Post on 27-Dec-2015
Manufacturing in Scotland
Content1. What is manufacturing?
2. Manufacturing and the Scottish economy
3. Why is manufacturing important?
4. The changing policy context
5. A manufacturing strategy for Scotland?
What is manufacturing?
National Statistics classifies a business under ‘manufacturing’ if more than half its revenue comes from ‘making things’
But the boundary between making things and selling services has undoubtedly become blurred
NS definition does not capture jobs and activities which depend on, or are closely allied to, manufacturing – for example, design work undertaken by a specialist non-manufacturing firm.
It is possible for a company to have more than half its revenues generated by manufacturing but a minority of employees directly engaged in making the product
Current statistics significantly underestimate the economic importance of manufacturing?
Manufacturing employment in Scotland
150000
200000
250000
300000
350000
1998
2000
2002
2004
2006
2008
2010
Year
Em
plo
ymen
t
Employment
EU27 Non-EU Total exports
Agriculture, Forestry and Fishing
95 40 160
Production and Construction
7,440 7,330 14,765
Of which manufacturing 7,240 6,770 14,010
Services 1,995 3,415 5,730
Total 9,525 10,780 20,660
Scottish exports by sector & trade area (£million), 2008
2008 (£1000s)
Manufacturing: total 407,018
Chemicals 159,898
Electrical machinery 109,108
Other manufacturing 113,237
Services 91,703
Other: Total 48,165
Grand total 546,886
Expenditure on R&D performed within businesses in Scotland 2008
Economic significance Jobs, R&D, exports Creates genuine wealth Drives innovation and productivity growth Enlarges the pool of skills and good jobs Sustains local supply chain industries and
services Supports the ‘export’ of business services
Social significance?
“With 3m jobs spread around the country – a good number in the middle income category – manufacturing is a force for social cohesion in a way that financial services are not”. Richard Lambert, Director, CBI
High value/low value“Manufacturing has a strong future. That future is based on
generating high value – to the company, to shareholders and to the country. High value manufacturers have strong financial performance, are strategically important and have positive social impact” (IfM, University of Cambridge)
“The UK along with other OECD countries has successfully retained large ‘low tech’ manufacturing sectors and we should build on the comparative advantage that implies…in knowledge based manufacturing we also need a ‘low tech strategy to complement the traditional ‘high tech’ one” (Work Foundation, Manufacturing and the Knowledge Economy)
Pop (millions)
Persons employed (1000s)
Labour costs (euro 1000 per
employee)
Value added (euro million)
UK 62 3,246 39.5 210,720
Germany 82 7,171 55.0 429,471
France 65 3,737 42.8 214,014
Italy 60 4,610 33.1 208,907
Sweden 9 797 46.2 49,948
Finland 5 407 43.0 30,078
Czech Rep 10 1,354 11.1 26,490
Poland 38 2,473 7.6 48,298
Europe: jobs, labour costs and value-added 2009
Changing policy context Previous UK Government policy: New
Industry, New Jobs; Advanced Manufacturing etc
EU policy UK election manifestos
Levers (1) Build on current momentum to design and implement
a modern industrial strategy for Scotland; built on comparative advantage with flexibility to address industry renewal and replacement
Fixing finance – Scottish Investment Bank is a positive start but new relationship between finance and industry is required
Skills and skills utilisation – sustainable productivity enhancement is vital to Scotland’s manufacturing future; investment in STEM subjects is essential
Levers (2) Image – quality employment is fundamental; so is
visible and unrelenting Ministerial support Ownership and control – create a level playing field
through implementation of a public interest test for takeovers and buyouts
Public procurement – extend the Defence Industrial Strategy approach to other key sectors?
State aid – increase to EU15 average and use strategically to support industrial strategy
Conclusion The continuing decline of manufacturing jobs is neither
inevitable nor desirable Manufacturing can thrive in ‘high cost’ jurisdictions Increasing manufacturing’s share of GDP will contribute
disproportionately towards meeting economic and social targets
Fixing finance is fundamental to elicit the levels of patient investment required to sustain and grow manufacturing
Scottish Government should revisit Economic Strategy to examine whether it provides sufficient support for manufacturing in Scotland