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Last Updated: Wednesday, 15 October, 2003, 07:23 GMT 08:23 UK
Manufacturing woes enable service growth
By Bill Wilson
BBC News Online business reporter

Bonga oil and gas platform on the River Tyne
Shipyard work is the North East is very dependant on MoD contracts

During the worst times of the manufacturing downturn in the north-east of England, around 8,000 jobs disappeared every year.

Engineering firms were finding it impossible to export their goods, and the textiles sector was moving overseas where production costs were cheaper.

And as one factory after the other shut its gates for good in the late 1990s and at the start of this decade, the regional economy had to find replacements for the lost jobs.

Now, as manufacturers in the North East see a slight upturn after five difficult years, they find that a growing service economy is competing for qualified workers.

John Bridge, chairman of development agency One North East, told BBC News Online: "Whilst the manufacturing sector has declined in employment terms, the service sector has boomed."

'Manufacturing skills'

Manufacturing facts
Employment in UK manufacturing fell 16% in the past five years
Between 1998 and 2000 nearly 16,000 manufacturing jobs were lost in the North East
Manufacturing accounts for 25% of the North East's GDP
175,000 are still employed in manufacturing in the region
Textiles has been one of the worst affected manufacturing sectors
One service company which has experienced strong growth in this period is print management firm Dataform, based at Balliol Business Park, Newcastle.

During the years of manufacturing decline, it has seen its turnover go from 7m a year in 1997 to near on 30m now.

Its growth has been partially at the expense of the print and manufacturing industry, as it has advised companies and set up systems on how to properly manage their inflow of office stationery and printed material.

Marketing manager Ian Spence explains the secret of the success: "A company may have previously been ordering tons of stationery and printed promotional material, which would then be sent out to district offices without any record about who was using it or whether it was actually needed.

It is symbolic that the company that built the Angel Of The North has succumbed to the haemorrhaging of manufacturing jobs
Derek Simpson, Amicus

"We have set up online systems where each office can order from us the precise amounts that are needed, and cut out over-ordering, which by its nature means less work for printers and stationery manufacturers"

The company employs 114 workers, many of them former employees from the print manufacturing sector.

"Many of our product buyers are former printers or print managers," says Mr Spence. "They have changed their skills from the manufacturing sector to the service sector thanks to their manufacturing knowledge."

Moved abroad

In the textiles trade - the second most-important regional manufacturing sector in the North East - Dewhirst and Sara Lee Courtaulds have closed factories and cut jobs in Northumberland, County Durham and Wearside.

The companies made clothing for Marks and Spencer, which is now buying clothing abroad to cut costs.

However when Dewhirst closed a factory in Peterlee, County Durham, with the loss of 650 jobs, only five of them signed up with the job centre.

Call centre worker
Many former textiles workers have found call centre jobs

The rest of the workforce "found employment in call centres, the public sector, or enrolled for retraining", reports Kevin Rowan, regional secretary of the TUC in the North East.

Hundreds of those made redundant were taken on almost immediately by a call centre opening down the road.

That call centre, Virtutel, has since been taken over by Npower, and remains a major employer in Peterlee.

"While the manufacturing sector has contracted, the service sector has expanded," says the TUC's Kevin Rowan.

"What we need to do is to embed the service sector in the region and also increase the skills base of those employed in the sector."

'Central pillar'

But that does not mean that the manufacturing sector has become irrelevant.

"The region remains the one most dependent on manufacturing as a percentage of employment and GDP," warns George Cowther, chief executive of the North East Chamber of Commerce.

"But there has been a growth in jobs in the service sector over the past five years in jobs like call centres, while the tourism and culture sectors have grown too."

A major event such as another September 11, a world oil crisis, or a downturn in the world economy would hit North East manufacturing hard once again
Alan Hall, a director of the Engineering Employers' Federation
While the service sector has grown since 1998, engineering jobs have been lost in that time for a variety of reasons, ranging from the strength of the pound in the late 1990s and the global economic downturn after September 11.

The cyclical nature of the shipbuilding and ship repair industries has also led to job losses, even though the marine industries are now experiencing a period of growth.

But the TUC's Kevin Rowan says: "Manufacturing remains a central pillar of the regional economy and we are determined to preserve and build on the base we have got.

"There is a growing realisation that the pressure on manufacturing in the region is constant, even when there are periods of guaranteed work, such as contracts from the MoD to build and fit-out ships.

"We have to keep increasing productivity, as the competition increases from overseas, particularly with the expansion of the European Union."

'Gentle recovery'

The region was dealt a blow on Tuesday, when Hartlepool Steel Fabrications, which built the Angel of the North, went into administration with the losss of 38 jobs.

But some remain cautiously optimistic.

Alan Hall, the director of the Engineering Employers' Federation (EEF) in the north-east of England and Cumbria predicts that the manufacturing sector is over the worst: "It has been a difficult period over the past four or five years.

"We now seem to be going through a gentle manufacturing recovery, partly due to a weekening of the pound against the euro," says Mr Hall who represents more than 400 manufacturers across the region.

"But a major event such as another September 11, a world oil crisis, or a downturn in the world economy would hit North East manufacturing hard once again."

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