It never ceases to amaze me that instead of recognising manufacturing as one of the most successful business sectors in the UK, it is seen by many as in decline. Manufacturing is indeed the unsung triumph of the British economy, including as it does some leading global companies.
The facts speak for themselves — we are the world’s sixth largest manufacturer and exports account for half of our manufacturing output.
Productivity in the manufacturing sector has grown by 50 per cent since 1997, more than twice as fast as the rest of the economy. This is a vital contribution to making our productivity growth the fastest in the G7 group of leading industrial nations.
My explanation for the lack of popular recognition of the success of manufacturing is first, that the sector has undergone a difficult period of restructuring in the face of intense global competition and this has stuck in the popular imagination.
Second, manufacturing is one of the most globalised of all sectors, with the fragmentation of supply chains across the world allowing niche players and specialists to thrive, resulting in fewer recognisable household brands.
Third, manufacturing is now so transformed that it is no longer recognisable as manufacturing to most people. The popular image is still of dark satanic mills and repetitive work whereas most of our success is now underpinned by high value-added, knowledge-intensive sectors based on innovation, research and development and specialisation.
Many of our new sectors do not fit manufacturing stereotypes. In electronics and semiconductors, which display many characteristics of ‘new’ manufacturing including fragmented supply chains, we are among the top three producers in Europe and have about 40 per cent of the market for integrated circuit application design.
Even in more traditional sectors such as the automotive industry, we are displaying our comparative advantage in modern manufacturing. All the Minis rolling out of Cowley are personalised for individual customers and for the first time, Nissan’s design centre in Paddington, west London is doing the design work for a car aimed exclusively at the Japanese market.
An interesting characteristic of successful modern manufacturing is investment in intangible assets such as design and training. Research points to intangibles investment growing faster than traditional capital expenditure.
We know the UK cannot compete solely on the basis of raw material endowment or low wages, but must focus on turning innovation into products and services into profits.
So if we want to be an innovation nation that lives off its value-adding brain power, let us be clear where the future lies. Some 75 per cent of business research and development in the UK is in manufacturing, and R&D spend is up 14 per cent in real terms since 1997. In fact, a recent survey shows that 75 per cent of companies have increased their expenditure on innovation in the past three years.
With the manufacturing environment changing, government support is changing too and we are reviewing our manufacturing strategy to ensure that it continues to address your needs.
I would like to help redefine the manufacturing sector in the public eye and there is now an opportunity to do this because of climate change. We all know the idealism of teenagers when it comes to the subject so what should we say to young people who want to save the planet? Become an engineer. Not a lawyer, journalist, campaigner, banker or even a politician, but an engineer.
Just as this country drove a revolution around the world with its development of steam and iron technologies, its manufacturing sector can again lead the way in the transition to a low-carbon future, whether this is through hybrid drivetrain development or in the nuclear supply chain.
Baroness Shriti Vadera is parliamentary undersecretary of state, Department for Business, Enterprise and Regulatory Reform