Rumours of the death of UK manufacturing have been greatly exaggerated. Surveys report bulging order books while engineering groups chalk up record sales and profits. Britain is still the sixth largest manufacturing country and productivity growth in the sector has outstripped the rest of the economy.
The misleading rumours are often prompted by the continuing decline in manufacturing em! ployment. Much labour-intensive mass production has, indeed, moved to low-wage economies in Asia and eastern Europe. But what remains in Britain is often the high-value-added production that cannot easily be shipped overseas because it requires particular skills, or needs to be made close to the customer.
The most successful British manufacturers make complex and innovative products that are hard to copy. They also provide much more service in the after-market, maintaining the product over its lifetime. Rolls-Royce, for example, keepsaircraft flying rather than just selling their engines.
The fortunes of UK manufacturing have improved since government stopped trying to pick winners which rarely proved successful. However, there is a role for government in ensuring a benign environment for innovative manufacturers, and in encouraging them to invest in Britain. Steps have already been taken, for example, to! improve links between higher education institutions and businesses th at can turn good ideas into profitable products.
While government procurement contracts should not favour British manufacturers merely because of their nationality, they could do more to favour innovation. Too often, decisions are made on the basis of upfront cost, rather than looking at the benefits of buying more innovative products over their lifetime.
The biggest contribution the government could make would be to sort out the lamentable state of UK secondary education and skills training. Britain produces some of the best graduates in the world, but schools still fail to turn out young people ready for the world of work, or to train enough non-graduates in the skills needed in a fast-changing world. Skills shortages have been filled recently by engineers from eastern Europe and farther afield, but that is not sustainable in the longer term.
The manufacturers that have survi! ved the shakeout have devised successful strategies for remaining competitive in the global economy. But they also know that continuing success depends on raising the pace of innovation and further developing the skills of the workforce.