UK manufacturing needs 'modern industrial strategy'

6 May 2016

The UK’s manufacturing sector must be championed because it makes the economy more balanced, diversified and innovative, according to the CBI.

CBI director-general Carolyn Fairbairn has called on the government to give its full backing to a “modern industrial strategy” and has urged businesses to work in partnership with the government to embrace long term opportunities and trends, particularly in digital.

Fairbairn emphasised the need to develop the right skills in the manufacturing sector, manage energy costs, and encourage more R&D investment.

In a speech she said manufacturing supply chains accounted for around 5m jobs, representing 15% of the UK workforce, and supply chain optimisation was among the CBI’s key priorities

Speaking to manufacturing firms at the University of Warwick, Fairbairn also outlined the importance of the sector to supporting higher skilled jobs outside London and to diversifying the UK’s economy to make it more resilient to economic shocks.

She said every manufacturing sub sector should have a plan for its future that addressed whether the sector was strategic for the UK and globally competitive and what the government and business can do to make it more successful.

Manufacturing was evolving in the digital age, according to Fairbairn, and the line between manufacturing and services was blurring further.

“In the years to come, as digital technologies increasingly define what we make and do, I think we’ll see more creative and technology companies doing things which could be classed as manufacturing,” she said.

“But on digital, less than half of manufacturers agreed that adopting digital technologies would boost job creation. Without vision, British firms risk being behind in the digital revolution.”

Outdated perceptions of a manufacturing career and skills shortages were holding manufacturing back, according to Fairbairn.

“When you say ‘manufacturing’ to people today, most people still think of hard labour and oil-stained clothes, not fighter jets, driverless cars or 3D printing,” she said. “We need to offer young people a true picture of 21st century manufacturing.”

Electricity prices in the UK are higher than the European average and, coupled with low spending on R&D, were inhibiting manufacturing progress.

“For our largest users electricity prices are still about 80% higher than the European average, double the cost of the USA. This has caused real headaches for our foundation industries,” said Fairbairn.

She added:  “In 2014, the government’s contribution to the UK’s total R&D spend was the lowest of the G7 economies, just 0.49% of GDP. In 2013-14 Innovate UK’s budget was just 0.03% of GDP. Is that really the best we can do?”

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