What happened to the march of the makers?
The UK’s economy is as imbalanced now as it was before the financial crisis. It’s time to shift the focus back towards industrial communities, says Paul Johnson.
At a national level the UK economy has been growing but this has not been replicated in wage growth. In fact, the UK is the only developed nation with more people in work but in lower paid jobs.
At a regional level, GDP per head in the poorest UK regions is lower than any region of France, Germany, Belgium, Holland, Luxembourg, Austria, Ireland, Sweden, Finland or Denmark. Research has shown that it is often Britain’s older industrial areas, places that the Industrial Communities Alliance represents, that fare the worst in these regions.
The economic recovery was led by London and the south east. This widened pre-existing divides in economic wellbeing. For example, between 2010 and 2014 a higher proportion of employment growth in older industrial Britain was in part-time work. In London and the south east the ratio between new full and part-time jobs was 16:1. For older industrial Britain this was 4:1.
‘It is wrong to think that high-wage economies
like the UK cannot retain a large manufacturing sector’
The Industrial Communities Alliance has long argued for a re-balancing of the economy away from a narrow range of sectors and places. Re-balancing in favour of Britain’s industrial communities has the potential to provide a huge boost to national income, to public sector finances and to employment.
In the wake of the financial crisis in 2008 and the subsequent recession, many commentators talked about the need to re-balance the economy away from financial services towards production, investment and exports. The chancellor called for ‘the march of the makers’. This hasn’t happened. The British economy remains at least as imbalanced now, if not more so, than before the financial crisis. Manufacturing output, for example, has still not recovered to its pre-recession level.
The reason why the UK finds itself in this precarious position is that it has neglected its industrial base. It is wrong to think of ‘industry’ as something from the past. This may be the reality in too many former industrial towns but industry remains central to every other major advanced economy.
It is also wrong to think that high-wage economies like the UK cannot retain a large manufacturing sector in the face of competition from China and other developing countries. The experience of Germany, where labour costs are generally even higher than in the UK, robustly refutes this claim. In Germany, the share of manufacturing in GDP is more than double the level in the UK – and Germany has a huge trade surplus.
Unless the alarming long-term trends in industrial production are addressed the British economy faces a bleak future. At a time when productivity growth in the UK is flagging, industry can provide high-value added jobs. Industry can also provide the exports to begin to bring the economy back into balance.
An effective industrial strategy can enhance competitiveness and help deliver a high-wage, high-employment economy.
A re-balancing of the economy towards industry is a win-win strategy:
- A shift towards production, industry and exports will sustain prosperity in the UK.
- It will also deliver a fairer Britain, with less reliance on London (with all its attendant problems of congestion and high costs) and the potential for a sustainable revival in many of the UK’s hard-pressed cities, towns and communities.
