Annex 1
ECONOMIC CONTEXT
Manufacturing has been at the core of the Welsh
economy since the industrial revolution. It now accounts for 24%
of Welsh GVA (2000) and about 17% of employee jobs (March 2003).
Wales is an important UK manufacturing region. Manufacturing accounts
for above the UK average of 18% for GVA and 14% for employment,
but slightly below the figures for the Midlands (25% and 19% respectively).
Structural change has been continual in the
post-war period. Since the 1950s there has been a dramatic shift
in the composition of employment. In the mid-1950s mining and
manufacturing accounted for almost half of employee jobs and the
three service categories for about one third. Today mining has
very few employees at all and manufacturing accounts for less
than one fifth of employee jobs. The three service sectors account
for over two thirds of employee jobs. Wales shares those broad
trends with the UK and most of the rest of the developed world.
All of the G7 countries have experienced a fall in the share of
manufacturing employment since the 1950s, and an increase in service
sector share.
There have also been significant changes within
Welsh manufacturing. Since 1980 manufacturing employment has fallen
by nearly 100,000 with over half of that fall occurring by 1990.
Over the whole period over half of the fall was basic metals and
fabricated metal products (mainly steel). Textiles and clothing
accounted for a further 15,000 net job losses. But employment
increased in food processing, wood products, publishing and printing,
office machinery and computers, manufacturer of TV and communications
equipment, medical and precision instruments, and other transport
(mainly aerospace). The manufacturing base is now significantly
more diversified: whereas metal manufacturing and metal products
accounted for over one quarter of manufacturing employment in
1980, that proportion has almost halved.
This overall picture of change if anything understates
the degree of change within manufacturing. In every year for which
we have records there have been new plants openings and expansions
of employment in existing plants. And in every year there have
been plants closing and downsizing. There is, as in all dynamic
modern economies, constant "churn". There has been no
year since WRME records began in 1967 when jobs lost through closures
and downsizing have been less than 10,000 (and between 1978 and
1983 the numbers were very much higher). But equally jobs in new
plants plus expansions in employment have generated new jobs.
And only in 1981 were there less than 10,000 of these new jobs.
Foreign Direct Investment has helped diversify
the manufacturing base and introduced fresh investment and new
working practices. In 2002, 65,000 people in manufacturing worked
in non-UK owned firms out of total manufacturing employment on
the database of around 170,000. American-owned (42.8%) and Japanese-owned
(19.2%) accounted for much of the employment. The proportion of
manufacturing employment in foreign-owned plants has increased
from just over 30% in 1980 to around 38% in 2002. However the
absolute level of employment has fallen a little, but, of course,
rather less than for total manufacturing employment
Short run trends can be different from these
longer run movements, largely because of macro-economic fluctuations
at UK and world level. Since 2000 there has been a significant
slowdown in the world economy associated in particular with sharp
falls in the technology sectors following the ending of the "dotcom"
boom.
In most twentieth century slowdowns most sectors
were affected to some degree. The recent slowdown has been unusual
in that it has affected the electronic and optical sector particularly
hard, and some other sectors hardly at all. Wales has shared in
these trends. The reduction in employment on the Welsh Record
of Manufacturing Employment (WRME) database between 2000 and 2002
is almost entirely explained by reductions in the electrical and
optical sectors, plus the well-publicised continuing restructuring
of the Welsh steel industry.
The future is, as ever, uncertain. But we can
be sure that there will be an increase in global competition.
To succeed Welsh manufacturing will need to raise its skill levels
and improve its innovation performance. Measured innovation performance
(eg patents and R&D) in Wales is known to be lower than the
UK average. Skill levels are also lower in Wales than elsewhere
and, almost certainly as a consequence, are Welsh earning.
HISTORICAL CONTEXT
Manufacturing has played and continues to play
an important role in the Welsh economy. It accounts for 24% of
Welsh GVA (2000) and about 17% of employee jobs (March 2003).
This is above the UK average of 18% for GVA and 14% for employment,
but slightly below the figures for the Midlands (25% and 19% respectively).
The attached graphs show the evolution of employee
jobs since the war.[1]
Notable points include:
— The sharp fall in manufacturing employment
in the early 1980s.
— The overall downward trend in manufacturing's
share over the whole period.
— The rise of services industries in
general, across all the three broad sectors identified here (distribution,
hotels and catering; banking, finance and business services; other
services).
— The halving of mining's employment
share between 1960 and 1974 and the further significant reduction
in mining over the 1980s.
— The total number of employee jobs
has risen over the period.
These broad trends would not be significantly
changed were we able to add in the self-employed, because self-employment
tends to be higher in construction, agriculture and service industries.
The overall effect since the 1950s has been
a dramatic shift in the composition of employment. In the mid-1950s
mining and manufacturing accounted for almost half of employee
jobs and the three service categories for about one third. Today
mining has very few employees at all and manufacturing accounts
for less than one fifth of employee jobs. The three service sectors
account for over two thirds of employee jobs.
Wales shares those broad trends with the UK
and most of the rest of the developed world. All of the G7 countries
have experienced a fall in the share of manufacturing employment
since the 1950s, and an increase in service sector share.
These trends reflect a variety of factors including:
increasing specialisation leading to activities formerly performed
in-house being contracted out to specialist firms in other sectors;
people spending more on leisure activities as incomes rise; and
rapid growth in manufacturing productivity plus migration of production
of some parts of manufacturing (notably textiles and, to a degree,
certain consumer electronic goods) to lower cost locations in
developing countries leading to fewer people domestically being
needed to supply demand for manufacturers.
EMPLOYEE JOBS
HISTORICAL SERIES
The following two charts show estimates of employee
jobs from 1948 to 2002. There follows some detail on sources and
adjustments to create as consistent a time series as possible.
Sources:
1948-74: Digest of Welsh Historical Statistics
(1700-1974) Table 4: insured employees (employed and unemployed).
1975-94: Digest of Welsh Historical Statistics
(1974-96) Table 7.3 Distribution of employees in employment by
broad industrial group.
1995-2002: NOMIS Employee jobs by industry.
Standard industrial Classification
The raw estimates for 1948-74 are all on the
basis of SIC1968. Some rough adjustments have been applied to
make these comparable with SIC1980 used for the 1975-81 estimates.
The adjustments affect distribution, hotels and restaurants and
banking, finance and business services. The estimates for 1982
onwards are based on SIC92.
Unemployment
Prior to 1975 the figures include both employed
and unemployed insured people. Figures for unemployment are also
available (table 5) and have been used to estimate employees by
industry (by gender).
1971 series change
Prior to 1971 estimates are based on counts
of National Insurance cards, for later years they are based on
a census of employment. This causes a discontinuity in the totals
and the industry split of employees. This has been smoothed over
the years 1965 to 1970 at an industry level.
Quarterly employee jobs series 1981+
A consistent series for total employee jobs
is available back to 1981 on NOMIS. This has been used to pro-rate
the industry detail available from the Digest of Historical Statistics.
In 1981, the employee jobs series is 35 thousand higher than shown
in the Digest. Earlier years have not been adjusted. If they were,
the first chart would show a sharper downturn in the number of
employee jobs in the late 1970s.
RECENT TRENDS
Employment
EMPLOYEE JOBS IN MANUFACTURING
|
| Thousands WalesUK
| % age of all employee jobsWalesUK
|
|
| March 1998 | 212
| 4,202 | 21%
| 17% |
| March 1999 | 206
| 4,084 | 20%
| 16% |
| March 2000 | 208
| 3,980 | 20%
| 16% |
| March 2001 | 198
| 3,853 | 18%
| 15% |
| March 2002 | 184
| 3,661 | 17%
| 14% |
| March 2003 | 179
| 3,532 | 17%
| 14% |
| % age change March 1998 to March 2003 | -16%
| -16% | |
|
|
Source: Short term employer surveys.
— Employee jobs in manufacturing have fallen steadily
over the last five years, by 16% in both Wales and the UK as a
whole between March 1998 and March 2003.
— Manufacturing jobs have also been falling as a
proportion of all employee jobs in Wales and the UK. Wales still
has a higher proportion of jobs in manufacturing than the UK as
a whole (17% in Wales in March 2003 compared to 14% in the UK).
Gross Value Added (GVA)
MANUFACTURING AND TOTAL GVA IN WALES AND THE UK
|
| 1989
| 1990 | 1991
| 1992 | 1993
| 1994 | 1995
| 1996 | 1997
| 1998 | 1999
| 2000 |
|
| Manufacturing GVA as a proportion of total GVA
|
| Wales | 31% |
30% | 28%
| 27% | 27%
| 27% | 28%
| 28% | 28%
| 26% | 25%
| 24% |
| UK | 24% |
23% | 21%
| 21% | 21%
| 21% | 22%
| 21% | 21%
| 20% | 19%
| 18% |
| Welsh GVA as a proportion of UK GVA
|
| Manufacturing | 5.4%
| 5.4% | 5.3%
| 5.3% | 5.2%
| 5.3% | 5.4%
| 5.3% | 5.3%
| 5.2% | 5.1%
| 5.1% |
| Total | 4.2%
| 4.2% | 4.2%
| 4.2% | 4.1%
| 4.1% | 4.2%
| 4.1% | 4.0%
| 4.0% | 3.9%
| 3.9% |
|
Source: ONS regional accounts.
— Manufacturing accounted for 24% of GVA in Wales
in 2000, compared to 31% in 1989. More than half of this reduction
took place since 1997.
— In the UK as a whole manufacturing accounted for
18% of GVA in 2000, with a similar fall from 24% in 1989.
— Welsh manufacturing GVA accounts for around 5%
of UK manufacturing GVA, while Welsh GVA as a whole accounts for
under 4% of UK GVA.
— Between 1995 and 2000 output from the manufacturing
sectors in Wales and UK both increased by around 6%. Since then
manufacturing output in Wales has fallen to around 90% of its
1995 level. Output in the UK has also fallen, but only to around
98% of the 1995 level.
— The recent reduction in manufacturing output in
Wales is largely due to reductions in the basic metals and optical
and electrical sectors.
Job turnover (churn)
Manufacturing is a very dynamic sector with large numbers
of jobs created and lost each year. Data from the Welsh Register
of Manufacturing Employment, (table shown below), which contains
information on all plants employing 11 or more people, shows that
over the 10 year period 1993-2002, there were on average each
year over 15,000 job gains and over 17,000 job losses.
ANNUAL GAINS AND LOSSES IN WELSH MANUFACTURING
|
| Employment Gains
Losses
| NetChange | Plants Gains
Losses
|
|
| NetChange |
| 1966-67 | 11,066
| 17,016 | -5,950
| 75 | 27
| 48 | 1966-67
|
| 1967-68 | 20,929
| 11,660 | 9,269
| 116 | 32
| 84 | 1967-68
|
| 1968-69 | 27,246
| 11,053 | 16,193
| 137 | 26
| 111 | 1968-69
|
| 1969-70 | 28,175
| 13,342 | 14,833
| 135 | 46
| 89 | 1969-70
|
| 1970-71 | 16,633
| 26,914 | -10,281
| 128 | 79
| 49 | 1970-71
|
| 1971-72 | 21,547
| 25,663 | -4,116
| 136 | 88
| 48 | 1971-72
|
| 1972-73 | 26,722
| 14,940 | 11,782
| 69 | 146
| -77 | 1972-73
|
| 1973-74 | 22,806
| 15,840 | 6,966
| 152 | 122
| 30 | 1973-74
|
| 1974-75 | 19,459
| 33,469 | -14,010
| 153 | 111
| 42 | 1974-75
|
| 1975-76 | 17,383
| 31,576 | -14,193
| 171 | 140
| 31 | 1975-76
|
| 1976-77 | 20,916
| 17,558 | 3,358
| 117 | 127
| -10 | 1976-77
|
| 1977-78 | 19,086
| 27,525 | -8,439
| 145 | 138
| 7 | 1977-78
|
| 1978-79 | 17,318
| 20,145 | -2,827
| 145 | 113
| 32 | 1978-79
|
| 1979-80 | 14,840
| 33,675 | -18,835
| 161 | 135
| 26 | 1979-80
|
| 1980-81 | 9,722
| 50,854 | -41,132
| 124 | 188
| -64 | 1980-81
|
| 1981-82 | 11,434
| 28,233 | -16,799
| 155 | 163
| -8 | 1981-82
|
| 1982-83 | 13,913
| 26,780 | -12,867
| 136 | 182
| -46 | 1982-83
|
| 1983-84 | 16,579
| 18,258 | -1,679
| 181 | 150
| 31 | 1983-84
|
| 1984-85 | 14,222
| 16,123 | -1,901
| 164 | 164
| 0 | 1984-85
|
| 1985-86 | 17,133
| 17,199 | -66
| 210 | 125
| 85 | 1985-86
|
| 1986-87 | 19,397
| 12,530 | 6,867
| 188 | 117
| 71 | 1986-87
|
| 1987-88 | 16,760
| 10,319 | 6,441
| 79 | 105
| -26 | 1987-88
|
| 1988-89 | 24,393
| 12,666 | 11,727
| 226 | 90
| 136 | 1988-89
|
| 1989-90 | 16,719
| 16,178 | 541
| 137 | 75
| 62 | 1989-90
|
| 1990-91 | 12,688
| 21,048 | -8,360
| 93 | 114
| -21 | 1990-91
|
| 1991-92 | 14,075
| 26,084 | -12,009
| 109 | 255
| -146 | 1991-92
|
| 1992-93 | 13,884
| 25,122 | -11,238
| 131 | 150
| -19 | 1992-93
|
| 1993-94 | 18,096
| 18,197 | -101
| 102 | 136
| -34 | 1993-94
|
| 1994-95 | 14,098
| 11,963 | 2,135
| 92 | 75
| 17 | 1994-95
|
| 1995-96 | 14,777
| 10,296 | 4,481
| 81 | 69
| 12 | 1995-96
|
| 1996-97 | 11,154
| 10,464 | 690
| 57 | 49
| 8 | 1996-97
|
| 1997-98 | 17,166
| 19,032 | -1,866
| 24 | 116
| -92 | 1997-98
|
| 1998-99 | 10,045
| 14,987 | -4,942
| 25 | 58
| -33 | 1998-99
|
| 1999-2000 | 13,099
| 17,621 | -4,522
| 76 | 110
| -34 | 1999-2000
|
| 2000-01 | 24,866
| 30,060 | -5,194
| 56 | 158
| -102 | 2000-01
|
| 2001-02 | 12,847
| 22,880 | -10,033
| 59 | 160
| -101 | 2001-02
|
| 621,193
| 737,270 | -116,077
| 4,345 | 4,139
| 206 |
|
| 1993-2002 average | 15,128
| 17,278 | -2,150
| 63 | 103
| -40 | |
|
Source: Welsh Register of Manufacturing Employment
(WRME) which contains details of all manufacturing plants in Wales
that employ 11 or more people.
Churn is a vital component of economic progress. It is a
process through which new products are brought to market and new
working methods are adopted, with consequent increases in productivity
and competitiveness.
Since 1966, the National Assembly, and formerly the Welsh
Office, has maintained information about employment in manufacturing
firms employing more than 10 people (which account for the vast
majority of manufacturing employment). Annual employment figures
have been collected for each plant. These figures have been used
to identify increases and reductions in staffing and can be used
to approximate gross job gains and losses in the sector over a
36 year period. It is understood that similar figures are not
available for any English Region or the other Devolved Administrations.
In July 1966 there were fewer than 300,000 people employed
in manufacturing firms employing more than 10 people in Wales.
Over the period to June 2001, about 700,000 jobs were lost in
such firms. Over the same period, almost 600,000 new manufacturing
jobs were created.
In a generation, therefore, Welsh manufacturing has almost
completely renewed itself about three times. The net result of
these job losses has been a reduction in the number employed of
just over 100,000, which is similar to the experience of other
parts of the UK and many other advanced countries.
Unsurprisingly, job losses were greater during times in which
manufacturing was experiencing difficulties. Job gains were greater
in boom times. Job losses were never less than 10,000 in any year,
and job gains were always over 10,000, except in 1980-81.
Consistent official output figures for manufacturing over
this period are not available because of discontinuities in the
data, particularly changes to the Standard Industrial Classification
of manufacturing industries. However, according to Cambridge Econometrics,
manufacturing output in Wales has risen about 2½ times over
the period.
1
Different sources have had to be brought together to get a roughly
consistent overall series-see attached notes. Back
|
