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Manufacturing in Scotland

Manufacturing in Scotland. Stephen Boyd, Assistant Secretary, STUC, National Economic Forum 15 December 2010. Content. What is manufacturing? Manufacturing and the Scottish economy Why is manufacturing important? The changing policy context A manufacturing strategy for Scotland?.

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Manufacturing in Scotland

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  1. Manufacturing in Scotland Stephen Boyd, Assistant Secretary, STUC, National Economic Forum 15 December 2010

  2. Content • What is manufacturing? • Manufacturing and the Scottish economy • Why is manufacturing important? • The changing policy context • A manufacturing strategy for Scotland?

  3. What is manufacturing? • National Statistics classifies a business under ‘manufacturing’ if more than half its revenue comes from ‘making things’ • But the boundary between making things and selling services has undoubtedly become blurred • NS definition does not capture jobs and activities which depend on, or are closely allied to, manufacturing – for example, design work undertaken by a specialist non-manufacturing firm. • It is possible for a company to have more than half its revenues generated by manufacturing but a minority of employees directly engaged in making the product • Current statistics significantly underestimate the economic importance of manufacturing?

  4. Scottish exports by sector & trade area (£million), 2008

  5. Expenditure on R&D performed within businesses in Scotland 2008

  6. Economic significance • Jobs, R&D, exports • Creates genuine wealth • Drives innovation and productivity growth • Enlarges the pool of skills and good jobs • Sustains local supply chain industries and services • Supports the ‘export’ of business services

  7. Social significance? “With 3m jobs spread around the country – a good number in the middle income category – manufacturing is a force for social cohesion in a way that financial services are not”. Richard Lambert, Director, CBI

  8. High value/low value “Manufacturing has a strong future. That future is based on generating high value – to the company, to shareholders and to the country. High value manufacturers have strong financial performance, are strategically important and have positive social impact” (IfM, University of Cambridge) “The UK along with other OECD countries has successfully retained large ‘low tech’ manufacturing sectors and we should build on the comparative advantage thatimplies…in knowledge based manufacturing we also need a ‘low tech strategy to complement the traditional ‘high tech’ one” (Work Foundation, Manufacturing and the Knowledge Economy)

  9. Europe: jobs, labour costs and value-added 2009

  10. Changing policy context • Previous UK Government policy: New Industry, New Jobs; Advanced Manufacturing etc • UK election manifestos • EU policy: Industry for Europe – Europe for Industry (20-20) • Current UK Government: ‘The path to strong, sustainable and balanced growth’ & • ‘A Long-term Focus for Corporate Britain’

  11. Levers (1) • Fixing finance – Scottish Investment Bank is a positive start but new relationship between finance and industry is required • Skills and skills utilisation – sustainable productivity enhancement is vital to Scotland’s manufacturing future; investment in STEM subjects is essential as is utilising the talents of all Scotland’s people • Image – quality employment is fundamental; so is visible and unrelenting Ministerial support

  12. Levers (2) • Ownership and control – create a level playing field through implementation of a public interest test for takeovers and buyouts • Public procurement – extend the Defence Industrial Strategy approach to other key sectors? Link procurement to innovation? • State aid – increase to EU15 average and use strategically to support industrial strategy • Build on current momentum to design and implement a modern industrial strategy for Scotland? Built on comparative advantage with flexibility to address industry renewal and replacement

  13. Industrial strategy…picking winners? • ‘In the same way that the success stories do not allow us to support governments picking winners under all circumstances, the failures, however many there are, do not invalidate all government attempts to pick winners…reality is that winners are being picked all the time both by the Government and by the private sector…but the most successful ones tend to be done in joint efforts between the two’ Ha-Joon Chang • ‘Freed from the threat of free-riders and the imperatives of short-term profit maximisation, scientists and companies working for the US military have created many of the technologies on which the country’s prosperity is now based’ John Cassidy, ‘How Markets Fail – the logic of economic calamities’

  14. Conclusion • The continuing decline of manufacturing jobs is neither inevitable nor desirable • Manufacturing can thrive in ‘high cost’ jurisdictions • Increasing manufacturing’s share of GDP will contribute disproportionately towards meeting economic and social targets • Fixing finance is fundamental to elicit the levels of patient investment required to sustain and grow manufacturing • Scottish Government should revisit Economic Strategy to examine whether it provides sufficient support for manufacturing in Scotland

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