Manufacturing

The UK and the North East in particular, has always relied on the Manufacturing Sector to provide a corner stone for the economy. However, in recent decades the influence of the sector is on the decline, mainly due to the growing importance of the Service Sector and the Public Sector. Despite this decline the sector remains important for economies who are seeking to increase imports and drive innovation.

Part of the decline can also be attributed to the increased competitiveness of a number of merging economies such as China, India, Poland and Brazil. These nations have capitalised on significant natural resources to create low cost manufacturing bases which are capable of undercutting their western competitors. Up to now, the solution for established manufacturing companies in the UK, USA and elsewhere in the EU was to move into high value added manufacturing. This is one of the fastest growing sectors in the global economy. Companies operating in this area are able to take advantage of the western world’s comparatively large stock of skilled workers.

Whilst the emerge of these new manufacturing superpowers has been based on cost, it is inevitable that as these emerging economies become developed, they will begin to move into high value added areas. This means that the sector in the UK will once again find itself vulnerable to competition from new areas, the only solution to this will be to constantly innovate in order to maintain a comparative advantage.

The global manufacturing sector is also being pressurised by the rising costs of production materials including commodities such as steel and oil. These increases will promote the use of alternate materials and give a significant advantage to anyone who is able to produce in a more efficient manner.

The future for the manufacturing sector in the UK is far from clear, but two things seem certain; increased competition and increased prices for raw materials. Companies who operate in the sector must strive to become more flexible, not only in their production processes, but also in the way they develop long term plans for future growth.