Memorandum by the CBI
1.1 The CBI is the premier organisation
speaking for business in the United Kingdom, with a direct membership
employing over four million people and a trade association membership
representing over six million of the workforce.
1.2 This paper has been prepared to support
the CBI's evidence to the House of Commons Trade and Industry
Committee inquiry on "productivity and competitiveness of
the United Kingdom manufacturing industry". The paper covers:
The backdrop for this inquirythe
current state of manufacturing, the impact of September 11, and
the short term forecasts for manufacturing performance.
An analysis of the underlying trends
and structural issues impacting on manufacturing, including the
United Kingdom's wider productivity issue, key manufacturing performance
indicators and comparisons with European (particularly France
and Germany) and US competitors.
An analysis of the factors affecting
the performance of the manufacturing sector, both at the macro
level and also those issues specific to individual firms (additionally,
a brief examination of particular sectors within manufacturing
and the circumstances unique to them is appended to this paper).
A summary of the implications of
the changes currently taking place within manufacturingwhat
does the future hold for United Kingdom manufacturing, what is
the vision for manufacturing, and what role can government play
2.1 The economic backdrop at present sees
manufacturing facing extremely tough challenges, with many sectors
experiencing the worst conditions since 1991. Exports, output,
employment and business confidence are all suffering.
2.2 Much of these current difficulties relate
to the economic cycle and the global slowdown. Clearly the events
of September 11 have had a negative effect both overall and for
specific sectors such as aerospace. But ultimately they have served
to exacerbate the underlying trend rather than change the course
of overall manufacturing fortunes.
The Current Situation in Manufacturing
2.3 The CBI's Quarterly Industrial Trends
Survey provides a snapshot of recent and imminent trends in key
manufacturing variables. It is recognised as the leading survey
of manufacturing activity. The latest results published in January
made depressing reading.
Over the past four months, domestic
prices fell at the second fastest rate since the survey began
in 1958only the Asian crisis in January 1999 saw prices
falling more quickly. Price expectations are now the worst in
the survey's history.
United Kingdom export orders fell
by even more than anticipated.
Domestic orders also weakened.
Manufacturing output fell at the
fastest rate since July 1999. Lack of demand will limit output
over the coming four months.
Efforts to rein in costs have resulted
in severe job cuts. Anticipated job cuts in the coming four months
are expected to show the change in numbers employed in manufacturing
to be the most negative since October 1992.
Impact of September 11 on Manufacturing
2.4 One month after the atrocities of September
11, the CBI and MORI commissioned a survey across all business
sectors to ascertain the economic outlook for business post-September
2.5 63 per cent of respondents said the
attacks had damaged business prospects. Of these, 52 per cent
said prospects were "slightly worse" while 11 per cent
said "much worse", indicating that the overall impact
was serious without being disastrous.
2.6 The survey highlighted that those firms
close to the domestic consumer expected to fare better than those
that are more exposed to international trading conditions. This
meant that manufacturers of industrial goods were more adversely
affected than manufacturers of consumer goods or indeed retailers
and others in the service industries.
2.7 Official data and further surveys subsequent
to September 11 have supported the notion that whilst there should
be no doubt the events had a negative effect, they served to heighten
concerns and underlying trends that were already apparent.
Short Term Forecasts
2.8 The CBI's latest Business Outlook (published
November 2001) forecast that 2002 will be a painful year for British
business, but that the UK will avoid outright recession. However,
the global slowdown is set to exacerbate Britain's two-speed economy,
with the manufacturing sector bearing the brunt of the global
|ONS Out-turns (%)
||CBI Forecasts (%) |
2.9 Perhaps of greatest concern is the sharp slowing
of investment growth, with manufacturing investment forecast to
fall in 2002 and 2003, whilst investment for the economy as a
whole bounces back. Manufacturing output, however, is expected
to return to growth in 2003.
3.1 But the current situation and short-term forecasts
are set against long-term trends and changes in the structure
of manufacturing. The United Kingdom has some historical factors
at play here too, including investment shortfalls and major strides
still to be made on the productivity front.
The United Kingdom and Productivity
3.2 It is widely accepted that the United Kingdom has
historically performed poorly in terms of productivity, particularly
when compared to our leading international competitors.
3.3 A number of recent reports, including McKinsey (1998),
O'Mahony (1999), and HM Treasury (November 2000), confirm that
the United Kingdom has a productivity gap with the US and with
leading European competitors such as Germany and France. The size
of the gap varies according to which measure of productivity is
used and the interpretation in various studies. However, there
is common consensus that the size of the gap in all cases is substantial
enough to suggest that a significant productivity shortfall exists.
3.4 Since 1997, HM Treasury has made productivity a priority
issue, and set out a number of measures aimed at closing the gap.
3.5 In 1998, the CBI and DTI jointly launched "Fit
for the Future", the national best practice campaign, with
the aim of securing a "massive increase in the number of
companies engaged in the transfer of best practice". The
campaign was launched on the premise that if United Kingdom manufacturers
could reach the average levels of performance of leading international
competitors then they would contribute an additional £60
billion to the economy. Applying this principle across the whole
economy would add a further £300 billion per annum.
3.6 More recently, HM Treasury invited the CBI and TUC
to work together to produce recommendations on how to address
the United Kingdom's historic poor performance in productivity.
The CBI and TUC undertook work in four key areas where there was
common ground and joint-working was likely to bring measurable
benefit. These four areas were:
Technology and innovation
The joint report and recommendations contained therein can
be downloaded from www.cbi.org.uk.
3.7 This submission does not set out to replicate the
various analysis that has been done to date, merely to reiterate
some of the key findings.
Depending on the measure used, the United Kingdom
continues to have a sizeable labour productivity gap compared
with other major industrialised economies. Output per employee
is highest in the US, with France then Germany just behind. The
United Kingdom trails the US by 45 per cent, France by 18 per
cent and Germany by 11 per cent.
In terms of output per hour worked, the United
Kingdom is again behind the US, France and Germany, though the
latter two countries' performances are much closer to that of
the US. This is attributable to the fact that employees in the
US and the United Kingdom tend to work longer hours than in Continental
In terms of total factor productivity, (which
captures the level of labour and capital inputs used, and the
efficiency with which these inputs are deployed), the United Kingdom
is again behind all of its major competitors, although its shortfall
is reduced. The United Kingdom trails France by 20 per cent, the
US by 18 per cent and Germany by 13 per cent. The reason the United
Kingdom has less of a shortfall on this measure is because although
we have relatively low levels of capital stock we do appear to
use this stock relatively efficiently.
3.8 On another measure, value added per person employed,
the United Kingdom again falls way short of France, Germany and
the USA. Between 1990 and 1999 the United Kingdom improved productivity
by 22 per cent, whilst the USA achieved gains of 41 per cent.
3.9 The United Kingdom's productivity gap for the whole
economy is also apparent in manufacturing. The United Kingdom
has a longstanding historic productivity gap in manufacturing
with our leading international competitors. Whilst the gap with
the US is not as stark as it was in 1950, the United Kingdom also
now finds itself behind France, Germany and Japan.
3.10 Work by Robert Rowthorn, Professor of Economics
at the University of Cambridge, highlights that since 1973, British
and American manufacturing output have increased by 14 per cent
and 114 per cent respectively. Labour productivity has shown strong
growth in British manufacturing since 1973, yet output has been
almost stationary. American firms now produce more than twice
as much with the same number of workers as they did in 1973, whereas
British firms produce almost the same as before with only half
as many workers. Productivity growth in Britain has therefore
typically been achieved through labour shedding.
Explaining the Productivity Gap
3.11 Particularly with the US, there are structural and
statistical reasons why the gap is so large. They have the benefit
of greater economies of scale and homogenous domestic markets.
But in addition to this, numerous factors have been put forward
to explain where and why the United Kingdom is weaker than it
should be in terms of productivity. These include:
Investment shortfalls (both in the public and
Weaknesses in intermediate skills, lifelong learning
and utilisation of skills in the workplace.
Difficulties in identifying and applying best
The United Kingdom placing insufficient focus
on product and process innovation.
The United Kingdom possessing a culture that gives
insufficient encouragement to entrepreneurship and enterprise.
Variations from sector to sector meaning that
not all industries are fully exposed to globally competitive environments.
4. MANUFACTURING PERFORMANCE:
4.1 Manufacturing employment in the United Kingdom, measured
by employee jobs, currently stands at around 3.8 million. This
represents a fall of 1.1 million jobs since 1988. In the same
time frame, employee jobs in all industries have risen from 23.5
million to 25.5 million jobs. Put another way, manufacturing employment
as a percentage of total employment has fallen from 21 per cent
to 15 per cent of total employment.
4.2 Invariably, large-scale job losses in manufacturing
attract media headlines. But it is important to look behind these
headlines. The absolute numbers employed in manufacturing should
not be looked at in isolation as an indicator of the relative
strength or importance of the manufacturing sector. The statistical
definitions of manufacturing account for at least some of the
loss in employment figures. In addition, the employment trends
we have seen in United Kingdom manufacturing are also apparent
in other mature manufacturing countries.
4.3 Much of the statistical job losses in this period
of time can be attributed to outsourcing. If a manufacturing firm
has outsourced functions such as IT, logistics or security for
example, then for statistical purposes they would be re-classified
4.4 The UK is not alone in seeing substantial reductions
in manufacturing employment, as many of the well-developed manufacturing
economies shift from low-cost, labour intensive manufacture to
high value-added, capital intensive manufacture requiring highly
MANUFACTURING EMPLOYMENT AS A PER CENT OF TOTAL EMPLOYMENT
|Source: OECD, 2001|
Output: Gross Value Added
4.5 Manufacturing output (measured in terms of Gross
Value Added) was £155 billion in 2000, an increase of 34
per cent since 1992 when output stood at £115 billion. In
the same time period, total service industry output rose from
£362 billion to £583 billion, an increase of 61 per
4.6 So whilst manufacturing output has grown in absolute
terms it has been outstripped by growth in the service sector,
with the inevitable consequence that manufacturing as a proportion
of GDP is falling, from A 21.2 per cent share in 1992 to 18.7
per cent in 2002.
4.7 This underlying trend is similar in all of our leading
international competitors, and has been even more marked in certain
other countries as they react to the world economic slowdown.
The manufacturing sector is struggling in all of the world's major
economies. Japan is the worst hit, with output falling by 4.4
per cent in Q3 2001 on the previous quarter. Manufacturing output
in the United Kingdom is declining at a similar rate to the US,
while Eurozone output is dropping at a slightly slower rate.
4.8 Manufacturing is vitally important to the United
Kingdom economy in terms of our balance of trade. Trade in semi-manufactured
and finished manufactured goods accounts for 83 per cent of all
goods exported. Manufactured goods equate to 59 per cent of all
United Kingdom exports of goods and services, though it should
be recognised that some imported materials are involved in the
manufacture of these goods.
4.9 The value of manufactured goods exported has increased
from £47 billion in 1980 to £188 billion in 2000. Over
the last ten years the value has increased by over £85 billion,
or 83 per cent. But although the United Kingdom trade deficit
had been falling for much of the 1990s, it has sharply increased
since 1998. Nonetheless, the value of services does not come close
to providing sufficient surplus to offset the widening deficit
on goods exported.
4.10 Net rates of return in manufacturing were running
at 8.7 per cent in 2000, compared to 14.1 per cent for the service
sector. However, by Q3 2001 manufacturing profitability had plunged
to 4.3 per cent, whilst the net rate of return in services was
holding up at 12.5 per cent. Clearly these figures are representative
of manufacturing as a whole, and there are differences within
various sectors of manufacturing. Many companies have been operating
at little or no margins in an effort to hang on to market share
in export markets, in the belief that there will be some correction
in the exchange rate in the medium term.
5. FACTORS AFFECTING
5.1 Growth in the economy is heavily dependent on investment
in physical capital to augment the productivity of labour. Historically,
the capital stock of firms and the stock of public infrastructure
in the United Kingdom have been well below that of its main international
5.2 United Kingdom manufacturing investment was just
under £4 billion for Q3 2001, which represents a fall of
8.9 per cent quarter on quarter and a drop of 13 per cent compared
to the corresponding quarter of the previous year. This contrasts
to non-manufacturing investment, which has risen 1.9 per cent
quarter on quarter, and 2.7 per cent on the corresponding quarter
of the previous year.
5.3 Investment is a key driver of productivity improvement
and given our historically low levels of capital investment it
is hardly surprising that it has impacted upon our relatively
poor productivity performance.
5.4 In order to compete at the value-added end of manufacturing,
which is where the United Kingdom has to position itself, innovating
more successfully than the competition is key to driving profitable
growth. Research and development (R&D) is a crucial factor
in developing more advanced products and processes, which ultimately
enable people and capital to operate more productively.
5.5 The DTI R&D scoreboard is an invaluable guide
to R&D performance across various sectors in the United Kingdom
and also provides information on how we compare to leading international
competitors. Overall United Kingdom R&D intensity (R&D
as a percentage of sales) is 2.1 per cent compared to the international
average of 4.2 per cent.
|All sectors except pharmaceuticals and oils
|Oil and gas||0.3%||0.4%
|Source: DTI R&D Scoreboard, 2001|
5.6 The UK does have some sectors that are leading performers.
The UK spend on R&D is dominated by pharmaceuticals (38 per
cent) and aerospace (10 per cent), both of whom invest in R&D
above international levels. The top two international sectors
are IT hardware (27 per cent) and automotive (18 per cent), which
amount for 45 per cent of total R&D compared to 13 per cent
in the UK.
5.7 The United Kingdom faces skills challenges on two
fronts: management and vocational levels. The US enjoys an advantage
in terms of highly skilled workers (degree level and above) whilst
Germany leads the way in terms of intermediate and vocational
5.8 The CBI/TUC productivity report submitted to HM Treasury
in October 2001 reiterated that skills was one of the major areas
that determines productivity performance. Investment in education
and training in the United Kingdom has risen over the last decade.
On two measures, employer expenditure and participation in training,
the United Kingdom has one of the highest levels amongst OECD
countries. In 2000, employers spent £23.5 billion on training,
a rise of 25 per cent in real terms since 1993.
5.9 However, maximising the quality and effectiveness
of training in the United Kingdom remains a key consideration.
There is further progress to be made on reaching individuals with
low skill levels and enterprises with limited resources for training.
Too many adults in the United Kingdom have low or no qualifications
in relation to those of our major competitors:
About seven million adults, one in five adults
of working age, have low levels of literacy and numeracyhalf
of them are employed.
Almost nine million people, 32 per cent of the
workforce, are not qualified to level 2 (equivalent to 5 GCSEs
at grades A*-C).
Low skilled employees receive less training than
highly skilled employees.
Part-time workers have less training than full-time
or temporary employees.
5.10 The CBI/TUC productivity report also flagged up
concerns that qualified scientists and engineers in the United
Kingdom may lack managerial and other skills, and that craftsmen,
technicians and IT specialists are in limited supply.
5.11 There are many examples of successful United Kingdom
companies that have inspiring leaders and very able managers.
However, evidence from various studies suggests very strongly
that in relation to leadership and management, too many United
Kingdom companies fall short of world-class performance.
5.12 Physical infrastructure, particularly in the form
of road, rail, sea and air ports, are crucial in order for United
Kingdom manufacturing to compete successfully with our international
rivals. The ability to get goods to market and people to work
is paramount. The need for this increases given the modern methods
and trends apparent in manufacturing today. Firms rely on finely
honed just-in-time procedures throughout the value chain and need
to move goods around rapidly. Additionally, the trend for sourcing
components from outside the United Kingdom means international
access is increasingly fundamental.
5.13 In addition to transport infrastructure, modern
manufacturing techniques and business processes increasingly require
world class information and communications technology (ICT) infrastructure.
The ability to conduct collaborative real-time design and manufacture
relies particularly on broadband internet technology.
5.14 The high proportion of United Kingdom manufacturing exports
that are sold into mainland European markets means that exchange
rates have a huge impact on the ability of United Kingdom manufacturers
to compete effectively in these markets. Similarly, United Kingdom
based manufacturers selling to domestic markets are being forced
to reduce costs to combat the threat of relatively cheap imports.
5.15 Exchange rate instabilities inevitably provide an
obstacle to certainty and planning, and there is no doubt that
the current weakness of the Euro relative to Sterling is resulting
in a cost disadvantage for United Kingdom exporters. In "old
money", at the height of the Sterling/DM exchange rate, Sterling
had risen to DM3.43 in May 2000 from DM2.75 at the beginning of
1999, an increase of 25 per cent in just over 16 months. Many
manufacturers took a decision to accept minimal or even loss-making
margins in the short run in order to retain market share in their
key overseas markets. However, almost two years on Sterling remains
valued at 3.16 DM/£, equivalent to 1.62 euros, and if this
continues it will inevitably accelerate the trend of sourcing
from, and relocating production to, low cost economies.
Economies of Scale, Exposure and Openness to World Markets
5.16 One of the key factors in the ability to drive productivity
is inevitably volume. Here the US, and to a lesser extent Germany
and France, have a fundamental advantage over the United Kingdom
in terms of scale of operation and size of the market. The US
in particular sells a high proportion of its manufacturing output
into its domestic market. This means it is less susceptible to
the performance of the global economy and also less exposed to
the implications of exchange rate fluctuations.
5.17 A measure of openness of trade can be calculated
by imports plus exports of goods and services as a proportion
|Openness to Trade
||GDP (US $billion) |
|Source: OECD, 1999||
5.18 The above table shows that Germany, France and the
United Kingdom are similarly open to trade, and to a far greater
extent than the US and Japan. This brings the United Kingdom tremendous
advantages in terms of technology transfer, choice of product
and potential markets. But it does demonstrate the importance
of having an environment for manufacturing that is as globally
competitive as any of our leading international rivals. The mobility
of manufacturing operations in the 21st century should not be
Firm level factors
Manufacturing techniques and Workplace initiatives
5.19 The recent "Uncle Sam" series of reports
by the Engineering Employers Federation (EEF) has examined many
of the factors explaining the differences in the United Kingdom
and US productivity performance. Two of the areas where differences
were found are in the areas of lean manufacturing and workplace
5.20 The EEF report showed that there is a significant
proportion of United Kingdom firms that do not make use of lean
manufacturing techniques. In fact, the take-up of lean manufacturing
in the United Kingdom is polarised. The report highlights that
a third of firms utilise lean techniques across the whole organisation,
while just over 40 per cent are not undertaking any lean manufacturing.
The major reason US firms were found to be having greater success
with lean manufacturing than United Kingdom firms was due to them
using the lean tools across the whole organisation and with a
5.21 The EEF study also reveals that the US makes far
better use of workplace initiatives to offer employees greater
incentives and improve employee involvement and communication.
The EEF found that it is not the adoption of any single practice
that is crucial, but the combination of a number of them and the
involvement of employees in decision making that is helping to
Deployment of technology and Workplace Organisation
5.22 Deployment of technology and process innovation
has a major role to play in enhancing productivity, an issue looked
at in some detail in the CBI/TUC productivity report submitted
to HM Treasury in October 2001. The CBI/TUC report drew on work
undertaken by Professor Toby Wall on the use made by United Kingdom
companies of various working practices and on how successful they
5.23 In order to maximise the benefits from technological
innovation the adoption of new people practices is necessary.
The findings from the report show that:
Overall, United Kingdom companies adopt fewer
innovative work practices than their foreign counterparts, although
take-up is increasing. United Kingdom owned companies in the United
Kingdom show lower use of total quality management, just-in-time
techniques, teamwork, empowerment and a range of practices compared
with foreign owned companies in the United Kingdom. United Kingdom
companies abroad adopted fewer such practices than either the
home owned or foreign owned companies in the country concerned.
Companies in the United Kingdom report less success with the practices
than companies abroad.
People practices such as empowerment and learning
culture are the strongest predictors of subsequent relative productivity
and profits; investment in Information and Communications Technology
predicts relative productivity but not profits; profit sharing
had a small positive effect.
The success of new technology and practices are
limited by inadequate developments in work organisation, but while
organisations often invest heavily in technology they underinvest
in people practices. Although people practices, in particular
empowerment, have demonstrable success, organisations were often
tentative in pursuing them.
6. MANUFACTURING: A STRATEGY
The importance of manufacturing
6.1 Recently, some commentators have questioned the importance
of possessing a strong manufacturing sector in the context of
the economy as a whole. The CBI strongly refutes this claim and
believes that a strong manufacturing base is fundamental to the
future prosperity of the overall economy.
6.2 In spite of all the difficulties confronting manufacturing,
it is directly responsible for almost four million people in employment
and in a wide range of skill sets. In output terms, manufacturing
contributes £150 billion GDP per annum to the United Kingdom
economy (equivalent to 19 per cent of total GDP).
6.3 But the importance of manufacturing stretches well
beyond these headline figures.
It is the bedrock for economic activity, the underpinning
layer of the pyramid upon which much service sector activity is
built. Simply through the direct supply chain links between industrial
sectors a further 2.4 million service sector jobs depend on manufacturing,
and the total interdependencies reach far beyond this. All manufacturing
organisations make use of design, marketing, accountancy and legal
professions. The success of manufacturing and services are inextricably
linked, and such linkages should be recognised as a source of
competitive advantage for United Kingdom manufacturers given our
strengths in the service industry.
Manufacturing is vitally important to the United
Kingdom economy in terms of the value of trade exportedcrucial
as we pay our way in the world. Trade in semi-manufactured and
finished manufactured goods accounts for 86 per cent of all goods
exported. Manufactured goods equate to 62 per cent of all United
Kingdom goods and services exported. As a nation so heavily dependent
on international trade we should not underestimate the strength
that manufacturing gives to the "United Kingdom brand".
Manufacturing is an important element of regional
policy and economic development, particularly in areas such as
the Midlands, North West, North East, Yorkshire and the Humber,
Scotland and Wales, where manufacturing makes up a higher than
average proportion of total employment.
A need for action
6.4 Manufacturing is in the midst of significant structural
change. This situation is not unique to the United Kingdom. The
increasing shift towards both sourcing from and relocating to
low cost countries is a trend faced by all developed manufacturing
6.5 But the CBI is concerned that although this trend
is to some extent inevitable, it is being prematurely accelerated
by a combination of the relative value of Sterling compared to
the Euro, the lack of a clear manufacturing strategy and the ever-increasing
burden of regulation. To counter this, we need a strong DTI that
is championing the cause for manufacturing right across government
6.6 There is limited time for action if there is not
to be an irrevocable shift in our manufacturing base overseas.
We are reaching the point where there is a real danger of the
United Kingdom manufacturing base shrinking below the critical
mass required to sustain the skills base and necessary range of
component suppliers to support manufacturing.
A strategy for manufacturing?
6.7 The CBI believes that a commitment to having a strong
and sustainable manufacturing base in the United Kingdom and a
recognition of the importance of manufacturing to the prosperity
of the economy as a whole should form the platform for a government
strategy for manufacturing.
6.8 This isn't a call for a prescriptive command economy,
and it isn't about picking winners. That would be a fundamentally
flawed approach. But it is a call for government to do more for
manufacturing, to speak positively about its successes and its
future, to make sure we have an economic climate conducive to
manufacturing, and to ensure we have in place the critical success
factors for the manufacturing of tomorrow.
6.9 A manufacturing strategy should start by setting
out a vision for the future of manufacturing in the United Kingdom.
This should provide inspiration for where the United Kingdom wants
to be positioned, what key capabilities we need to possess and
what the critical factors are that will determine the success
of key sectors that will be vital to future competitiveness.
6.10 Structural changes mean that UK manufacturing has
to change and adapt. We have to possess agility, be nimble and
have the flexibility to change. Quality is now a given, rather
than a source of competitive advantage. We cannot be competing
on a low-cost basis in labour-intensive commodity manufacture.
But we can compete given economies of scale and capital intensity,
and by focusing on high value added products and processes driven
by technology, design, innovation and service provision. Manufacturing
needs progressively to redefine itself as a lifetime service provider
based around a core manufactured product. But we also need to
retain a critical mass of production capacity in order to sustain
the required skills and range of component suppliers necessary
to support the strong and diverse manufacturing base which is
essential to a healthy economy.
6.11 In order to achieve this vision and make the transition
successfully, the CBI believes a set of strategic objectives should
be drawn up that form the basis for a manufacturing strategy,
with action points for government, industry and others set against
6.12 The objectives should start with having a conducive
business environment in which to manufacture. This should include
a government commitment that all policies and legislation being
considered right across government will be carefully assessed
to ascertain the impact on manufacturing competitiveness before
6.13 The strategic objectives need to include the macro-level
factors that are fundamental to any prosperous environment for
manufacturing. We need a trained workforce that excels in technical
skills, in science, technology and engineering. The education
system needs to be better aligned with the higher skills and technology
needs of tomorrow's manufacturers. The industry-academia axis
needs to be strengthened, so that historic strengths in innovation
are turned into commercial reality and competitive advantage.
To build on this, academia must develop a business-like interface
so that industry can easily access the wealth of research being
undertaken in our academic institutions.
6.14 We need world class infrastructure in the form of
roads, rail, sea and air ports. All are vital for manufacturing
in an age of just-in-time delivery and global sourcing, and particularly
so for the United Kingdom given our higher exposure to international
trade flows. Today, infrastructure also means information, communication
technologies. Government must deliver on its commitment to make
the UK the best place in the world to do e-business. Broadband
infrastructure is key to this.
6.15 Capital investment and a massive increase in research,
development and innovation are necessary if the United Kingdom
is to be at the leading edge of manufacturing. It is for government
to create a tax framework that encourages this and in doing so
make a compelling argument for investment and innovation to be
carried out in the United Kingdom. We should be at the forefront
of technology developments in key sectors right across the spectrum
6.16 And we need to develop sectoral capability. We need
to identify the sectors fundamentally important to manufacturing
right now, and consider how they can be fostered and developed.
We need to identify the core strengths we possess in the United
Kingdom and determine how we can best build on these. Analysis
of the generic issues facing manufacturing gives part of the story.
There are many horizontal issues common to all sectors of manufacturingskills
and infrastructure to name but two. But there are also vertical
issues that are unique to each sector and these require specific
actions. So it is important therefore for government to have a
strong sector focus in its manufacturing support. To demonstrate
that a "one size fits all" approach is not sufficient,
an analysis of some of the particular circumstances and issues
facing various sectors within manufacturing is appended to this
6.17 The onus is rightly on industry to make the transition
to high-value added manufacture and achieve the vision set out
above. But government too has a role to play. United Kingdom manufacturing
industry would welcome further strategic direction to assist this
process and a government commitment to play its part in putting
the necessary building blocks in place.