Manufacturing a terminal case?

A new government so as a result new ideas and new initiatives abound about education and training. As with previous administrations they have highlighted the woeful state of manufacturing in this country and proclaimed that it needs to be regenerated (whatever that means?) This state of affairs is by no means new – it’s been occurring over many decades with successive administrations.
Manufacturing industry has never really seriously figured on any political agenda in this country and when it was the interest has been tokenistic, half hearted and lack lustre. Manufacturing has been declining as a proportion of GDP in most advanced industrialised nations over the past 30 years but it has been declining at a higher rate in this country. In fact between 1995 and 2000 the rate of decline in this country was twice the average for the other G7 countries. For example for the month of June 2002 manufacturing output fell by 5.3%, the largest decline since 1979. This picture reflects the political indifference and inaction shown towards manufacturing by successive British governments and their obsession with banking, financial and service industries. Whilst these favoured areas grew, traditional manufacturing rapidly declined.
 An interesting figure which reflects the highly distorted nature of this country’s economy is that the tax take from financial services represents 12.5% of the total amount raised by the revenue office. The government has to protect this area of employment at all costs, especially the City – hence their reluctance to introduce stronger regulation of the banking and financial services for fear they might move and base their business in other countries. The level of British economy dependency on these businesses is totally disproportionate whilst other countries have maintained a manufacturing base e.g. Germany and many of the Scandinavian nations. Some political leaders especially in Britain and France have argued that this process was inevitable as the tide of globalisation was irreversible -other nations accepted this fact but took positive action to develop their manufacturing industries.
As mentioned above the decline of traditional heavy industries was largely inevitable as demand patterns changed and this country failed to compete with the emerging economies of East Asia and/or other countries who had invested in new plant, research and development. Additionally their governments adopted a long term strategy for manufacturing and macro-economics that recognised the importance of a realistic balance between services based industries and manufacturing. One of the long standing problems was Britain’s inability to develop and sustain high volume production. In spite of warnings the manufacturing base collapsed during the 80s and 90s. The symptoms had been clear to everyone – the outcome of an assumption that the country could survive on service-based industries, invisible earnings and massive pockets of regional unemployment and underemployment.
Other signs of these transformations in the workforce were evidenced by the decline in student numbers and apprenticeships in colleges and other training providers offering craft, technician and technologist provision. As mentioned in the history of technical education on this website departments in colleges and universities downsized, closed or merged with other departments. The funding methodology rewarded low cost and high recruiting provision and this directly contributed to the imbalances in the skill base and the workforce profile in the country. As a result the situation in colleges, training providers and universities came to reflect the overall position nationally of manufacturing namely one of invisibility, low priority and lack of any real investment, resource or support. This was coupled this with the continuing negative perception of manufacturing and engineering among parents and other relatives who may have experienced being made redundant from manufacturing industries and they became resistant to their children entering that world of employment, so contributing to the downward spiral in recruitment.
Even with the emerging newer technologies this hostility and consequent suspicion of the more practical and vocational areas of employment continued. Successive governments have attempted to encourage increased participation in engineering/technology/built environment technologies but all failed to appreciate the fundamental and underlying causes of the problems. In spite of frequent statements about the paucity of mathematics/ physical science/engineering students at all stages of education and training no effective long term strategies were introduced. Initiatives abounded but these were never properly resourced, evaluated or implemented with real commitment and the continued reality of the current skills shortages has become even more manifest.
So the politicians and their commission for skills et al inform us of the problems and possible impending crises associated with skills gaps and shortages when they themselves have created many of the problems. They have dismissed the importance of manufacturing and placed an over emphasis and faith in the financial services and the emerging knowledge based industries. The problem with these approaches is that they are fundamentally flawed. The mathematical reality of an economy based on the financial and service industries is now largely discredited. The current recession is testimony to the fragility of this assumption and the consequences will resonate as a result of the current financial crisis for years to come! A culture of witch craft and financial terrorism as practised by the bankers and other financial sectors cannot be a basis for stability. Assuming there is any real political will this country must completely and fundamentally review reform and rebalance its long term strategy toward wealth generation by establishing an effective and efficient manufacturing sector providing products and services that the rest of the world want to buy and which complements the service industries. This government like previous ones constantly proclaims the importance of the information and knowledge society inventing a whole series of meaningless and vacuous e-expressions such as e-government, e-commerce, e-democracy, e-learning, and the previous government even appointed an e-envoy! – the only one not used is e-by-gum!
So can this country regenerate a manufacturing base, which is appropriate for the 21st century and which will compete within the global economy? Before one attempts to answer this vital question a number of key factors need to be considered. Clearly it must be accepted that many services and manufactured products will be made abroad in developing countries where labour costs at present are much lower.   The movement of companies, whether domestic or overseas owned, reflects this fact of globalisation including Black and Decker, Dyson, Doc Martin, Massey Ferguson and Raleigh cycles.  Also many companies outsourced their call centres abroad after an initial hope, by previous governments, that the UK would become a world centre of excellence for this area of employment e.g. British Airways, General Electric and Zurich Insurance. These movements reflect/parallel, albeit on a more rapid scale, what happened to the traditional manufacturing industries. In addition the significant level of outsourcing manufacturing abroad coupled with the massive number of Mergers and Acquisitions (M&A) by foreign companies since the 1980s has significantly weakened the manufacturing and commercial foundations of the UK.  Other factors that complicate the issue are the fluctuating exchange rate, the reluctance to strengthen the regulation of the financial services, our massive dependency and love affair with the USA and its financial systems and the related negative and ambivalent attitude to the EC and the Euro – after all the EC is our largest export market! Inward investment is also declining after boom years in the 1980s and 90s and recent evidence has shown that the country’s share relative to mainland Europe has declined from 26% to 18% in the early 2000s. Finally the continuing low levels of productivity in this country compared with other countries adds to the inevitable and continued decline. The annual surveys on productivity levels from McKinsey and other organisations show the country still lagging behind most of our competitors e.g. France 32%, Germany 29% and US 55%. These threat elements whether real or imagined do not instil confidence in any lasting renaissance of manufacturing or the rebuilding of an effective education and training system in these important areas especially in the current period of austerity.
So what is the current government doing to maintain and enhance the manufacturing base in this country? At present very little. The planned austerity measures are bringing about massive cuts to the budgets across all stages of the education and training system. This is a very short sighted approach but it always seems to happen during recessions Governments reduce funding for training and sadly companies also reduce their commitment and funding to training at times of austerity. Every time the press publish information on manufacturing output ministers and civil servants respond by engaging in semantic gymnastics arguing that manufacturing has been redefined and that really no problems exist if one accepts these new definitions. Clearly the nature of manufacturing will change as new industries and technologies appear but there must be a precise understanding within the definitions of what constitutes manufacturing. This country extols its excellence in the arts, fashion, computer games and media but overall even these receive little support and again are going to experience massive cuts in their funding. This is the reason why an effective system of labour market research and intelligence, national and international, is essential and which is able to identify and track how the global market is changing.
In spite of some excellent reports from the EEF and the occasional broadsides from the CBI the Trade Unions and the Chambers of Commerce little seems to happen. The usual knee jerk reaction is to establish working parties, commissions, focus groups, skill summits populated with people who lack any real experience and knowledge of the issues but who tell the government what they want to hear. Inevitably they revisit and discuss ad nauseam the same issues highlighted over many years.
The Way Ahead- (It’s All Been Said Before):
·         Develop a comprehensive and up to date Labour Market Intelligence/Research system/network that pays particular attention to current and possible future global markets and their transformations
·         Redefine what currently and in the future constitutes British manufacturing and how it relates to the global market
·         Once the definitions are agreed develop a long-term strategy which recognises its relationship, realities and consequences within the global economy
·         Long term strategies must be developed to improve the low levels of productivity
·         Long term strategies must be developed to tackle skills gaps and shortages
·         The increasing burden of regulation and direct and indirect taxation on companies must be halted and reversed with real incentives to encourage creativity and innovation
·         Create a clear strategy for developing a sensible balance between the services and manufacturing industries that are seen to complement each other and realise a synergistic relationship
·         Tax incentives should be considered to help particularly Small and Medium Sized Enterprises (SMEs) to encourage employers to invest in retraining and CPD programmes to improve skill levels among their employees
·         Increased funding for technical, vocational and training programmes in all sectors of the educational system and a fundamental review, reform and expansion of apprenticeships/internships.
·         A commitment to improving the number of people possessing the higher levels of skills that aligns to the prioritised manufacturing industries i.e. > 2/3 both in employment and those in education and training.
·         A comprehensive, coherent and consistent set of strategies developed for post-16 education and training which once and for all resolves the issues associated with parity of esteem between the so-called academic and vocational programmes.
Pricewaterhouse Coopers’ 2010 survey involving more than 1000 human resources directors identified that 53% of the respondents expressed concern about the difficulty in recruiting the right people and rated that the continuing skills gaps/shortages were the greatest challenge confronting this country in 2011. In addition 34% HR directors expressed concern about global mobility, (presumably that fewer qualified people would come to this country and more workers would move abroad?) and 23% about the country’s regulation and employment legislation. The survey continued that the UK has lost its position as the world’s most educated workforce, (was this ever true- where did this belief come from – a bit of historical arrogance?), and this would limit future growth of the UK economy.

 Final comment:

The British chancellor Gorge Osborne has come up with the somewhat vacuous expression ‘march of the makers’ which I presume is meant to be a clarion call for British manufacturing. Sadly its just another example of empty rhetoric and political speak and opportunism.

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