UK manufacturing has entered a new phase of decline – new SPERI Brief

Brief-25-200A new SPERI British Political Economy Brief ‘UK manufacturing decline since the crisis in historical perspective, published today, argues that UK manufacturing has entered a new phase of decline.

The new Brief, by SPERI Deputy Director Craig Berry, shows that:

  • In the 5 years since 2011 the UK manufacturing sector has bucked historical trends and created new jobs.
  • However, output growth since 2011 has been negligible. Traditionally, the sector has been able to increase output despite job losses due to productivity gains.

While the decline of manufacturing appears superficially to have halted, this new analysis suggests the sector’s decline has in fact entered a new, dangerous phase. The report explores the challenge facing Theresa May, who has made industrial policy one of the key pillars of her economic agenda, and casts doubt on the recent positive commentary surrounding manufacturing in the context of the current post-Brexit collapse in the value of sterling.

Download SPERI Brief No. 25: UK manufacturing decline since the crisis in historical perspective

Read the coverage of the brief in the Guardian: UK manufacturing recovery based on increase in low-skilled jobs, finds report

Dr Craig Berry, SPERI Deputy Director and author of the new brief: 

“The growth in manufacturing jobs in the last five years, however limited, is to be welcomed. British manufacturing is not dead, but the sector is in great peril. There are few signs of sustainable growth in advanced manufacturing industries, and we now seem to be witnessing a new phenomenon whereby the UK manufacturing sector is creating lower-skilled jobs without enhancing its productive capacity. This is a different kind of manufacturing decline than we have experienced in the past, but it is decline nevertheless.

“Despite some analysts predicting a resurgence in manufacturing due to the fall in sterling, Brexit is likely to prove to be a significant challenge to the manufacturing sector in the years ahead, given the probability of trade barriers between the UK manufacturing and its key trading partners, lower levels of investment from European manufacturing firms, and a more challenging research environment for UK universities.

“Theresa May has promised a renewed focus on industrial policy, but it is not clear that her agenda will differ substantively from that of the previous government. What is required is an industrial strategy which ensures all economic policy functions are focused on supporting sustainable industrial development. Challenging the primacy of the Treasury in economic policy-making will be central to this endeavour.”