New Communist Party of Britain
Manufacturing is probably the most valuable sector in the British economy because of its contribution to exports, and the dependence on it of other sectors of the economy such as transport, retail and financial services. Irrespective of its decline manufacturing is still the most important sector in generating wealth.
Manufacturing spawns a lot of other activities. The making of vehicles leads to factories being built, maintained and tooled, the vehicles need to be transported to showrooms, sold, bought, insured, fuelled and repaired and requires trained workers. The money that is used to fund these activities circulates and is managed within the financial services sector whether it be the provision of vehicle insurance, loans, overdraft facilities, foreign exchange facilities or other banking activities such as looking after workers’ wages.
In 2010 the selling and repair of motor vehicles was valued at £137 billion of GDP or about 10 per cent of total GDP. Finance and insurance was £126 billion, or about nine per cent of total, and of which a proportion is a direct consequence of the manufacture of cars or indeed any other manufacturing activities. Without manufacturing the finance and insurance sector would be very much smaller and more speculative than it already is.
Britain’s manufacturing includes major companies in the aerospace, defence, car and pharmaceutical industries and accounted for £265 billion of exports in 2010 or about 60 per cent of all exports. It contributed about 10.25 per cent to the Gross Domestic Product (GDP) compared to 47 per cent in China, 25 per cent in Germany, 24 per cent in France, 23 per cent in Japan and 22 per cent in the US. In the 1960s the contribution of manufacturing to Britain’s GDP was about 30 per cent.
In contrast the financial services’ sector contributes about 8.9 per cent to GDP and about 10 per cent to exports.
The rundown of Britain’s manufacturing capability has continued during this slump; jobs fell by 14 per cent or 406,000 in the four years to the end of 2011. Output only declined by five per cent because of the increase in productivity during the same period. The mounting loss of highly skilled engineering jobs and closure of world-class engineering factories is resulting in a loss of skills which will be very hard to replace in the future. The shortfall in the manufacture of goods is made up by imports, with Britain increasingly importing more goods than it exports resulting in a negative trade balance of £98 billion for goods - an increase from £10 billion in 1998. Having once been the workshop of the world Britain exports less than China, the United States, Germany, Japan, France, Netherlands, South Korea, Italy and Russia.