Manufacturing can lead UK’s post-coronavirus recovery

Japan's economy was left in disarray by the Second World War. Key industries which made up the country’s backbone were brought to their knees. The country was stalling with no end in sight. In 1950, Japanese businessmen turned to an American from Wyoming to help them rebuild their shattered economy. An industrial expert, William Edwards Deming taught Japan’s manufacturers how to produce high-quality products economically.

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Companies such as Toyota and Sony adopted Deming’s concepts and became world-class producers in their fields. Other Japanese manufacturers followed suit and Japan turned the global economy on its head, beating US industry at its own game. From its post-war hardship, manufacturing inspired Japan’s meteoric economic rise. It was the spark which ignited the Japanese economic miracle.

Fast forward to 2020 and the UK too is now staring down the barrel of a recession. The coronavirus pandemic has brought about unprecedented challenges, with the British government tasked with the unenviable balancing act of protecting public health, while trying to keep the economy from coming to a standstill.  

But as Covid-19 tore through the nation, there was no other option but a national lockdown. Britain’s people retreated into the sanctuary of their homes. Businesses and spending stopped, the streets fell silent, the economy teetered.   

As a result, the economy suffered its biggest slump on record between April and June as the coronavirus lockdown measures pushed the country officially into a recession. The economy shrank by some 20 per cent compared with the first three months of the year. It’s the first technical recession since 2009. 

But as the country cautiously comes out of lockdown, getting the economy back up and running is a priority. As the government looks to get the cogs turning, manufacturing will be a powerful source for economic growth and prosperity if used in the right way. 

Manufacturing is an integral cog in the country’s economic engine

Despite the devastating impact of coronavirus manufacturing remains a staple of the British economy. In 2019 – 2020 the manufacturing sector’s annual output accounted for £192bn to the UK’s economy. The industry accounts for 47 per cent of exports and 66 per cent of R&D investment. It saw some 2.7 million people employed with the average salary in the sector standing at £33,5000 – some 13 percent higher than the rest of the country.  

The adoption of industry 4.0, which includes connectivity, advanced analytics, automation, and advanced manufacturing technologies was gaining momentum before Covid-19, helping companies transform their operations in everything from production efficiency to product customization, with improvements in speed to market, service effectiveness, and new-business model creation. It can help the industry lead the economic charge. 

Indeed the opportunity for the manufacturing industry to drive the country’s economic fightback is still very much there. Not all sectors of the manufacturing industry have been decimated by Covid-19.  The medical devices, pharmaceutical, chemicals, and defence sectors have remained relatively unscathed from the virus. While we have seen the best of the manufacturing sector through its PPE response, rising to the ventilator challenge, and increased drug production.  

While pockets of growth in the sector since lockdown have been linked to the healthcare industry, other areas of potential growth are emerging. Chancellor Rishi Sunak vowed to spend a record £600bn on infrastructure over the next five years. Placing the UK’s manufacturers at the heart of delivering this will be key to ensuring Britain can thrive post-Covid-19. Meanwhile, the automotive, textiles, electronic and aerospace sectors are all expected to see output growth on 2019 levels by 2021.

With the industry’s infrastructure still very much in place to hit the ground running, manufacturing already has the tools at its fingertips to lead Britain’s recovery. It has all the instruments available to promote Job growth, production and R&D investment. The limited reopening of the economy in May, that accelerated in June, saw strongest growth in manufacturing and construction where workers were able to return to factories and building sites.

Manufacturing is an integral cog in the country’s economic engine. Ensuring the sector takes every advantage, from government support and investment to collaboration among industry leaders, will continue to drive this growth. It will be crucial in manufacturing Britain’s recovery.

David Millar is managing director of Heap & Partners