Office for National Statistics (ONS) report.
Joe Grice, chief economist at the ONS, says a number of factors have caused this rise, including:
- A better quality, more skilled workforce
- Shift in production from low to high productivity goods
- Improvements in IT
- Increased investment in research and development
- A more integrated global economy
Currently, the UK is the 11th largest manufacturing nation in the world; in 2006 it was in sixth place, so apart from the recession what else has happened to prompt this change?
One reason is many services that once counted as part of the manufacturing industry such as catering and building services have been reallocated to sit in different economic categories. Another factor is strong competition from Asian markets.
China is currently the largest manufacturing economy with a 22% share of the world’s manufacturing activity. It knocked the United States from the number one slot in 2010, making the US second with a 17% share.
Crucially, China invested 8.5% of its gross domestic product (GDP) on infrastructure from 1992 to 2011. This was more than any other large economy spent according to McKinsey Global Institute. By investing before it was needed, China eliminated many supply constraints, which in turn increased the availability of production factors and reduced costs.
With around 22% of Germany’s economy attributed to manufacturing, it’s the fourth biggest manufacturing nation in the world. While other countries, including the UK, have been hit by tough completion in Asia, Germany has increased its exports to China and wider Asia.
Interestingly, Germany has a strong base of small and medium-sized enterprises (SMEs) helping to drive success in its manufacturing sector.
Currently, the UK imports more than it exports, which impacts on the country’s balance of payments deficit with the rest of the world. A stronger manufacturing industry would reduce this deficit, and investment is a major factor in making this happen.
Investing in technology
Martin Spring, a professor at Lancaster University Management School, believes Britain needs to realise that manufacturing is about more than just producing things. It involves having knowledge in a wide variety of areas, including research and development, design and production, and maintenance and repair.
Companies need to create new business models that put this knowledge to use, and come up with ways to increase the profitability of the manufacturing industry. This is why manufacturing companies are increasingly investing in information technology such as ERP software to streamline and control their processes to deliver better service to customers.
Microsoft Dynamics AX
Previous ERP software was built to tackle past problems. Today, solutions like Microsoft Dynamics AX allow the manufacturing and equipment industry to manage assets locally or globally, with technology and features that connect and give much- needed insight.
Microsoft Dynamics CRM
Manufacturers are increasingly finding that price-cutting and products don’t offer the differentiation they once did and are turning to CRM systems to help them give customers what they want.
Microsoft Dynamics CRM for manufacturing gives companies in this fast-moving industry access to more accurate forecasts and enables them to deliver a personal experience with each business interaction they make.
The future of UK manufacturing
Despite competition, the UK manufacturing industry is doing well and has many assets including a highly skilled workforce and an increasing number of mid-sized innovative companies.
What is fundamental to maintaining a growth trajectory is investment in IT, particularly in flexible business solutions such as Microsoft Dynamics AX and Dynamics CRM in particular providing manufacturers with the tools they need to create a 21st Century business.