The Changing Shape of UK Manufacturing Joe Grice, Director and Chief Economist

Outline Why is productivity important? Manufacturing output, employment and productivity Potential reasons the increase in manufacturing productivity: A better quality workforce An improvement in the information technology base A change in the composition of the UK manufacturing industry Investment in research and development Capital deepening A more integrated global economy Productivity growth by export status Productivity growth by firm ownership

Current price Gross Value Added per hour and hourly wage Source: Labour Productivity Measures from the ABSLabour Productivity Measures from the ABS :

Labour productivity (output per hour) , (1948=100) Source: Labour Productivity (ONS) :

Whole economy and manufacturing output and workforce jobs Source: Index of Production (ONS), Gross Domestic Product (ONS) & Labour Market Statistics (ONS) :

PRODCOM sales growth, (average annual growth, , %) Source: UK Manufacturers’ Sales by Product(PRODCOM) :

Reduction in manufacturing jobs between 1979 and 2013 (%) Source: Labour Productivity Statistics (ONS) :

Contributions to change in Gross Value Added, Source: Multi-factor Productivity (ONS) :

Labour quality by industry (1993=100) Source: Quality Adjusted Labour Input (QALI) :

Percentage of manufacturing hours accounted for by qualification Source: Quality Adjusted Labour Input (QALI)

Percentage of manufacturing hours accounted for by age Source: Quality Adjusted Labour Input (QALI)

Contribution to manufacturing sub- industries productivity growth Source: Labour Productivity (ONS) and Labour Market Statistics (LMS)

Average annual labour productivity growth by ICT maturity Source: Annual Respondents Database (ARD): Annual Business Survey (ABS), E-commerce survey, and Community Innovation Survey (CIS)

Job flows out of the manufacturing industry: 2002 to 2013 Source: Labour Force Survey Microdata

Net capital stock and output per hour Source: Capital Stock and Labour Productivity

Research and development expenditure as a proportion of turnover, % Manufacturing Services Food products and beverages; Tobacco products Textiles, clothing and leather products0.1 Pulp, paper and paper products; Printing; Wood and straw products0.1 Refined petroleum products and coke oven products Chemicals and chemical products Pharmaceuticals Rubber and plastics Other non-metallic mineral products Casting of iron and steel Non-ferrous metals Fabricated metal products except machinery and equipment Machinery and equipment Computers and peripheral equipment Electrical equipment Consumer electronics and communication equipment Precision instruments and optical products; photographic equipment Motor vehicles and parts Other transport equipment1.1 Shipbuilding Aerospace Other manufactured goods0.9 Source: UK Business R&D Publication (ONS)

Average annual labour productivity growth by exporting status (% per annum, 2001 to 2010) Annual Respondents Database (ARD): Annual Business Survey (ABS), E-commerce survey, and Community Innovation Survey (CIS)

Average annual labour productivity growth by firm ownership, (% per annum, 2001 to 2010) Annual Respondents Database (ARD): Annual Business Survey (ABS), E-commerce survey, and Community Innovation Survey (CIS)

Conclusion Manufacturing productivity has risen across a broad range of sub-industries, from textiles to pharmaceuticals. Due to steady output growth and a noticeable fall in employment. A range of factors are having an impact – such as labour quality and capital deepening. This presentation has been designed to inform and encourage the debate around manufacturing productivity – not provide a comprehensive and definitive explanation.