Indeed there are several opinion concerning the subjects, some thinks the manufacturing sector in UK is dead and should be abandon, because of numerous failure in the past; while some other feels the contrary showing as evidence the growth of the sector and the opportunities it can provide for the country.
United Kingdom manufacturing environment
The United Kingdom manufacturing sector has acquired a bad image, people think is dead due to sign of decline of the past years. Indeed it suffers from under-investments during several years. You can see on the graphs below first the under-investment which shows its decrease from 22% in 1992 to 17% in 2000, and then the percentage of investment according to each sectors where it is possible to see that the major part of investment goes to the pharmaceutical sector, then electrical and optical and aerospace decreasingly until mechanical equipment:
(CBI, Chris Cassley, October 2010,
CBI Manufacturing, Manufacturing in the UK, p3).
Moreover, because of its strong pound, the United Kingdom lost a lot of companies which move to other countries like Eastern Europe or Asia where the work force cost much less. Besides, the bad image of UK manufacturing deter qualified persons to come there, which start to create a lack of skills.
Also due to the high pound, the cost raised and so fears appear about the possible growth of the inflation (BBC news, 1st February 2011, UK manufacturing growth at fastest since records began).
Innovation is one of the serious issue facing the country, indeed UK is the European country which use the less innovative US patent. And in our actual society the competitive advantage came from the capacity to develop innovative products, as Michael E Porter and Christian H M Ketels say 'competitive advantage is gained through "the ability to produce innovative products and services at the global technology frontier using the most advanced methods"' (Institute of Strategy and Competitiveness, Harvard Business School, May 2003, UK Competitiveness: moving to the next stage).
The competitive market is changing, first with the new technologies which change the way of making product, it can improve the productivity by faster machinery, and the problem is that such technologies are not always available to all countries, some are more advanced than others, like for example in Asian countries which are now a strong competitor. Moreover these technologies can also improve the supply chain nowadays we can order raw materials via the Internet, and transportation is also easier so the delocalization of companies is no longer such a threat. That's why Asian and Eastern Europe country increase the competitiveness of the market and add new pressure.
Nevertheless, the UK manufacturing sector show signs of rebirth. Indeed, with 15 % of the GDP (Gross Domestic Product) of the United Kingdom, ,it generates 130billions a year and with 2.6million employees; manufacturing seems to be on track. Moreover, as it is showed on the graph below, the exportation rate in good, it never been less than 46% (in 2009 according to the CBI) and it will increase again with 55% of exportation (CBI quoting By Prospects, Tammy Goldfeld, October 2009,Manufacturing overview).
(CBI, Chris Cassley, October 2010, CBI Manufacturing, Manufacturing in the UK, p2).
That's why economically and socially speaking, the falling of UK manufacturing would be a disaster, indeed as it a large part of the GDP the standard of living would fall dramatically and the economy would suffer, indeed 'the conventional feeling about G.D.P. is that the more it grows, the better a country and its citizens are doing' (The New York Times, Jon Gertner, 13th May 2010, The rise and fall of GDP). Moreover the unemployment rate would rise a lot because manufacturing employed more than 2 million people and it may be difficult for people to find new jobs so it a social and economical problem, people will lose their purchasing power.
Chief economist Ms Lee Hopley said: "Manufacturers are ending the year on a high and should enter 2011 on a strong footing" (Press association, 2011, UK manufacturing firms 'strong'). The main reason which explain this growth is the demand from overseas market.
Nonetheless, the manufacturer are facing some major issues while trying to develop themselves; indeed as they all need skills they are struggling against each others to get what they want.
Tom Lawton, of public accounting firm BDO LLP says "Manufacturers now need to take advantage of this continued growth by investing in capital equipment and the skills within their workforce. They should also take the opportunity provided by the UK's competitive currency to grow market share overseas both in the Eurozone and emerging markets." (Press Association, 2011, UK manufacturing 'strong').
We can see improvement in this sector while observing the companies investing in their business, trying more and more to employed qualified persons to face their lack of skills, they also buy new machinery to address the lack of innovation.
Another sign of manufacturing recovery is the high Markit/CIPS rate registered in January. This ratio is composed of several data, collected through questionnaire addressed to 600 industrial companies, which are New, Output, Employment, Suppliers' Delivery Times, Stock of Items Purchased.
As it's showed on the following graph, 'the Markit/CIPS survey for the purchasing managers' index rose to 62 in January 2011 from 58.7 in December 2010, the highest reading since the survey was created in 1992. Levels of new orders rose at the fastest rate in the survey's history' (Financial Times, 1st February 2011, Conflicting data paint picture of a two-speed economy).
Index of production: (Office for national statistics, 13th January 2011, Index of production).
You can see on the previous graph manufacturing production increasing again indeed it experiences a growth of 5.6% in November 2010 compared to the same month the year before.
'The largest contributors to the increase were the machinery and equipment industries which increased by 20.0 per cent, the food, drink and tobacco products industries which increased by 8.7 per cent and the basic metals and metal products industries which increased by 11.6 per cent. The largest negative contribution to overall output was a decrease of 2.8 per cent from the chemicals and manmade fibers industries.' (Office for national statistics, 13th January 2011, Index of production).
The next table shows what drive the competitiveness of manufacturing, and explain that the two main forces which influence the competitiveness are the government and the market. Then, it is easier to understand the different factors involved.
Besides, table 1 classify these factors in order of importance, so it is shown that the most significant driver is 'talent' which concerns skilled people (engineer, researchersa€|) and influence innovation. And then come the cost of labor and materials and the energy cost and policies which composed the 'foundation of manufacturing competitiveness, 'the three drivers are the "foundations" of manufacturing competitiveness, according to manufacturing executives surveyed' (Aleda V. Roth, Craig A. Giffi, Atanu Chaudhuri, Hans Roehm, Deloitte, June 2010, Global manufacturing competitiveness index, p7).