THE BLOG

Manufacturing the UK's Economic Recovery

03/03/2014 10:17 GMT | Updated 30/04/2014 10:59 BST

The Chancellor has his sights set firmly on driving economic recovery, and a central component of the plan is his target to increase the value of annual UK exports to £1 trillion by 2020. This equates to approximately a 100% increase from where we currently stand, and there is little disagreement that it is an exceptionally tall order. Issues of legislation and red tape aside, each of which weighs heavily into this debate, the question is: can we realistically produce at this heightened level?

British power infrastructure is reaching a pivotal moment in its history; many plants are creaking towards total shut-down and as the nation becomes hungrier for technology our need for energy grows, so the debate isn't just about what will replace them but how can we produce even more to meet demand? The manufacturing industry, indeed any industry, doesn't stand a chance of expanding to Osborne's target if there is no power to fire up the factories.

Assuming we reinvigorate our infrastructure and have enough power to go around, the next stumbling block is the escalating price of energy, which sends the charge for running a production line in Britain shooting skywards. Industrial electricity prices have risen by almost 100% in the last decade, and the UK's biggest manufacturers have exceptionally high requirements, pushing the issue of cost to the forefront as a primary concern in the industry.

It is a well-known fact that the UK is not in the least competitive when it comes to the cost of energy when compared to many countries worldwide, even with the finance packages provided by the Government. Whilst countries such as the USA have experienced something of a production renaissance due to the shale gas-led cheap energy boom, Britain lags woefully behind as a compelling place to be a high energy user; businesses that have so far remained on home soil may soon find themselves in a position where it is no longer viable to stay, and that would be catastrophic for the sector's targeted growth.

Businesses are quickly running out of options when it comes to accessing cheap energy through traditional routes, and a great number are consequently looking at ways to tackle this on an individual basis, taking steps to minimise usage, get creative with resources and make use of on-site opportunities to lock down expenditure. Whichever way you look at it, there are only so many ways to slice up the finite amount of energy we can access through the National Grid, so it makes sense on a commercial basis to recognise that any additional power must come from elsewhere.

Despite Osborne's statements to the contrary, UK manufacturing has not in fact been leading the economic recovery; growth in the sector was smaller than predicted in the last quarter of 2013, and the ONS has revised its estimate of output growth down to +0.7% in response. This is a clear signal that it isn't enough to simply tell businesses to up the production ante; the instruction has to be reinforced by guidance as to how this can be achieved. There are several very important threats to sustained growth here, and if they are not recognised in tandem there is slim chance that we will come anywhere close to the Chancellor's ambitious target.