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Industry is key to beat downturn; MANUFACTURING.

Byline: JOHNCRANAGE Industrial Editor

Manufacturing needs "timely, targeted and temporary" Government funding if the industry is to be a key part of the post-recession "real" economy, a report published today argues.

The Work Foundation says that with the financial services sector's contribution to GDP possibly contracting, manufacturing should be a priority sector of the knowledge-based economy on which the country will increasingly rely.

Companies should be given the same access to funds as the support announced for financial services, the Foundation argues in the report, Manufacturing and the Knowledge Economy, published today.

Report author Ian Brinkley, associate director at the Work Foundation, an independent research body specialising in work and corporate performance, said: "The question needs asking: what are we going to live on in the future?

"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 myth-making around the demise of manufacturing, the sector remains extremely important for jobs, exports and GDP."

The report argues that high and medium tech companies that combine strong service operations with traditional manufacturing - what it calls the "manu-service sector" - represent one of the "best hopes for the upturn".

The transformation of manufacturing in recent years means that separating the industry from the service sector does not reflect its "inter-connected, interdependent" nature.

Companies such as Rolls-Royce make as much, if not more, from service contracts, sales of licences and hours of flight time on its engines as from the engines itself, the Foundation says.

Carmakers run finance houses and pharmaceutical companies offer healthcare services as well as drugs.

Such manu-service industries are typically adaptable, high profitable and very knowledge intensive.

The Work Foundation report urges the Government to back manufacturing and ensure it has the necessary finance to evolve and grow. "The same criteria used to support the financial sector through the recession - 'timely, targeted and temporary' - should be extended to manufacturing," it says.

Home furnishings and fashion retailer Laura Ashley yesterday issued a profits warning after it had to increase promotional activity and the slide in the pound put pressure on margins.

The group, which has 228 stores in the UK, also reported a fall in like-for like sales of 6.2 per cent as consumer confidence continued to deteriorate.

It expects profits for the year to the end of last month to be about pounds 9 million, lower than market expectations.

The company said trading had been tougher since its last update in December, with more promotions and an increase in import costs due to the weak pound. It expected the current financial year to remain challenging and unpredictable.
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Title Annotation:Business
Publication:The Birmingham Post (England)
Article Type:Industry overview
Date:Feb 18, 2009
Words:468
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