The UK has a productivity puzzle and is struggling to achieve growth. Both the Prime Minister and Leader of the Opposition have made kick-starting the British economy their principal priority. Yet according to most indicators UK growth is sluggish, productivity outside of financial services is poor and real wages have barely moved since the 2008 Great Recession.
Why? In this report, the Centre for Social Justice makes the case that it’s the comparative decline of British manufacturing that holds the key. While so much of our growth has been driven out of the City of London in recent decades, our other service industries are not as productive as manufacturing. Britain remains the ninth largest manufacturer in the world, yet manufacturing has dropped as a share of our GDP from 25 per cent in the 1970s to just 9 per cent now. With a ballooning trade deficit, we have become more and more dependent on imported goods.
Manufacturing is economically vital to regions such as the North East, North West and Midlands. Falling at a faster pace than in almost any other developed economy, manufacturing’s struggles have contributed to our deep regional disparities. Manufacturing provides well-paid jobs, paying 12% more than equivalent sectors. Yet 62 per cent of British adults say they have seen manufacturing decline in their local area.
Nearly half of UK adults believe the Government should seek to boost manufacturing as the key to growth. Half say manufacturing decline is a reason to be less proud of Britain, and 77 per cent we are too dependent on foreign imports.
It’s time to make a change. Manufacturing offers strong potential for growth through innovation and technology. Yet manufacturers are struggling with a high cost base, unfair competition and soaring energy costs.
We convened over 60 regional manufacturers alongside Make UK, Midlands Engine and East Midlands Chamber to listen to their concerns and to inform our recommendations. We are calling on the Government to reboot “Industrial Strategy 2.0”, with a focus on capitalising on manufacturing’s productivity premium. We need much greater regional planning, a tax and incentive plan for industry, and a technical skills pipeline. And we need a strategy focused on levelling up the most under-invested in regions with levelling up at its core.
Britain needs stronger growth, more productive industries and better paid jobs. Read our a report to see our plan to reboot British manufacturing.