Re-balancing....

The Financial Times today has an article by their Economics Editor on the significance of manufacturing in the UK economy. This was based on data at the Office for National Statistics.

The main point is that during the 12 years of NuLabour the share of national output due to manufacturing has fallen from 20% to 12.4% (During the recent recession manufacturing has fallen still further , to 11%.) We may still be a major manufacturing country, but it is accounting for a smaller and smaller proportion of GDP.

There was a dip during the Thatcher years, from about 25%, which was derided as something very bad by the then Labour opposition.

There has been a decline in manufacturing in many other advanced economies, although Germany and the USA have not seen such a rapid fall. There is something almost "natural" about this. Developing countries, often with an exchange rate advantage, have lower (labour) costs and often poorer working conditions than would be tolerated here.

The result has been the loss of production overseas - either by close-down here or by using overseas production facilities.

If there is a balancing, as other international marketable goods or services are provided here in place of "metal bashing and assembly", this need not be a concern. Switzerland has been very successful without much heavy industry.

One cause for concern here is that the expanding sectors here are local banking, health and education. There is a limited potential for exporting these.

Does the economy need need re-balancing then? Yes, but it will not happen in the present regime of company taxation and regulation. Setting up new manufacturing capacity is expensive, and needs to have the government on side.