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UK manufacturing is twice as big as usually thought

08 May, 2018

Manufacturing accounts for nearly a quarter of the UK economy and more than 7.4 million jobs depend on it – far more than usually thought – according to new research commissioned by the Manufacturing Technologies Association (MTA).

For the first time, the study by the analyst Oxford Economics takes into account the full impact of the UK’s manufacturing economy, including the indirect effect of complex supply chains, and the effect of the way that manufacturing employees spend their pay.

The revised figures suggest that the sector represents 23% of UK GDP – more than double the 9% figure usually cited – and is responsible for five million more jobs than the 2.6 million usually quoted.

“This report clearly demonstrates that anyone who says that manufacturing doesn’t matter much to the UK’s economy is badly mistaken,” says MTA CEO, James Selka.

“The figures that people often quote, setting manufacturing alongside the service sector, miss the point that a huge part of the service sector – from logistics, to research to catering – serves manufacturing,” he adds. “The impact is felt far outside factory gates, in offices, laboratories, shops and warehouses right across the country.

“For every £1m the manufacturing sector contributes to GDP itself,” Selka points out, “it creates another £1.5m elsewhere in the UK economy, and for every direct job within the sector, another 1.8 are supported elsewhere in the UK economy.

“Manufacturing creates a wealth that is irreplaceable,” he argues, “and we need to make sure that Government policies promote and grow it.”

Selka: manufacturing creates irreplaceable wealth

It is usually stated that the manufacturing sector contributed around £177bn to the UK’s GDP in 2016. However, if manufacturers’ purchases from UK-based supply chains are included, the figure rises to £301bn (15% of GDP) and the number of jobs supported almost doubles from 2.6 to 5 million (15% of the UK total workforce).

If a third factor – money spent by manufacturing employees – is added in, the total impact of manufacturing on UK GDP soars to £446bn.

Another finding of the Oxford Economics study is that nearly 70% of business r&d investment during 2016 was made by the manufacturing sector. And, in the same year, manufactured goods accounted for 48% of the UK’s goods and services exports.

Finally, the report reveals that productivity in the manufacturing sector is £67,000 per year (compared to a UK average of £56,700) and that the median wage in industry is £27,400 – 19% higher than the average pay-packet across the whole economy.

MTA CEO Selka believes that there is an opportunity, through the Government’s Industrial Strategy, to increase productivity levels further still “and to help the UK economy grow and boost our exports by encouraging manufacturing investment to take advantage of new technologies such as big data, AI and additive manufacturing”.

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