Nations Choose Prosperity
Why Britain Needs an Industrial Policy
Edited by Ruth Lea
Distributed by Coronet Books
$16.50 paper original
After years of being seen as outmoded, industrial policy is back on the political agenda, this time renamed 'industrial activism'. There is a widespread concern, fuelled by the crisis in the financial sector, that we have been too complacent about the decline in UK manufacturing, assuming that service industries would guarantee continuing prosperity with or without a vibrant manufacturing base. The shift against manufacturing in Britain's economy has been dramatic. Manufacturing accounted for over 30 per cent of Gross Value Added (GVA) in 1970, but by 2007 it accounted for less than 13 per cent; whilst services made up just over half the economy in 1970 but now represent around three-quarters of economic activity.
This has had a serious impact on the balance of payments, as import growth has outstripped export growth. In 1997 the current account was almost in balance. A modest deficit in visible trade (goods) of GBP12.3bn was almost totally offset by healthy surpluses on services and in investment income. But by 2008 the visible trade (goods) deficit had soared to nearly GBP93bn. Nevertheless, the idea that 'we don't make anything now' is false. Manufacturing industry remains a very major contributor to the British economy. It represents nearly 13 per cent of GDP, 75 per cent of business research and development (R&D), half of UK exports and 10 per cent of total employment. Britain is the sixth largest manufacturing nation in the world after the USA, China, Japan, Germany and Italy, larger than France. The manufacturing sector is still over one-and-a-half times larger than the financial sector.
The contributors to this volume, the first publication of the Civitas Manufacturing Renewal Project, consider the consequences of the decline of manufacturing and how they could be reversed. No one argues for protectionism: free enterprise and competitive markets are vital, and the primary causes of economic prosperity are the talent and energy of the individuals who make up a nation. However, there needs to be a constant effort to ensure that laws, regulations and public policies provide people with the best possible conditions for free enterprise. Certainly low taxes and the avoidance of over-regulation are vital, but positive policies are also needed in transport, ports, energy and monetary policy, public procurement and much more if we are not to fall behind.
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