Industrial scene

Britain's future in manufacturing

Britain has a rich manufacturing heritage, but can it ever relive its former glories?

Somewhere in the region of 20 per cent of the world's GDP comes from the manufacturing sector. There is no denying that this contribution has been declining of late – 30'years ago it was closer to 30 per cent – but that falling-off is more to do with increased efficiency and automation that has, in turn, led to a drop in prices.

Since modern manufacturing began some 200 years ago, global GDP has increased by around 2 per cent a year and, although it has dropped back recently, manufacturing has grown at 2.6 per cent a year. Manufacturing is seen by many economists as the catalyst for the growth of a civilisation, but the question remains: what do we do with it now?

Another interesting side note is that over that same 200-year period, manufacturing output per person has risen by about 1.8 per cent per year on average, while GDP per person has risen by 1.1 per cent.

Even back in the heyday of the Industrial Revolution, Britain was only fourth in terms of manufacturing, behind leaders China, India and Russia, and that was during a time when there were only 35 recognised nations. As the 1800s progressed Britain steamed ahead and, with 2 per cent of the world's population, delivered 15 per cent of the manufacturing output. That period of supremacy was short-lived as the US assumed world leadership status at the turn of the century, a position it held until very recently when the new powerhouse of China retook top spot.

As for Britain, it gradually slipped down the league table to fifth in 1990, further down to sixth in 2006, and is currently clinging on at the foot of the top ten. "Britain has swapped its role as a mass production country in manufacturing for a niche player, something fitting into global supply chains," Peter Marsh, manufacturing author and Financial Times manufacturing correspondent, says. "We still make some interesting products; if you are looking at the best quality mattresses in the world, the best [two] companies are in Britain.

"My way of looking at it now is to forget about it in the manufacturing context, developed, non-developed, which is all fairly meaningless. I prefer to think of the world as the new MCC (Marylebone Cricket Club); cricket lovers will obviously love that phrase, but the new MCC is the new manufacturing-capable countries of which there are now a lot and we should all be pleased about."

Lessons from the top

One man well versed in the trials and tribulations of UK manufacturing is BAE Systems chairman Dick Olver, and he is a stalwart believer in the sector. "I am obsessed; some may say evangelical, with the role and the importance and future potential of manufacturing in the UK, which I guess means that, as chairman of the UK's biggest manufacturing group, I might be in the right job," he says.

He talks eloquently and passionately about what he calls the two-sided myth of UK manufacturing. One side is that we no longer make anything in this country and the other side is that we can grow our economy and drive a sustained and sustainable economic recovery without a vibrant competitive and growing manufacturing sector.

A year ago the Department of Innovation, Business and Skills published a study called 'Manufacturing in the UK'. It found that manufacturing was the third largest sector in terms of the share of UK GDP behind only business services and the combined wholesale and retail sectors. The report added that manufacturing employed some 2.6 million people representing over 8 per cent of total employment and it generated £140bn in gross value-added, representing about 12 per cent of the UK economy.

"That is a bigger share than something that we talk a lot about, financial services, and nobody says that we don't do that anymore. In fact, we do quite a lot to protect it. It's truly extraordinary that our economic self-image is so distorted. The fact is that we remain one of the world's ten largest nations and our overall manufacturing output is 56 per cent higher now than it was in 1990."

Olver believes that the other side of the myth – that we can recover without manufacturing – is equally misguided. "With due respect to the UK's world class retail sector, the way to revitalise the UK's global economic competitiveness is not to open more shops," he explains. "We cannot retail our way out of the economic malaise that currently surrounds not only the UK, but most of the major developed economies of the world.

"I believe that the only way for our economy to recover is for our high value manufacturing exports to be maintained, galvanised and recalibrated. The quickest acting and highest octane fuel for growth in our economy is a blisteringly strong export performance. Nothing else comes close. Historically that has been the lesson from Germany and today it is the message from China."

A tradition of winning

"There's absolutely no doubt in my mind that the UK's refocus on manufacturing and engineering has not come soon enough," Ron Dennis, executive chairman of McLaren Automotive and McLaren Group, says. "And that rebalancing of our economy away from over-reliance on financial services makes long-term sense. At McLaren – in all its forms – we're fully committed to this.

"We believe passionately in the importance of making things, of manufacturing high-tech, state-of-the-art, premium products. We're committed to growth, which is good news for jobs, good news for exports and good news for UK plc."

They may be accused of grasping at straws but many within the manufacturing sector have been heartened by the choice of two engineers to adorn the new £50 note. Out goes the image of Sir John Houblon, the first governor of the Bank of England, replaced by images of Matthew Boulton and James Watt – two of the greatest figures in the industrial history of Great Britain, whose famous company, Boulton & Watt, engineered and manufactured state-of-the-art steam engines throughout the 19th century.

At McLaren, Dennis has witnessed first-hand just how committed to manufacturing the government is when, eight weeks ago, the Prime Minister officially opened the brand-new McLaren Production Centre in Woking. "On the same day the government announced the Queen Elizabeth Prize for Engineering and a few days before that it inaugurated the 'Make it in Great Britain' campaign," Dennis adds. "It's therefore fair to say that we can see that the UK's attitude to manufacturing is changing, as has our own attitude, at McLaren, through a commitment to innovate.

"We're constantly looking at what we do and how we do it – and that's because change sits at the heart of McLaren. We focus everything we do, both on and off the track, on our single ambition: To win."

But Dennis is quick to point out that winning doesn't always mean following the traditional path. Sometimes it means daring to try something different. "At McLaren we've fostered and built a culture of daring to try new things, by recognising that the best ideas often evolve out of failures. Daring to try something different is in our DNA.

"It's what led us 30 years ago to introduce full carbon fibre construction to Formula 1, at a time when our rivals mistrusted it. We then perfected it while our rivals struggled to catch up. Daring to try something different is what led us to use F1 technology to develop our first road car, the McLaren F1 – a record-breaking and ultra-high-performance sports car. Daring to try something different is what has led us to launch Britain's newest car company, McLaren Automotive, which employs more than 700 people with more new jobs to come, and supports a supply chain of dozens of high-tech British businesses."

Until recently, McLaren had never been a full-scale car manufacturer. However, as it ramps up to producing 4,000 sports cars every year, it has learned how to combine F1 know-how with state-of-the-art production techniques, used in one of the world's most efficient and highest-quality facilities. "We've innovated, to bring technology and materials to the market that were previously seen only on cars costing three times as much as our new McLaren 12C."

But while each F1's carbon fibre chassis required hundreds of hours to lay up, with obvious cost consequences, the 12C's revolutionary carbon fibre mono cell can be built in just four hours." *

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