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Monday, 18 March, 2002, 15:02 GMT
The facts about UK manufacturing
BBC News Online provides some facts and figures to shed light on the debate about the long-term survival of British manufacturing.

What is a manufacturer?

In the traditional sense, it is a company that makes a product from raw materials by hand or machinery.

"It is usually done in a repetitive way on production lines in factories," says Professor Tim Congdon, chief economist at Lombard Street Research.

The UK manufacturing sector is currently in recession and last year recorded its largest annual decline for a decade.

In today's more complex economy, however it not always clear whether a company belongs to the gloomy manufacturing sector, or the much heralded services sector.

Why the confusion?

Well, many companies in the service industry support manufacturers and in some cases have been spun off from them.

For example, a company such as TNT offers a logistics service for manufacturers, among other customers.

Historically, this kind of work would have been done by the distribution arm of the manufacturer.

Other companies that design or market manufactured goods are often classified by the UK's Office for National Statistics (ONS) as "services" but are very closely allied with manufacturers.

"It is very difficult to draw a boundary between services and manufacturing," explains Andy Scott, director for international competitiveness at the Confederation of British Industry (CBI).

So why does it matter?

Such distinctions are at the crux of the argument as to whether British manufacturing is on its last legs.

The UK's services industry is seen as the engine of growth for the national economy, accounting for a hearty 66% of gross domestic product (GDP).

By contrast, manufacturing shares little of the glory - and is in decline according to economic data from the ONS.

Therefore some might argue that such cut and dry definitions paint a misleading picture.

Nevertheless, it is generally acknowledged that UK manufacturing has suffered from years of under-investment.

How important is manufacturing to the UK economy?

Manufacturing output accounts for about 20% of the national economy, generating more than 150bn a year.

The sector also employs four million people - representing roughly 14% of everyone working in the UK.

A further 2.4 million jobs in the services industry depend upon manufacturing, says the CBI.

Manufacturers also provide 60% of the UK's exports - a sizeable contribution for a country that is heavily involved in international trade.

However, the economic influence of the manufacturing sector is slowly dwindling.

Just after World War II, for example, manufacturing accounted for almost 40% of the UK economy.

The sector also employs considerably less people than it used it. At the end of the 1970s, it employed just under a third of the total UK workforce.

And in the last year alone, an estimated 150,000 manufacturing jobs were lost.

In which manufacturing sectors is the UK most competitive?

The British manufacturing sector is fairly diversified, but its key strengths lie in the aerospace, high technology and pharmaceutical industries - and to some extent car production.

One of the largest manufacturing sectors is the production of food, beverages and tobacco.

However, many of the traditional heavy industries in the UK, such as ship-building and metal-bashing, have seen their fortunes decline.

Since January 2001, the overall manufacturing sector has been in recession, with output declining from month to month.

So what's the problem?

Because of its exposure to international trade, the sector has suffered more than most from the global economic slowdown.

Its problems have also been sorely exacerbated by the strong pound, which has made British exports that much more expensive than other international goods.

Reduced investment and a generally poor image have also robbed manufacturing of the ability to modernise and attract new blood.

In addition, cheaper labour costs abroad have persuaded some companies to move their production operations to Eastern Europe or Asia.

Finally, the collapse of the telecom and technology sector last year dragged down even more the performance of the manufacturing industry as a whole.

ABN Amro's economist Richard Iley sees this as key factor because he argues that the tech industries have kept manufacturing afloat in recent years.

What does the future hold?

No one knows for sure, but the CBI expects manufacturing output to start growing again by 2003.

Over the long-term, many economists predict that there will be a shift into more high-tech manufacturing which is less labour intensive.

This is because the UK will find it increasingly difficult to compete with other countries, such as China and India, that can pay workers lower wages.

Union Jack behind image of Ford Dagenham plant

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