Inside the black box of manufacturing

Inside the black box of manufacturing: conceptualising and counting manufacturing in the economy.

A report prepared for the UK Department for Business, Energy and Industrial Strategy, by Jostein Hauge and Eoin O’Sullivan.

 


  

Manufacturing makes a vital contribution to the UK economy. As measured in the national accounts, manufacturing provides over 2.7 million jobs; makes up 49% of UK exports; and contributes 66% of all UK R&D business expenditure (Office for National Statistics, 2018).


As impressive as these statistics are, manufacturing’s contribution to the UK economy – about 9% of GDP – may seem dwarfed by services, which make up 70% of UK GDP. However, these official statistics fail to fully incorporate the role of UK manufacturing in supporting national economic competitiveness and growth. In particular, the official manufacturing statistics do not include the additional value added or jobs generated by services across manufacturing value chains. Many of these services would not thrive, or even exist, without UK-based manufacturing. In fact, many of these services, in particular technical and professional ones, require deep knowledge and sophisticated capabilities related to the manufacturing activities they support.

 

It is important, therefore, that policy makers understand this bigger picture and the dependencies between recorded manufacturing activity, industrial services and capabilities so we can develop policies and programmes that will support long term UK industrial competitiveness and growth. The UK Department for Business, Energy and Industrial Strategy welcomes this report that helps to further our understanding.

  

Foreward by Clare Porter, Head of Manufacturing, Department for Business, Energy and Industrial Strategy