The True Impact of UK Manufacturing on the Economy

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The True Impact of UK Manufacturing on the Economy

Manufacturing

A new report has revealed the scale and importance of the manufacturing sector to the UK's economic wellbeing. The Manufacturer highlights some of its most significant facts and statistics for you.

From economic prosperity and high-value employment to research and design, it is an absolutely vital sector, and high time it was appreciated for its unrivalled contributions to UK plc.

 

 The True Impact of UK Manufacturing – conducted on behalf of the MTA (Manufacturing Technologies Association) by research group Oxford Economics - Infographic 4

 

The following is adapted from the foreword to a report – The True Impact of UK Manufacturing – conducted on behalf of the MTA (Manufacturing Technologies Association) by research group Oxford Economics.

The fundamental questions MTA chief executive, James Selka, wanted answered are these: if the old chestnut ‘we don’t make anything anymore!’ is true, then how does this sector account for almost half of our exports? How is it that 70% of the UK’s Business R&D is in manufacturing?

Because manufacturing is less obviously present in our communities – fewer people work in the sector than in previous generations, and factories are seldom located in town centres any more – there is a tendency to believe it is a sector that has declined to the point of irrelevance.

But nothing could be further from the truth: in fact, UK manufacturing extends to about a quarter of the economy.

 

 The True Impact of UK Manufacturing – conducted on behalf of the MTA (Manufacturing Technologies Association) by research group Oxford Economics - Infographic 1

 

That means that the sector is essential to delivering an Industrial Strategy that can work for the benefit of the country’s prosperity. The oft-repeated ‘fact’ that manufacturing accounts for only a small proportion of UK GDP tells you more about how GDP is calculated than it does about the true impact of manufacturing within the UK economy.

Our report is an attempt to tell that richer story.

 

There are three aspects to assessing the impact of manufacturing:

  • The direct impact: the output of businesses that are traditionally considered as manufacturers for the purposes of the GDP calculation

  • The indirect impact: the economic effect supported in the supply chains of those businesses

  • The induced impact: the effect of the spending by people employed directly and indirectly in manufacturing.

 

This report estimates all three of these impacts. The first gives us the relatively familiar numbers; 9% of GDP and 2.6 million jobs (still bigger than the UK’s financial services).

However, the second and third elements give us real food for thought. Including the indirect impact, manufacturing accounts for 15% of the UK economy and more than five million jobs.

 

 The True Impact of UK Manufacturing – conducted on behalf of the MTA (Manufacturing Technologies Association) by research group Oxford Economics - Infographic 2

 

When we incorporate the induced impact, the figures rise still further to 23% and seven million jobs. Those last two sets of numbers give a truer picture of the importance of manufacturing to the UK economy than the first.

The reasons are clear: over the past 40 years, manufacturing has increasingly outsourced activities, which used to be done in-house, in areas as diverse as logistics and catering.

There are also companies, from design houses to accountancy practices, whose activity, or at least a large part of it, is predicated on serving manufacturing businesses.

That output and those jobs are not normally considered as manufacturing, but they would not exist if there was no manufacturing. Any assessment of manufacturing’s importance to the UK economy must take those indirect impacts into account.

Not to do so is to miss half the picture. The induced impacts are also vital to understanding the full picture of the sector.

If manufacturing disappeared overnight, it would leave a huge hole in the economy as the wages of manufacturers disappeared.

Over time, other industries might substitute for manufacturing, but simply buying everything from abroad would not replace the lost wealth that manufacturing creates. The country would be much poorer as a result.

 

 The True Impact of UK Manufacturing – conducted on behalf of the MTA (Manufacturing Technologies Association) by research group Oxford Economics - Infographic 3

 

Today, there is an opportunity, through the Industrial Strategy, to help the UK economy grow and boost our exports by fostering manufacturing investment to take advantage of industrial digitalisation and new technologies such as big data, artificial intelligence and additive manufacturing.

With the government focused on delivering that Strategy and making the changes wrought by Brexit work for, not against, the UK economy, it is vitally important to understand the economic impacts of our industries in the real world.

By demonstrating the importance of manufacturing, this report does just that.

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