MANUFACTURING AT A CROSSROADS Since the previous issue of Drives & Controls appeared in June, we have had a change of government. The Labour Party has had 14 years in opposition to hone its plans for the UK manufacturing sector, so we look forward with interest to discover its vision is for this vital part of the UK economy. Of course, any plans may need to be scaled back because of the dire state of the public nances. We are unlikely to see billions of pounds being invested to revitalise the manufacturing sector, but at least we can hope for a cogent, imaginative industrial strategy from the new administration. The new government enters power as we are getting mixed signals about the state of UK manufacturing. The headline news of the past month has been the report from the manufacturers’ association, Make UK, that Britain has slumped from being the world’s eighth-largest manufacturer, to twelfth position, as it has been overtaken by nations such as Mexico, Brazil and Russia. This is the rst time that the UK has found itself languishing outside the world’s top ten. The situation is perhaps not as bad as it rst appears. It is not so much that UK manufacturing has shrunk dramatically; more that some of the emerging manufacturing nations are growing faster. And, in the case of Russia, its manufacturing base has been boosted by its massively increased spending on arms production, which now accounts for 6% of its GDP. The UK is not the only traditional manufacturing nation which has slipped down the league table. Italy and France have both been overtaken by Mexico and Russia, falling to ninth and tenth positions respectively. Another statistic from Make UK reveals that the number people employed in the manufacturing sector has fallen by around 34,000 in the past year. Even so, the sector still has 64,000 vacancies, so the skills shortage has not gone away. Make UK reckons that if these roles could be lled, they could add about £6bn in output to the UK economy every year. But at least those who are employed in the sector are earning an average of £38,769 – putting them about 10% above the average pay-packet for the UK economy as a whole. Another positive sign comes from the latest manufacturing PMI (Purchasing Manager’s Index), published at the start of August, which puts the UK on 52.1 – a two-year high and up from 50.9 the previous month. Any gure above 50.0 represents an expanding sector. The PMI also reports that production in the UK is growing at its fastest rate since February 2022, and that order books have strengthened for the third month in a row. Not surprisingly, UK manufacturers are sounding more optimistic about the future than they have for 2½ years, with about 60% expecting their output to rise in the coming year. Reacting to the latest PMI gures, Make UK senior economist James Brougham points out that just as demand is returning for UK manufactured goods, “so too does the ghost of the past that haunted the sector for so long. Manufacturer’s input price in£ation has struck its highest point in 1½ years, reminding the sector that it is uniquely sensitive to demandside pressures.” He adds that “the perfect intervention from Government of a long-term and robust industrial strategy, delivered at speed, is more needed than ever to restore investment condence across the sector.” Across the Channel, things are much less rosy. The latest PMIs for Germany, France and Italy are all below 50 (on 43.2, 44.0 and 47.4 respectively), indicating that their manufacturing sectors are shrinking. In fact, the only EU economies with manufacturing PMIs above 50 are Greece, Spain and Ireland, with Greece being the only one above the UK’s level. But poorly performing EU economies is not good news for the UK. Make UK’s gures reveal that six of the UK’s top ten export markets are still in the EU, with a combined value of £150bn – almost three times as much as exports to the US. So we still rely heavily on the EU, and Make UK is calling on the new government to smooth out trade barriers with Europe to help boost this trade. The Labour government has a lot on its plate. Its attitude to manufacturing will be crucial to the future of the sector, and whether we ever manage to climb up the global league table of manufacturers again. Tony Sacks, Editor n COMMENT
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