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Back manufacturing!

Pessimism breeds pessimism. When forecasters portend bad things, and headline writers highlight words like "grim" and "gloomy", sentiment is soon soured and the whole thing becomes a self-fulfilling prophesy. Even me writing these words could be construed as negative. But the fact remains there is a demand frenzy to feed some people's appetite for gloom, not least those would be editors who publish this depressing stuff and the commentators and bloggers who use it to fortify their venom and increase their status.

Continuing pessimism through excessive and irresponsible reporting, which has no purpose other than headline grabbing, creates panic and gives a distorted view of what's happening in the real global economy and more specifically in the UK. This consequently will breed a greater deterioration of the economy than need be.

That's not to say we should hide behind the facts or bury our heads in the sand but there absolutely has to be a sense of prospective when reporting on this current recession, and look horizontally--currently this is NOT happening. It would be fairly safe to say the UK is capable of excessive pessimism as much as excessive optimism--England football matches spring to mind! But amid the hysteria surrounding the current situation, the manufacturing sector should nevertheless be confident about its importance to a recovery and its role in helping 'the real economy', even if its significance goes unreported.

With the UK's strength in financial services in question, those high and medium tech manufacturing businesses which have also developed strong service portfolios on top of their traditional product offerings--the 'manuservice' sector--represent one of 'the best hopes' for the upturn.

The Work Foundation, which has recently issued a new report, makes the case that if the Government is serious about helping 'the real economy', loan guarantees and emergency funding ought to be extended to the manufacturing sector.

Ian Brinkley, associate director at The Work Foundation, asks the important question--what are we going to live on in the future? He explains: "Modern manufacturing is once again facing a battering from the recession, but it would be a big mistake just to write the sector off. We need to preserve as much of the industrial base as possible because once it is lost it is near impossible to get back again. Despite the mythmaking around the demise of manufacturing, the sector remains extremely important for jobs, exports and GDP."

The report describes the transformation of manufacturing over recent years. The old way of separating manufacturing and services does not now reflect the inter-connected, interdependent nature of modern manufacturing. Companies such as Rolls Royce make as much, if not more, money from service contracts, sales of licences and hours of flight time on their engines as from the engines themselves. Car makers run finance houses; and pharmaceutical companies offer healthcare services as well as drugs. Such manu-service industries are typically adaptable, highly profitable and very knowledge intensive.

In the UK the share of manufacturing in total value added declined from 35% to below 15% between 1970 and 2005, whereas the share of 'knowledge services' (highly skilled, ICT-intensive service work) rose from 23% to 46% over the same time. However, a key driver behind the growth of knowledge services is manufacturers adding services to their primary manufacturing function. Frequently, products have become relatively cheaper as services have become more expensive.

High to medium tech manufacturing is producing nearly as much added value to the UK economy (10%) as high tech services (11%). And with the Pound so low against other major currencies exporting opportunities have never been so competitive. This is welcome news, since 70% of all manufacturing exports came from high to medium tech 'knowledge economy' manufacturing sectors.

The Government knows how important the manufacturing sector is to a recovery even if it doesn't show it--but does the man in the street, the mass media, or even the banks? We are constantly bombarded with details of the bank bailouts, but shouldn't our attention be turning towards supporting sectors that will have an equally important role to play in economic stimulus as the banks do?

The Government needs to take the bull by the horns and back manufacturing and ensure it has access to the necessary finance to continue to evolve and grow. The same criteria used to support the financial service sector through the recession--'timely, targeted and temporary'--should be extended to manufacturing.

Aaron Blutstein

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Title Annotation:EDITOR'S COMMENT
Author:Blutstein, Aaron
Publication:Plant & Works Engineering
Article Type:Editorial
Geographic Code:4EUUK
Date:Feb 1, 2009
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