Memorandum submitted by the Department
of Trade and Industry (COM 21)
1. This memorandum is in two parts; the
first is an analysis of relevant factors, and the second a concise
account of Departmental and some wider Governmental policies and
2. Manufacturing matters. It is central
to our future as a leading knowledge-driven economy. It accounts
directly for around 19 per cent of GDP, about 60 per cent of exports
and just under four million jobs. Manufacturing also supports
large numbers of service sector jobs. As a major contributor to
innovation and the exploitation of new technology, manufacturing
is a major source of productivity growth. It plays an essential
part in enabling Britain to pay its way in the world.
3. Manufacturing is also changing under
the double impacts of technology and globalisation. Industry must
respond positively to the increasing challenges by investing in
new skills, increasing innovation and improving productivity.
The Government is committed to helping with these aims.
I. ANALYSIS OF
UK MANUFACTURING INDUSTRY
Overall Manufacturing Performance
4. As with other major industrialised economies,
the overall proportion of output and employment accounted for
by manufacturing has fallen over the past 30 years. UK manufacturing
output as a proportion of GDP fell from 35 per cent in 1960 to
19 per cent in 1999, compared with corresponding falls of 27 to
16 per cent for the US and 39 to 22 per cent for Germany. Manufacturing
employment as a percentage of overall employment has fallen even
more sharply in the major industrial countries over the past 30
5. The following key factors, which affect
all industrial economies, help to explain the relative decline
in manufacturing's share of GDP.
Rising Incomesas incomes grow,
consumers tend to spend a lower proportion of income on manufactured
goods. Consumers are able to devote much of their increased income
to luxuries, particularly services. The types of manufactured
goods bought also change. Over the last 30 years we estimate that
three quarters of the decline in manufacturing's share of GDP
in the UK may be attributable to these domestic demand effects.
Technologythe stock of scientific
and technological knowledge is expanding at a growing rate. Modern
economies are characterised by unprecedented speed of technological
change, providing the opportunity for firms to develop innovative
new products to meet the needs of increasingly sophisticated consumers.
Productivity advance in manufacturing is more rapid than in the
service economy. As well as helping to account for the declining
share of employment in manufacturing, this contributes to a decline
in the relative price of manufactured goods, which in turn partly
explains the decline in the share of manufacturing in the value
Globalisation and Tradeopen
markets and rising flows of trade and capital further intensify
international competition. Some decline in the importance of production
of manufactured products in advanced economies is to be expected
as a result of this increased competition. This means that businesses
in all advanced countries need to be ever more productive and
innovative in the face of lower-cost competition in standard products.
However, globalisation also means that successful firms have much
larger markets for their innovative products, permitting profitable
specialisation. Globalisation has also led to changing patterns
6. In addition, the fall in the reported
share of manufacturing output in GDP can in part be explained
by a tendency to outsource service inputs previously provided
within manufacturing concerns. This has taken place as companies
have restructured to concentrate more on their core businesses
to improve performance. The result is that some activities which
had previously been included within the manufacturing sector are
now undertaken in firms classified within the service sector.
There is a growing trend, for example, for companies concerned
with logistics to be required by their customers to provide final
assembly operations. This manufacturing activity would be classified
as a service when undertaken by logistics companies.
Shorter term trends in the manufacturing sector
7. In addition to these longer term trends,
UK manufacturers have undoubtedly had to contend with difficult
circumstances in recent months. In common with other major industrialised
economies, manufacturing output has contracted and the rate at
which employment has fallen has increased. The slowdown in GDP
growth in 2001 was most marked in the US, following the ending
of the Information and Communications Technology (ICT) investment
boom, the decline in equity prices and the rise in oil prices.
This, alongside continuing difficulties in Japan and weaker growth
in Europe, has meant that global demand for manufactured goods
has been weak. And although the global manufacturing recession
was already in evidence before the tragic events of 11 September,
the resultant increased uncertainty has further accentuated manufacturers'
8. Manufacturing output peaked in the UK
in December 2000, and the latest available data shows that UK
manufacturing output in the three months to November 2001 fell
by 4.7 per cent compared with the same period in 2000. This period
of contraction has been heavily influenced by falls in the output
of high-technology industries stemming from developments in the
US, especially the electrical and optical sector, which had grown
very rapidly in the preceding period.
9. Chart 2 illustrates the global nature
of the slowdown, with US output peaking in summer 2000, and all
the major industrialised economies experiencing a contraction
in 2001. The fall has been particularly strong in the US, where
output was 6.7 per cent lower in October 2001 than in October
2000, and in Japan, where the corresponding figure was 13 per
10. Manufacturing employment in the UK declined
by 3.9 per cent in the 12 months to November 2001. Falls have
been sharper in the US, where manufacturing employment fell by
7.2 per cent in the 12 months to the end of December, and in Japan
where in the 12 months to November manufacturing employment fell
by 5.4 per cent.
11. In recent years, UK manufacturers have
also had to contend with the impact upon cost competitiveness
arising from the weakness of the Euro's exchange rate. Alongside
falling prices for exports to the euro zone, and more recent weaknesses
in global demand, manufacturing profitability had until the last
few months also been hit by higher oil prices. The net rate of
return in 1997 was 11.9 per cent, but fell to 8.7 per cent in
2000, and by the third quarter of 2001 had fallen to 4.3 per cent.
Manufacturing investment in the UK has also fallen, in common
with the global trend, decreasing in real terms by 13 per cent
over the year to the third quarter of 2001.
12. However, despite these long and short-term
pressures on manufacturing the long-term trend in manufacturing
output is still upward. Within manufacturing, some sectors have
been able to grow faster than the overall economy. Annex A shows
that since 1991 this has been the case for the chemical, electrical
and optical sectors. Within these sectors the pharmaceutical,
computer and communications sectors grew considerably faster than
the whole economy.
The Productivity Gap
13. This analysis suggests that the current
challenges faced by the manufacturing sector result from a combination
of short and long-term pressures. Some of these short-term pressures
will abate as the global economy recovers from the current downturn.
The long-term ability of UK firms to benefit from the recovery
of demand will depend on the sector's underlying productivity
and competitiveness, which is in turn determined by factors such
as the skills of the workforce, the quantity and quality of capital
equipment, the level of innovation and the degree of enterprise
and competition in the economy.
14. In this respect, the latest data from
on productivity (table 1) provides some cause for concern. It
shows that both for the overall economy and for manufacturing,
the UK's performance lags behind that of other major economies
when measured in terms of labour productivity (both GDP per person
employed and GDP per hour worked for the overall economy, GDP
per hour worked for manufacturing). ONS data shows essentially
the same picture, at the level of the economy as a whole.
RELATIVE LABOUR PRODUCTIVITY LEVELS, 1999
(UK = 100)
|Whole economy (GDP market prices)
||Manufacturing (factor cost)|
|GDP person employed
||GDP per hour worked||Output per hour worked
15. NIESR also provide a breakdown of the productivity
gap for different sectors within manufacturing (Annex B). The
consistent nature of the productivity gap with France, Germany
and the US is striking. Across the 17 sub-sectors, there are only
three sectors where UK performance exceeds one of the comparator
countries. This suggests that all UK sectors have an opportunity
to become even more productive.
Explaining the Productivity Gap
16. NIESR have attempted to explain the gap in labour
productivity between the UK economy and the economies of the US,
France and Germany, using as a starting point levels of capital
services and skill-adjusted labour inputs (table 2).
ACCOUNTING FOR THE PRODUCTIVITY GAP
|US-UK gap||France-UK gap
|% contribution of:||
|Physical capital|| 65
|| 62|| 73|
|Skills|| 1|| 14
|Total Capital|| 66
|| 76|| 98|
|Other Factors (or "Total Factor Productivity")
|| 34|| 24|| 2
17. This shows that the major factor accounting for the
UK's productivity gap is a relatively smaller physical capital
stock. Data specifically for the manufacturing sector supports
the findings on the importance of investment for the whole economy.
NIESR calculate that capital per hour worked in France was 80
per cent higher than in the UK in 1999, and 34 per cent and 33
per cent higher in Germany and the US respectively. When we look
specifically at ICT capital per hour worked, the gap with the
US is 167 per cent, although the UK exceeds France on this measure.
18. Table 2 also shows that the UK's low average skill
level explains a significant part of the gap with France and Germany.
Part of this skills gap arises from a lower proportion of workers
with intermediate vocational skills (ie level 3).
The importance for manufacturing of investment in skills is illustrated
by the data in Annex A. This shows that the most rapidly growing
manufacturing sectors tend to have high levels of educational
attainment, as proxied by the percentage of employees with degrees.
19. Around one third of the whole economy productivity
gap with the US, and a quarter of that with France, cannot be
explained by lower physical and human capital. Table 3 shows relative
labour productivity in both the overall economy and in manufacturing
after taking account of physical capital stocks and labour force
skills (total factor productivity (TFP)). Whilst the whole economy
TFP gap with Germany is insignificant, in the manufacturing sector
it is much larger. The TFP gap with the US is also much larger
in manufacturing than for the whole economy.
TOTAL FACTOR PRODUCTIVITY: INTERNATIONAL COMPARISONS 1999
(UK = 100)
20. The gap is made up of other factors, which are difficult
to measure but are likely to include differences in:
Competitive intensity: studies show that increased
competitive pressures in an industry are associated with improved
firm efficiency and productivity growth rates. Increased
competitive pressures encourage firms to innovate and reduce costs.
They also encourage changes to market structures, allowing successful
firms to grow, and moving resources away from less efficient producers.
Innovation, including the application of new technology:
Annex A shows that the most rapidly growing manufacturing sectors
tend to have high levels of R&D, one important indicator of
innovation. In terms of our international performance for innovation,
chart 3 using data from the Community Innovation Survey shows
that UK manufacturers are in the bottom half of the EU league
in terms of the revenue they earn from new or improved products.
Management: management is a key input into the
production process and the quality of management can be crucial
in determining competitiveness. Rapidly changing markets, new
technology and demanding customers place a premium on managers'
ability to lead, innovate and organise employee and supplier relationships.
However, recent research suggests that the UK is performing behind
most of its main competitors. The Government's National Skills
Task Force found that UK managers were inadequately qualified
compared with international competitors and that there was a perception
that they were of low quality. The
report quoted survey evidence suggesting that UK managers performed
particularly poorly in terms of their adaptability, entrepreneurial
and technical skills.
II. GOVERNMENT POLICIES
21. The Government's policies can be considered under
the environment in which businesses operate;
proactive measures to address the issues which
underlie the productivity problem.
22. Long-term macro-economic stability is the key basis
for providing the right framework for manufacturers. We cannot
insulate ourselves from the setback in industrial production,
illustrated in chart 2 of the previous section, which has occurred
worldwide. Neverthelessas a result of actions taken to
establish a stable macro-economic frameworkthe UK has the
lowest inflation for 30 years, long-term interest rates are at
their lowest for 35 years and employment has risen by 1.2 million
23. We have acknowledged (in paragraph 11) the pressures
arising from the weak Euro. But companies have responded positively
and have in many cases sought to maintain export volumes and market
share at the expense of profit margins. This was evidenced by
the fact that the value of UK exports of goods to the Euro zone
grew in 2000 by 10.7 per cent compared with 1999. In recent months
the global slowdown has led to a fall in the growth of world trade
including between the UK and Euro zone.
24. In principle, the Government is in favour of UK membership
of EMUa successful single currency offers potential benefits
in terms of trade, transparency, costs and currency stability.
In practice, the economic conditions must be right. The determining
factor underpinning any Government decision on membership of the
single currency is the national economic interest and whether
the economic case for joining is clear and unambiguous. The Five
Economic Tests will define whether a clear and unambiguous case
can be made, and include the impact of membership on investment
25. Ensuring macro-economic stability makes a major contribution
to encouraging investment. In addition the Government has improved
incentives to invest by:
making permanent the enhanced 40 per cent capital
allowances for small firms investing in plant and machinery;
reforming capital gains tax to provide better
incentives for investment by introducing a capital gains tax taper;
cutting corporation tax to its lowest-ever level.
26. Since 1997, the Government has introduced measures
to improve the UK's overall competition regime. The Competition
Act 1998 strengthened the powers of the Office of Fair Trading
(OFT) to identify and address anti-competitive practices across
the economy and introduced strong financial penalties for firms
that breach competition law. Further reforms will be taken forward
in the Enterprise Bill.
27. An efficient infrastructure is important to manufacturing.
The Government's 10 year plan for transport is intended to address
weaknesses in our transport infrastructure over the long-term.
28. Business has its part to play in protecting the environment,
including tackling the threat of climate change. The Government
introduced the Climate Change Levy on 1 April 2001, as part of
its strategy to reduce greenhouse gas emissions and meet the UK's
target under the Kyoto Protocol. The levy package is revenue-neutral
to business as a whole. The Government foresees commercial as
well as environmental advantages to UK businesses starting the
transition to the low carbon economy expected in the future. A
number of EU competitors already have energy taxes and other climate
change policies which affect their manufacturers in varying ways.
UK businesses are adapting to the Levy. It incentivises energy
efficiency improvements and offers the chance to buy levy-exempt
electricity from new renewables or direct from good quality combined
heat and power plant. Those manufacturers in Climate Change Negotiated
Agreements are working towards energy saving targets and receiving
an 80 per cent Levy discount in return. The Government is keeping
in touch with business to monitor early experience with the Levy.
Pro-active measures addressing productivity issues
29. Raising productivity is the key aim of the Department
of Trade and Industry. This is reflected in policies to promote
the spread of best practice, encourage innovation, raise skill
levels and improve the transfer of ideas from the science base.
Changes following the recent DTI reviews will aim to enhance the
Department's capability to help drive up productivity. We will
maintain and enhance the drive towards higher value added manufacturing
exploiting the best of modern technology and supporting well-paid
jobs. We are about to recruit by open competition a new Director
General for science and technology who will be responsible for
technology transfer particularly into manufacturing.
30. We are helping established industries to modernise
by promoting lean manufacturing, best practice, the improvement
of skills and supply chain development. In the automotive sector
the Society of Motor Manufacturers and Traders Industry Forum
has recruited over 40 UK engineers and trained them in process
improvement techniques. It has completed more than 600 activities
in over 350 companies (predominantly small and medium sized enterprises)
in the automotive sectors. The DTI has provided £9.8 million
to support the development and products of the Industry Forum,
out of total costs of £34 million. The results of companies
undertaking master class activities have included a 30 per cent
average increase in labour productivity, and a 25 per cent average
reduction in things not right first time. Comparable benefits
are being achieved in other key sectors as similar techniques
are applied in aerospace, chemicals, metals and oil and gas.
31. The CBI-led Fit for the Future Campaign, which DTI
supports, provides a focal point for UK best practice activities
to increase productivity at a national, regional and local level.
The Fit for the Future campaign promotes the best practice message
more widely between organisations, encouraging individuals and
organisations to swap ideas. It signposts companies to valuable
sources of information and advice and helps raise the profile
of their best practice activities. The campaign is building a
network of partner organisations delivering best practice programmes
and initiatives. Within the best practice campaign, we are encouraging
joint approaches to developing high-performance working practices
through our support for partnership in the workplace. At the Manufacturing
Summit in December 2001 the Secretary of State for Trade and Industry
announced new investment of £20 million to help take forward
the joint CBI/TUC work on productivity. The money will go towards
an expansion of the Partnership Fund to help employers and employees
work together and promote the lessons learnt, and to extend further
the reach of the Industry Forum techniques to additional manufacturing
32. Success in manufacturing comes from constantly innovating,
investing in new products, new designs and materials and new production
technologies. Exploitation of the UK's strong science base is
an important means of achieving this. Expenditure on the science
base has risen from £1.4 billion in 1996-97 to just under
£2 billion in 2002-03. We have put a major effort into measures
to turn more scientific ideas into commercial success. It is expected
that the University Challenge seed funds will increase the number
of research discoveries that are exploited commercially, thus
helping to move companies up the value added chain.
33. Although the specific detail will be looked at as
part of the follow-up work of the Business Support Review, the
Department offers a number of schemes which encourage industry
to develop and take up new technology:
LINK: promotes partnership in pre-competitive
research between industry and the research base;
SMART: provides grants to help SMEs to utilise
technology and develop innovative products and processes;
Teaching Company Scheme: facilitates the establishment
of project-based partnerships between the science base and companies
Faraday Partnerships: promotes collaboration between
industry, Research and Technology Organisations and universities;
International Technology Service: helps firms
become aware of new technological developments and management
practices from across the world.
34. DTI also supports sector based research and technology
programmes. For example, the DTI's civil aeronautics research
programme, worth £20 million annually, works in partnership
with the industry, research organisations and academia to improve
the competitiveness and sustainability of the sector. The programme
supports research and technology into wing design for large civil
aircraft (where the UK has world-leading capability), aero-engines
(giving the UK a capability in large civil turbofans matched only
by one US company) and for mechanical and avionic sub-systems
(such as landing gear, cockpit and flight management systems)
where the UK industry is strong, supplying both Airbus and Boeing.
35. DTI also helps develop new industries. Assisted by
Government policy, the UK is a world leader in biotechnology,
along with the US and Germany. The biotech sector already employs
around 20,000 people in some 300 companiesthat number is
expected to increase four-fold in the next 10 years. Ensuring
the UK has a strong capability to exploit biotechnology through
manufacturing is key to maintaining our leadership in this important
36. In recognition of the crucial role R&D plays
in the innovation process, the Government has introduced an R&D
Tax Credit for small firms worth £150 million a year. This
offers a super-deduction on qualifying R&D expenditure equivalent
to 150 per cent of actual spend, thereby reducing tax. For companies
not in profit, the benefit is payable as a cash payment of £24
for every £100 spent on qualifying R&D. The Chancellor
has also announced that a volume-based R&D tax credit for
large companies will be introduced in the 2002 Budget to further
encourage greater levels of R&D activity.
37. We have established nine Regional Development Agencies
in England, to harness regional knowledge and initiative. From
1 April 2002 they will have targets to increase productivity,
innovation, enterprise and investment in their regions, in ways
that depend on the specific strengths and weaknesses of each region.
As an example of cluster policy, four RDAs, led by the East Midlands,
are working with the Motorsports Industry Association and DTI
Automotive Directorate to develop a joint strategy to promote
the sector and to ensure it maintains its international expertise
through capitalising on the supply chain linkages, facilitating
technology transfer and the diffusion of innovation, spreading
best practice across other sectors and exploiting commercial spin-offs.
In Rotherham, Yorkshire Forward have been working with Sheffield
University and Boeing to establish the Advanced Manufacturing
Park as a base for Boeing's worldwide research in advanced alloys
for the aerospace industry.
38. In partnership with RDAs and the Small Business Service,
a Manufacturing Advisory Service (MAS) is being set up with two
main components. Firstly, Regional Centres for Manufacturing Excellence
(RCME) are being established in every English region and in Wales
to provide hands-on advice, support and practical assistance to
local manufacturers. Secondly, a national network of Centres of
Expertise in Manufacturing is being established to support the
introduction of best manufacturing practices, methods, processes
and technologies. The MAS will also network with other complementary
activities such as the Industry Fora programmes. It will provide
guidance to appropriate sources of help to meet manufacturers'
skills and training requirements, working closely with the Centres
of Vocational Excellence and New Technology Institutes which are
being developed by the Department for Education and Skills.
39. Through the Small Business Service, we are establishing
Regional Venture Capital Funds in every English region, operating
as public/private partnerships. The Government is investing up
to £80 million and the European Investment Fund up to £53.5
million. Taking account of private sector funding, the Government
expects that the funds will provide up to £235 million of
extra finance for small firms. Two funds started operating in
January 2002 and the majority of the remaining funds should be
up and running by the end of this financial year; they will help
SMEs with growth potential, including manufacturers, by increasing
access to new, commercially run, small scale venture capital funding,
which was not previously available from commercial sources.
40. In addition to this venture capital support for investors,
Regional Selective Assistance (RSA) provided about £220 million
in 2000-01 of direct funding in Great Britain (including the Devolved
Administrations) for capital investment and jobs in the Assisted
Areas. About 90 per cent of all RSA offers accepted by value go
to the manufacturing sector. Since 2000, RSA has been refocused
more on high quality, knowledge-based projects, with skilled jobs.
Recent success stories of investment procured by RSA include:
expansion of the Nissan car plant at Sunderland
for the production of the new Primera and Micra ranges;
a new speciality chemical facility on Humberside
by Nippon Gohsei;
the modernisation of a copper tube manufacturing
facility in Bilston, West Midlands;
the Atmel semiconductor wafer fabrication facility
in North Tyneside;
BMW's new engine facility at Hams Hall, West Midlands.
41. As a general guide, we expect on average every £1
million of RSA to lever in £10 million of private sector
investment and create or safeguard 200 jobs. In the four years
1997-20 around 3,000 companies accepted offers of RSA in support
of proposed investment of £6.5 billion, estimated to create
or safeguard 135,000 jobs.
42. Complementing these measures, Invest UK promotes
knowledge-based inward investment and provides assistance on innovation
and other investment issues to help retain and further expand
existing investment from overseas and multinational companies.
UNCTAD figures released
in January 2002 showed that Britain was the world's second most
popular destination for inward investment last year, and number
one in Europe.
43. Working with its UK network partners, Invest UK provides
information about starting or expanding a business in Britain,
including details of locations, financial incentives, product
sectors, availability of labour, employee costs and skills, and
tax. It also helps to find suppliers and deal with utilities and
planning regulations. Its role can vary significantly, from making
initial contacts abroad, to helping a company manage the whole
process of setting up or expanding its business.
44. International trade enables manufacturers to increase
the potential markets for their products, and to benefit from
resulting productivity gains. Trade Partners UK spends some £67
million per annum in supporting UK business to engage in international
trade and investment, through for example attendance at international
trade fairs, participation in overseas missions and provision
of market and sectoral information, much of which is focused on
manufacturing industry. Trade Partners UK is currently evaluating
the impact of its activity on individual business performance.
45. Modern manufacturing demands people with high-level
skills who can adapt quickly to changing requirements. Success
in delivering those skills will depend on joint action from Government,
employers and individuals: all must be actively engaged in skills
development, which is an essential pre-condition for sustainable
economic success. Individuals will need to raise their level of
skills and to be prepared to adapt them, when required, over their
whole lifetime. We have created new services to provide timely
and flexible solutions to support this change through, for example,
46. We have already made a lot of progress. Standards
are already being raised in schools, colleges and universities
and the reform of the 14-plus curriculum is particularly important
if we are to provide technical and vocational careers to manufacturing
industry. The new Learning and Skills Council and its 47 Local
Learning and Skills Councils provide a strong voice for employers
in the planning and delivery of post-16 learning. They work with
a range of partners including the Small Business Service, National
Training Organisations/Sector Skills Councils, local authorities,
Regional Development Agencies and the Employment Service. The
introduction of new Sector Skills Councils to replace the current
National Training Organisations will ensure that the needs of
specific sectors, including the manufacturing sectors, are factored
into the decisions of all the key players in education and training,
and are addressed by all Government Departments.
47. A number of key specific initiatives support manufacturing.
The network that promotes Science, Technology and Maths in schools
is being strengthened with funding of £6 million over three
years and the Modern Apprenticeships programme today has 223,000
young people undertaking apprenticeships. In 2000-01 engineering
manufacturing was one of the top five most attractive sectors
with 8 per cent of new trainees.
48. To drive up the quality of the workforce the Government
is also working with employers and women scientists and engineers
to increase the recruitment and retention of women in UK research,
development and manufacturing.
49. New Technology Institutes and Centres of Vocational
Excellence are being created to provide courses mainly at technician
level, bringing together teaching and skills development with
work. They will work closely with the Manufacturing Advisory Service
to identify and target real need amongst manufacturers.
50. The Learning Skills Council is currently running
a number of workforce development pilots based in specific sectors
of industry including the automotive sector. The Automotive Skills
task force in the West Midlands is designed to attract new entrants
(from school, FE and HE); upskill the existing workforce while
maintaining quality throughout the supply chain; and meet the
skills demands of expansion and innovation. To date the task force
has improved the responsiveness of further and higher education
institutions through "preferred supplier" arrangements.
It has also established an active dialogue between FE colleges
and employers and improved skills analysis through a clear regional
focus, together with effective liaison with national bodies such
as the National Training Organisation for Engineering Manufacture
51. The Government also recognises that more must be
done to raise demand from employers and individuals for workforce
development. The recent Performance and Innovation Unit report
on workforce development proposed a much more demand-led system
and assessed a number of policy measures to take this forward.
A detailed action plan setting out agreed policy will be published
in the summer.
52. At the Manufacturing Summit in December there was
a consensus between government, industry and the trade unions
on a vision for the future of manufacturing, focusing on high
skill and high value added activities. All the partners agreed
on the need to work together to drive up productivity and competitiveness.
53. The United Kingdom has many highly successful manufacturing
businesses and the potential to create many more. In automotive,
Britain has the two most productive car plants in Europe, the
most productive truck plant, and is the world centre for the production
of Formula One racing cars. The sector is supported by high technology
steel production70 per cent of steels used in cars today
did not exist 10 years ago. In the aircraft sector, Rolls-Royce
is one of two world leaders in its field. Since its formation
30 years ago, Airbus has risen to be one of the only two large
civil aircraft manufacturers and it recorded 53 per cent of total
orders in 2001. In Britain we design and manufacture the wings
for the whole range of Airbus aircraft. We have world leading
companies in key areas of electronics, pharmaceuticals, biotechnology,
food production, technical textiles and boat building.
54. We need a successful manufacturing sector to create
and sustain well-paid jobs, to sustain exports and prosperity,
and to support our service industries. The Government's policies
are based on partnership with industry and unions and are aimed
at fulfilling our manufacturing potential.
Annex A: Factors influencing productivity, by sector
|Percentage of whole economy (1995)
||Average annual percentage growth (1991-2001 q3)
||R&D as per cent of value added (average 1991-2000)
||Percentage of employees with degrees
|Electrical and optical||2.78
|of which computers and office equipment
|communication equipment, TV, radio
|Chemicals and man made fibres||2.39
|of which pharmaceuticals||0.68
|Plastic and rubber products||1.06
|Publishing, printing, paper and pulp||2.75
|Food, drink and tobacco||2.85
|Basic and fabricated metals||2.52
|Machinery and equipment||1.92
Source: DTI calculations from ONS data.
Annex B: Relative output per hour worked by sector,
1999 (UK = 100)
|Electrical and Electronic Equipment||273
|Textiles, clothing and footwear||159
|Rubber and plastics||140
|Paper, printing and publishing||139
|Food, drink and tobacco||136
|Other transport equipment||100
Pre-Budget Report 2001, HM Treasury. Back
O'Mahony, M and de Boer, W, Britain's Relative Productivity
Performance: Updates to 1999, NIESR, forthcoming (2002). Back
UK Competitiveness Indicators: Second Edition, DTI, February
See for example, Blundell, Griffith and Van Reenam: Dynamic Count
Data models of technological innovation. The Economic Journal,
105, March 1995, and Nickell: Competition and Corporate Performance,
Journal of Political Economy, 104(4), 1996. Back
Johnson S, and Winterton J, Management Skills, Skills Task
Force Research Paper 3, 1999; Bosworth D, Empirical Evidence
of Management Skills in the UK, Skills Task Force Research
Paper 18, 1999. Back
UNCTAD Press Release, 21 January 2002-FDI Downturn in 2001
Touches Almost All Regions. Ref: TAD/INS/PR36. Back