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A Manufacturing Slump Is Impacting the UK Economy - What Must Be Done?

02/12/2015 10:12 GMT | Updated 30/11/2016 10:12 GMT

The United Kingdom has a long and proud history of manufacturing. The Industrial Revolution helped put the 'Great" into Britain and put this country at the top of the World. Following the industrial revolution an explosion in British manufacturing helped make the country a world leader in exports and incredibly wealthy as a result. Other countries such as America and Germany soon followed suit. For all its societal ills at the time, 19th century Britain was an industrial and economic powerhouse. However, in the 21st Century, the industrial landscape looks somewhat different.

The late 20th century saw rapid and exponential growth in the service sector, while the manufacturing industry went into free-fall and increasingly outsourced to cheaper locations abroad, thereby shrinking the UK's manufacturing industry beyond all recognition. This, of course, has meant that Asia, with China and India at the head, is now responsible for much of the world's manufacturing output.

In the last few decades the UK's workforce went from one that specialised and excelled in large scale heavy manufacturing, to one that excelled in the sale and consumption of consumer goods. Former industrial big hitters such as the south Wales valleys and the north east of England are today more likely to be home to a call centre rather than a factory.

It is within this context that recent growth statistics from the ONS are of such interest. In the third quarter of 2015 (Q3) UK growth was up by 0.5%, driven by Britain's dominant services sector. On the one hand, the figures were largely positive. The overall growth of the UK's services sector in Q3 was the highest of any quarter so far in 2015. However, the figures also show that the manufacturing industry is in decline. What's more, this decline dragged down the country's overall growth by between 0.1-0.2%. And while manufacturing may not be the UK's most important industry anymore, as our focus shifts to the development of a more digitally focused economy, neglecting it is still a seriously dangerous and ignorant strategy.

I'm not saying that the UK should attempt to punch with the big hitters in the Far Eastern markets, something which is unfeasible considering the sheer scale of their manufacturing sectors, however, this great nation of ours has significant strengths and provides products of a quality which remain highly regarded around the world. The 'Made in Britain' tag retains serious gravitas, and is undoubtedly a hallmark of excellence.

What is clear is that a serious imbalance has occurred, and we've moved too far away from our manufacturing roots. As the far reaching impacts of the 2008 recession are still being felt, it's not a sector we can afford to ignore.

So, how can this imbalance be addressed? British industry often suffers when it tenders for projects on British soil. While British industry has a regional advantage, the vast economies of scale that other nations can offer means that British companies are often passed over home based projects.

The dire state of the UK steel industry can be exemplified by the fact that in 1967 it employed 250,000 people; in 2015 that number stands at just 25,000. In a recent case, the government were found to be using Swedish steel for projects only days after Tata steel in Scunthorpe was forced to lay off 1,200 of its staff. Critics strongly railed against the UK Government for allowing this to happen, asserting that cheap steel imports from China are ruining communities that rely on the steel industry to thrive.

There will be a number of large scale projects on British soil in the coming years that will require a lot of manufactured components. For example, the Crossrail project - which will see a new train line cut through London from east to west will certainly require millions of tonnes of steel, plastic and other materials which can (and should) be produced within our own borders.

In order to help combat the manufacturing industry's decline, the government must ensure that a large proportion of these products and materials are supplied by UK manufacturers. How can they do this? One way would be to ensure that more British companies get to pitch for tenders. It would be unfair to give projects to British companies as standard - unfeasible in this globalised world - but it seems only fair to at least provide them with a seat at the table with the very people who will make these economically vital decisions.

The logic is simple. UK manufacturing is down, and this is dragging the entire economy down with it. The manufacturing sector is not nearly large, or moneyed, enough to compete with prices offered by foreign companies that can - in some cases - offer resources such as steel for less than they cost to produce. It therefore falls to the government to step in and ensure that British industries at least get a chance to pitch for tenders put out for projects on UK soil. Otherwise, with the way things are now, the UK's already beleaguered construction industry is likely to take even more of a nose dive; and that doesn't bode well for anyone in the UK.

Simon Thomas is the Managing Director of Asset International, a leading manufacturer of Weholite large diameter plastic pipes. Asset International Ltd supplies bespoke designs to the water and construction industries, from surface drainage to foul sewers and inter-process pipework: www.weholite.co.uk