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As part of its coverage in the run up to next year’s general election (which will be a year today), the Today Programme (from 1:37:00) ran a piece on voter attitudes in the North East yesterday. A key theme was how the North East needs to ‘return to manufacturing’, putting the bulk of investment in industry rather than services if it is to create jobs in the future. But in reality it needs to do exactly the opposite.
Many arguments in favour of manufacturing are based around the emotional pitch that ‘we need to make things’, as one interviewee put it.
But some statistics are useful here. Contrary to popular opinion, the UK does still make things: it remains one of the largest manufacturers in the world by the value of goods that it produces, and makes a valuable contribution to economic output. It’s just that it employs many fewer people to do this. In 1970 over 30 per cent of the workforce was employed in the sector. Today it stands at around 10 per cent.
This decline is a result of global economic forces. In order to stay competitive, UK manufacturers have had to become much more productive. And this has meant a huge reduction in the numbers of people they employ. At this point many invariably start talking about Germany. But Germany operates in exactly the same competitive environment as the UK. And its employment in manufacturing has fallen from over 35 per cent to less than 20 per cent as a result. So while manufacturing has contributed to the UK’s growth and helped improve productivity in the UK economy (a very good thing) it has not created jobs.
The North East’s problem is not that its manufacturing is not productive enough, or that it has lost manufacturing jobs, but that it hasn’t created enough jobs in ‘new’ industries to offset these job losses. As Enrico Moretti points out in his excellent book The New Geography of Jobs, in order to remain prosperous an economy needs to continue to innovate. Industries grow, mature, then decline. Those cities that are successful have seen growth in new industries as mature ones have declined. Unfortunately, as the North East has grappled with the decline of manufacturing jobs in recent years (while benefiting from increased manufacturing productivity), it has struggled to encourage innovation and job creation in new areas of economic activity to offset this.
This is by no means unique to the cities in the North East. Other places, such as Blackburn and Stoke, are in a similar situation. But the key message is that harking back to the past is unlikely to support job opportunities for the majority in the future. And this means that rhetoric around the ‘march of the makers’, and policies that focus on manufacturing without considering how to also invest in services, which have created the vast majority of jobs in the last 20 years, are likely to do little to improve the economic fortunes of these places.
A positive vision for the future does not lie in a return to the past. Manufacturing is a vital part of the UK’s economic future. But it will be services and ‘new’ industries (some linked to, but not part of, traditional manufacturing) that deliver jobs at the scale that areas like the North East needs, and they need investment, support and marketing too. Politicians, both local and national, who claim otherwise are failing the places they represent.
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