Monday, February 11, 2013
MANUFACTURING AND THE WELSH ECONOMY
Indeed, manufacturing still accounts for 18 per cent of the Welsh economy, as compared to 11 per cent of the UK economy.
More relevantly, the manufacturing sector has grown by 7 per cent between 2009 and 2010, mainly on the back of increased exporting activity. This is twice the growth rate for the rest of the Welsh economy over the same period.
The other good news is that this growth in output is being accompanied by a growth in jobs.
For example, the latest Labour Force Survey figures had shown that the number of manufacturing jobs in Wales had reached 153,000. This represented an increase of 14 per cent over two years as compared to a 2 per cent rise for the rest of the UK.
But it is not only in Wales where we have seen a revival in a sector that had been largely written off during the last decade by many economic commentators and following the 2008 global economic crisis, there has been a re-assessment by developed nations around the World as to the importance of manufacturing within their economies.
In the USA, there has been renewed interest in manufacturing because of its broader effects on the economy and innovation. For example, the President’s Council of Advisors on Science and Technology published a report on “Ensuring American Leadership in Advanced Manufacturing”. This emphasised the importance of developing a strong innovation policy to support advanced manufacturing.
This would develop tailored incentives and through improved education and training of the workforce to use and develop advanced technologies, support new technologies that would form the basis of new industries; and establish shared infrastructure facilities that could be accessed by small and medium sized firms for widespread benefit across industries.
In Europe, there has also been a growing appreciation of the importance of advanced manufacturing to both individual nations and the continent as whole.
For example, it is estimated that manufacturing accounts for 20 per cent of all direct jobs (and 40 per cent of indirect jobs) as well as the generator of two thirds of all R&D investment.
The European Commission has recognised this role through developing specific programmes, such as ‘Factories of the Future’, which is a partnership with the manufacturing sector that aims to strengthen the European industrial base, create sustainable industry and secure well paid manufacturing jobs in Europe.
Yet, despite this increased focus by policymakers on supporting manufacturing, there remain challenges considerable to not only the development of manufacturing in Wales but also its survival.
For example, whilst off shoring of lower value added activities to emerging economies is continuing, the same emerging economies are also moving up the value chain to compete directly in high value industries. This poses a direct threat to those companies that originally moved to Wales because of lower labour costs.
Despite this threat, there are, nevertheless, opportunities for Welsh manufacturers in utilising innovation to develop new markets based on new technologies, especially though integrating services into their business models. There is also enormous potential to further expand manufacturing within a range of industries in which the economy has specific strengths, including aerospace and automotive products, food and drink processing, optoelectronics, defence and medical technologies.
To do this successfully, not only will Wales have to continue with the attraction of foreign direct investment, but will have to focus specifically on growing the indigenous manufacturing sector which has been largely neglected during the last two decades.
The Welsh Government’s sector panel for Advanced Materials and Manufacturing has certainly helped to create a focus within the heart of policymaking for driving forward the case for the manufacturing industry.
But there is certainly more that could be done to support the sector, especially in linking directly with other policies in science and innovation currently being developed in Wales and, more importantly, with strategic priorities for the next round of European Structural funding.
In fact, I would like to see manufacturing not only identified as one of the key sectors for the Welsh economy within such a strategy, but that the financial resources are actually put into place to ensure that it remains so.
The recent revival of manufacturing in Wales is something that all of us should welcome not only in terms of the number of jobs, but for high quality employment, innovative products and processes, export potential and a route for many less academically qualified young people into excellent careers through apprenticeships.
The role for politicians and policymakers, both at the UK and Welsh Government levels, is to ensure that this revival is not a ‘flash in the pan’ but is one that will make sustainable long-term contribution to the Welsh economy.