The Economic and Business Outlook for Manufacturers

London, 07/10/23

David Smith, Economics Editor of The Sunday Times, graced us with his presence at Advanced Engineering 2023. His opening session, ‘The Economic and Business Outlook for Manufacturers: Prospects in a Time of Uncertainty,’ provided valuable insights and prompted profound questions about the current state and prospects of the manufacturing sector. We are delighted to note that these discussions didn’t end with the two-day event but extended to a broader audience. Read his further thoughts, facts, and inquiries regarding the manufacturing industry.

“A few days ago, I visited the Advanced Engineering show at the NEC in Birmingham, and it provided a reminder that we do indeed still make things in the UK, and that engineers and manufacturers remain highly inventive and innovative, as they must be to compete in the world.
I understood the machinery and gizmos on show at about half the exhibit stands, including some clever robots and, dotted around, Formula One racing cars, in which the UK is a world leader.
It is important to encourage manufacturing and engineering, which are going through a tough time now, as is industry globally. The latest purchasing managers’ index (PMI) for the sector suggested UK manufacturing output fell for the eighth month in a row in October.
In contrast, several readers got in touch with me about an article in The Economist, which suggested that UK manufacturers are doing very well and quoted figures from the OECD indicating that productivity has been booming in the sector, with gross value added per employee up by 37 per cent between 2007 and 2021, against an average of 12 per cent for other G7 countries.
This seemed odd, not least because while manufacturing accounts for just under 10 per cent of the economy, a figure like that is hard to square with the broadly stagnant productivity picture for the economy as a whole.
So I had a look at the figures and they are indeed odd. They suggest that UK manufacturing productivity was unremarkable until 2019, but, outstripping productivity growth for the economy as a whole (as it usually does).
It then jumped by more than 16 per cent between 2019 and 2021, apparently receiving a massive pandemic boost.
There is a much less dramatic effect in official figures from the Office for National Statistics. The OECD may have been using older 2021 figures for manufacturing, now revised lower.
So, what is going on here? Manufacturing output held up well during Covid, and in some areas was directly boosted by it, before subsequently falling back — but employment fell, by about 6 per cent at its low point. Furlough may also have affected the comparisons. The big picture is that if we take manufacturing output over the long term, last year it was a mere 5.9 per cent higher than in 2007, which is not much to show for 15 years, while manufacturing employment fell by between 13 and 14 per cent.
We all want manufacturing to succeed, but it is too soon to celebrate”.
david.smith@sunday-times.co.uk
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