UK manufacturing has entered a new phase of decline, report warns

Theresa May at the Tory party conference.
Theresa May at the Tory party conference.
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UK manufacturing has entered a new phase of decline, according to a new report which will make gloomy reading for Prime Minister Theresa May.

New evidence on the recent performance of UK manufacturing points towards a perilous future for the sector, according to the report by the Sheffield Political Economy Research Institute (SPERI).

The SPERI report analyses the recent performance of the British manufacturing sector.

The report explores the challenge facing Theresa May, who has made industrial policy one of the key pillars of her economic agenda, and casts doubt on the recent positive commentary surrounding manufacturing in the context of the current collapse in the value of sterling.

In the 1970s, 1980s and 1990s, a significant number of jobs were lost in British manufacturing, yet output continued to grow, according to the report.

This pattern began to shift in the 2000s, with job number falling by a third, and output actually falling by around four per cent.

The SPERI report said: “Since 2011, the historical decline in manufacturing jobs has gone into reverse, with the number of jobs having risen by around five per cent.

“However, output growth during this period has been negligible.”

Dr Craig Berry, deputy director of SPERI and author of the report, said: “The growth in manufacturing jobs in the last five years, however limited, is to be welcomed. British manufacturing is not dead, but the sector is in great peril. There are few signs of sustainable growth in advanced manufacturing industries, and we now seem to be witnessing a new phenomenon whereby the UK manufacturing sector is creating lower-skilled jobs without enhancing its productive capacity. This is a different kind of manufacturing decline than we have experienced in the past, but it is decline nevertheless.

“Despite some analysts predicting a resurgence in manufacturing due to the fall in sterling, Brexit is likely to prove to be a significant challenge to the manufacturing sector in the years ahead, given the probability of trade barriers between the UK manufacturing and its key trading partners, lower levels of investment from European manufacturing firms, and a more challenging research environment for UK universities.

“Theresa May has promised a renewed focus on industrial policy, but it is not clear that her agenda will differ substantively that of the previous government. What is required is an industrial strategy which ensures all economic policy functions are focused on supporting sustainable industrial development. Challenging the primacy of the Treasury in economic policy-making will be central to this endeavour.”