looking on. The little manufacturing that we now do in this country is usually of low skilled assembly. Many of our largest companies have been sold to foreign companies for short term gain to satisfy the greed of the few within the finical services industry.The technology of many of our manufactures has been removed from this country . As a result we now have the ridiculous situation that many of these low paid jobs are being subsidised with welfare payments and tax credits to make up the difference between the minimum and the living wage. The large number of take overs by foreign multinationals in recent years will not ultimately benefit our nation. These companies pay no corporation tax in this country. Historically our governments have been too weak to stand up to these large corporations who often use blackmail with the threat of closing down factories in the pursuit of further concessions, whereby we end up with the double whammy of subsidised wages and subsidised land and factories for the benefit of foreign corporation profits. Welcome to globalisation! Not a very bright future for our children?

  6. UK oil production is the elephant in the room. Oil pushes up the exchange rate. Sourcing offshore becomes attractive unless the relative added value of UK production is very high. Meanwhile overvalued pounds buy more value in foreign assets than British ones. So finance booms. We could have done some of this better but much was inevitable.


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