Assuring the future of manufacturing in Europe
Manufacturing has a vital role to play in solving the economic imbalances we face - whether financial, demographic, security or environmental. So says Steve Gallon, UK managing director of electrical enclosure manufacturer, FIBOX.
Speaking as a lifelong member of the Department of the Bleeding Obvious, we have to accept that the world is changing. Emerging from a period of juggling with a struggling economy, globalisation, climate change, digital communications and the growth of emerging economies, present many profound challenges to UK manufacturing sectors. Yet, where there are huge challenges, there are also massive opportunities.
Even though the manufacturing sector has been battered and bruised throughout the global recession, the UK is still a major driving force in the world's knowledge economy, capable of hitting well above its weight in terms of population size. With only 1% of the world's population, we fund 4.5% of the world's science, and produce 8% of the world's technical papers. Getting those innovative ideas and inventions out of the lab and into the market is a complex process, but one that is vital to the continued growth of the UK economy.
With the lowering of economic barriers to trade, the reduction in transport costs and the enabling effect of communications technology, manufacturing that was once traditionally entrenched is now seen as highly competitive and naturally has gravitated to those countries of lowest overall cost. Manufacturing in comparatively high wage economies such as the UK, has therefore had to change radically to remain globally competitive.
While the present weakness of the pound is an influential factor helping Britain's manufacturers, particularly in the Eurozone, the ever rising costs of raw materials such as oil and metals is also playing a hugely important part in encouraging the trend of bringing production back to the UK.
Rising commodity prices
Everyone is aware that China's main advantage as a manufacturing base is lower costs, but higher commodity prices are now starting to erode it. A few years ago, the price of, say, a metal casting might have been 50% lower in China than in the UK. But because of the huge international increase in metal prices; the benefit of cheaper labour costs is much less obvious. Add to this to possible concerns over quality and the logistics of delivery, then that same casting produced in the UK becomes a much more attractive proposition.
Manufacturing's share of UK GDP - around 14% - is currently on a par with other mature industrial democracies, such as France and the US, although it is lower than Germany where it is around 20%. However, and in spite of the recession, 'post-industrial Britain' has still managed to nurture and protect world-class companies in many highly technological fields, including those in the pharmaceutical, aerospace, defence and biotechnology sectors. The problem facing us is that outside of these sectors, much of our manufacturing remains stuck in a 'low-value, low-skills' trap - price-sensitive, not very sophisticated and critically vulnerable to competition from emerging industrial economies.
However, it would seem that frozen industrial policies are now making a comeback. A prime example of this is was demonstrated recently by the Government in collaboration with the North East Development Agency offering huge cash incentives to car maker Nissan to build its new electric car - the Leaf - at its Sunderland plant. This investment is set to safeguard hundreds of jobs once production begins in 2013 and is part of a £420m investment in electric cars.
It is expected that about 50,000 Nissan Leaf hatchbacks, which will run entirely on lithium-ion batteries, will roll off the Sunderland production line each year. Added to the region's much welcomed news regarding this new car manufacturing technology to complement the electric car plant, Nissan has also said that it would invest some €200m in a battery factory near to its North East manufacturing plant.
As vehicle electrification continues to materialize across the country, significant changes within the transport industry are likely to happen alongside the electric car rollout. One addition will be the desperate need for a comprehensive network of battery recharging stations. While there are few such charging points available at present, Nissan has met this problem head on and signed a further agreement with the regional development agency, One North East, to introduce more than 13,000 charging points in the next three years. And London has committed to introduce 25,000 points.
Climate change is an inescapable challenge for world leaders and while the issue of the effects of global warming remains highly debated, there is evidence to support the detrimental impact of carbon emissions on the environment.
With this in mind; together with further targeted Government assistance, there is no doubt that many more opportunities exist for innovative UK manufacturing companies to develop their businesses in tomorrow's renewable energy generating systems; the development of low carbon products, expand and export less energy-intensive processes and invest in services to support individuals, companies or Governments in their venture to embrace low carbon activities.
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