What will be left of UK manufacturing?

There is a real danger that over twenty per cent of the output of UK manufacturing industry might be lost before this recession is over.

The Guardian reports that “closures, short-term working and the mothballing of plants led to a drop of more than 5% in UK manufacturing production in the final quarter of 2008, according to data from the Office for National Statistics.” Manufacturing output has now fallen by 10.5% in 10 successive months from the peak in February 2008.

The signs of a deep downturn in what remains of our industrial heartlands are all there to see. Profitability has been squeezed – the net rate of return is already lower than it was during the 1990-91 recession. Employment is contracting and at some time this year the number of people classified as working in manufacturing will dip below 3 million – just 12 per cent of the employed labour force.

The net trade deficit in manufactured products has continued to widen despite the possible benefits of a cheaper pound. One problem is that the weaker currency increases the costs of importing component parts but in a recession, producers find it difficult to pass on these costs to their own customers, hence a decline in profit margins. Manufacturing production accounts for just 18 per cent of UK real national output.

Student handout UK_Manufacturing_Recession_Feb_2009.pdf