Taking a longer term view of productivity, and notwithstanding the points raised about how the manufacturing sector in particular is changing and adapting to market needs by offering services, it is possible to put the current circumstances in their historical context by comparing them with those resulting from previous recessions.
A Financial Times article does an excellent job of painting the political landscape of three recessions; those in the early 80s, the early 90s and the global financial crash.
Broadly, it makes the point that the first two recessions caused manufacturing to shed jobs and close inefficient companies in the painful process, and what emerged/survived were more efficient and productive companies that helped the productivity curve continue to rise.
It argues that what’s different this time is that fewer jobs have been cut, key industries have been protected from irreversible closure and that output has remained flat. In turn, productivity has not continued its normal upward trend, and the UK is losing ground (in productivity terms) in comparison with its former gains and to other G7 countries.
The piece, attributed to Charles Goodhart (senior economic consultant to Morgan Stanley), finishes with the claim that the UK is well positioned, following the recession, to grow again as the tide turns. Although the article was written earlier in 2016 I still believe it is relevant today.
Recent productivity results for the UK show that it really could have been written yesterday. So what can we do? I’d like to build on that point a little.The answer, unsurprisingly, is to increase levels of automation. It is through automation that the UK can grow both its manufacturing output and its productivity, which in turn will protect and help growth in the sector and increase its contribution to the UK economy.
Post Brexit-vote, the UK government is making promising noises about an industrial strategy. Automation should be at the heart of this. A recent study from Barclays suggested that £1.2bn worth of investment in automation could boost the British economy by £60.5bn within a decade – a remarkable return on investment. That kind of increase would represent a gain to the value of the UK manufacturing sector of 19.6% in just ten years.
In the unlikely scenario that anyone should need a reminder of what is possible, it’s my great pleasure to point out the resurgent success of UK automotive manufacturing – the UK is now arguably the World leader in highly automated car production. It’s a sector that is growing, making new, skilled employment available and is a clear sign that the UK is ready, willing and able to step up and take its place in an information-enabled age of manufacturing.
This example fills me with pride, since Rockwell Automation solutions are at the heart of much of the fantastic work happening in the UK automotive sector. The automotive sector here is a fantastic test-bed for the implementation of The Connected Enterprise approach that can underpin a renaissance of UK manufacturing productivity. It is a standard bearer for the sheer scale of opportunity that exists for the UK, which is ideally placed to benefit from global trends in manufacturing in the age of the Industrial Internet of Things.
And it really should be the blueprint for a UK industrial strategy.