The importance of manufacturing to the UK economy
Despite evidence of UK manufacturing becoming less visible — new figures show that the industry is, in fact, responsible for 23% of UK GDP; over double the figure that is routinely quoted.

As the UK capital London welcomes over 500 new skyscrapers, former — austerity riddled — industrial towns, where city centre factories lay derelict, are gripped in despair. As globalisation grips the world, developed economies have shifted towards an unhealthy reliance services. You would be forgiven in thinking that UK manufacturing has declined to the point of irrelevance.
In reality, however—a report conducted by research group Oxford Economics on behalf of Manufacturing Technologies Association, The True Impact of UK Manufacturing (released April 2018)— has shown manufacturing in 2016 as a whole accounted for nearly quarter of the UK economy, despite declining visibility within communities as factories move away from large cities.
It is the first report of its kind, which has taken into account the full impact that UK manufacturing has on the economy by considering three aspects: the direct impact; the indirect impact; the induced impact. James Selka, CEO of the MTA, concluded: “This report clearly demonstrates that anyone who says that manufacturing doesn’t matter much to the UK’s economy is badly mistaken.”
The direct impact measures the output of businesses that are traditionally considered as manufacturers. This section provides the numbers we largely already know: 9% of UK GDP and 2.6 million jobs.
What is really telling, is the two following sections on the indirect and induced impacts — research that separates this particular report from others previously. These two aspects correspondingly cover what encapsulates the economic activity and employment supported in the supply chain of the manufacturing sector, and comprises the wider economic benefits that arise when employees within the manufacturing sector spend their earnings.
As the UK economy has developed, manufacturing companies have regularly outsourced enterprises: in particular to goods and services, and research and development sectors — contributing to 45% and 44% of UK domestic purchases respectively. These industries — despite not being classed under the definition of manufacturing — would cease to exist if the manufacturing industry folded. When the indirect impact is taken into consideration, manufacturing is responsible for 15% of the UK economy and more than five million jobs.
The report suggests: “UK manufacturing companies purchased £232 billion of goods and services from UK suppliers in 2016.” Industry publication The Manufacturer commented: “Any assessment of manufacturing’s importance to the UK economy must take those indirect impacts into account.”

Additionally, when the effect of the induced impact is taken into regard, it reveals that manufacturing — as a whole — accounts for 23% of the UK economy and seven million jobs. It is noted employees who work within the manufacturing industry earn 19% more than the UK average. Therefore, manufacturing workers have increased spending power and contribute £144 billion to the British economy — in particular benefitting sectors such as hotels, restaurants, shops and real estate.
The report states: “By combining the induced GDP impact in each sector with productivity estimates, we also estimate that manufacturing supported 2.3 million jobs through worker spending multiplier effects in 2016.”
Throughout 2017 manufacturing output in Britain continued to grow at a rapid pace. The strong economies of continental Europe buoyed an upturn in orders — made cheaper by the depreciation of pound sterling following the Brexit vote in 2016.
However caution should still be exercised: The Financial Times reported manufacturing output in 2018 has declined in the UK — following a global trend — despite the positive news from 2017. It is suggested poor weather at the start of the year, and US President Donald Trump’s global trade strategy — which has led to uncertainty within the industry due to the threats of tariffs — can be implicated.
Following the first indications that manufacturing output in Britain declined, The National Institute for Economic and Social Research downgraded its UK GDP growth forecast for 2018 from 1.9% to 1.4% — following a growth of just 0.1% in the first three months of the year, well below the predicted 0.5%.