StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Decline of the UK Manufacturing Sector Over the Last 40 Years - Report Example

Summary
This report "Decline of the UK Manufacturing Sector Over the Last 40 Years" presents factors considering aspects like technology improvements, stages of economic maturity, low-wage competition, North Sea oil, ‘crowding out’, the effect of Sterling (£) exchange rate, labor productivity, etc…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER92.9% of users find it useful
Decline of the UK Manufacturing Sector Over the Last 40 Years
Read Text Preview

Extract of sample "Decline of the UK Manufacturing Sector Over the Last 40 Years"

Decline of the UK Manufacturing Sector Over the Last 40 Years The United Kingdom (UK) which was a powerful economy in the 19th century faced a gradual decline in the manufacturing sector by 20th century. The gradual deindustrialization over the past 4 decades in UK could be attributed to various causes. This decline in the manufacturing sector could be credited to many factors viz. the growth of service industry, changing patterns of domestic demand, availability of resources, international competition and globalisation. This work examines the above factors considering aspects like technology improvements, stages of economic maturity, low-wage competition, North Sea oil, ‘crowding out’, the effect of Sterling (£) exchange rate, , labour productivity etc. for the decline in various manufacturing sectors Changing patterns of domestic demand: Changes in domestic demand have played a key role in the changes in the structure of UK’s economy. The domestic demands in the 19th century were over automobiles and machineries. The consumer demands towards 20th century shifted to manufacturing, automotive, aerospace and defence, construction and house building, chemicals, pharmaceuticals and consumer products. Each of these domains have a particular manufacturing focus. The Department for Business Enterprise & Regulatory Reform(2008, pg.20) talks about ‘changing patterns of demand with rising real incomes and increasing leisure time. Spending on consumer durables, travel and communications ……increased demand for environmental standards arising from growing real incomes and a growing international consensus regarding the economic case for action to reduce carbon emissions in response to climate change.’ Over the end of 20th century, the demand slowly shifted towards recreation, travel and communications, foreign holidays etc. leading to the growth of service sectors such as hotel and restaurants, personal services etc. which in turn lead to the decline of UK’s manufacturing sectors. In the future, factors such as ageing population, rising incomes will impact domestic demands for goods and services. Over the years, considering the age distribution of the UK population and their respective patterns of consumption, there will be demand for energy and health sectors. However, there will be a rising demand for environmental goods and services (EGS) in UK and global economy Stages of economic maturity: It is known that as economies develop over time, gradual shifts take place between the primary, secondary and tertiary sectors. At early stages of development there is a shift away from agriculture towards industrial and service activities, as the relative importance of agricultural products (food in particular) declines in people’s consumption and manufactured goods and services become more important. As incomes continue to rise, the share of manufacturing in output and employment tends to decline, and that of services tends to increase. (Needham & Dransfield 1995, p. 57) UK being the world’s oldest industrial nation, has gradually attained the stage of economic maturity over a period of time. Due to increasing involvement in service sector , there has been a steady decline in manufacturing sector over the past decades. Availability of resources: During the start of the industrial revolution in UK there were abundant natural resources and also human resources. As the economy developed, there was a shift in demand towards services and the employment in service industry increased and availability of man power in manufacturing sector declined, which in turn had an impact in UK economy. International competition and globalisation: The impact of globalisation in the UK manufacturing industry increased import penetrations and therefore increased international competition. The manufacturers in UK were forced to opt for low cost production which lead to decrease in output and increase in unemployment. Globalisation, in recent times affected the manufacturing sector and the economy declined heavily due to recession. However, the trend has been improving presently. International competition also led few manufacturers to resort to innovative ideas. …Over the last four years, Hydrapower Dynamics has turned itself from a manufacturer of hose assemblies into a provider of engineering services. The catalyst for change was a dramatic decline in business and competition from bigger companies. (BBC News 2002) Technology improvements: Technological improvements stems from continuous research and development. Research on new product line to develop the existing product in order to stay in the international market. During the late 20th century the R&D costs in UK were very less compared to its manufacturing costs. But, recently there has been a rise in the R&D costs and the technological progress is slowly being achieved. …KPMGs Mr. Greaves, who works with many Midlands manufacturers, says companies need to "change or die". "But if you are flexible and forward-thinking and open to new ideas, youre alright." (BBC News 2002) Low wage competition: One of the key concerns for the decline of employment according to Robert C. Hine and Peter W. Wright (1998) … The manufacturing sector has experienced large scale job losses: of the 7.26 million jobs in the sector in 1979, some 2.8million or 40% had disappeared by 1992. This is due to the import competition from the low wage economies. Robert C. Hine and Peter W. Wright (1998) …To the extent that low-wage competition shifts UK consumption from domestically-manufactured to imported goods, jobs in UK manufacturing will be lost. During the period, the prices of UK manufactured products were undercut by the lesser priced imported products from low wage economies. India and China being the two among the low wage developing economies have been increasing their share of global output, trade and FDI. North Sea Oil: Discovery of North Sea Oil lead to the discovery new oil sector in the UK economy. The oil sector improved rapidly that the share of manufacturing sector got depleted. After the discovery of North Sea Oil, UK which imported oil, started exporting oil. This led to the decline of manufacturing sector with respect to employment and output. Being one of the few exporters of oil made the British currency strong. But that high value made the sale of manufactured goods difficult in the international markets. Crowding out: Crowding out was a major cause of manufacturing decline between late 1970’s and early 1980s. The manufacturing sector was crowded out because of the government spending on the non-market public sectors such as health and education. The tax collected by the government from the manufacturing sectors were spent on the services provided by the government. Therefore the manufacturing concerns monitory resources were used for non market public sector was one of the causes of its decline. The effect of Sterling exchange rates: The value of pound increased during 1979/80 owing to the discovery of the potential oil sector and oil exports. Higher value of pound means higher price for goods. The UK manufactured goods became more expensive than the imported foreign products. Consumers resorting to buying imported goods had strongly affected the manufacturing industry. The table shows the value of GBP/USD over a period of years. The strength of GBP or the increasing value of pound is seen from the increasing value of GBP/USD ratio. 1 GBP in USD since 1971 Source: OANDA.COM Historical Currency Converter(Wikipedia) The inflation in UK for the past three decades is shown in the following chart. Source: OANDA.COM Historical Currency Converter(Wikipedia) Manufacturing sector and labour productivity: Output till the middle of 1980 was less than the international competitors. Therefore competition in the global market proved difficult. After 1980 the labour productivity improved due to the slimming down of the manufacturing base which resulted in the more productive manufacturing sector. Source: National Statistics (BBC NEWS world edition 2002) Even though there is a down trend in the UK economy, UK manufacturing sector could survive and has more chances of thriving in the future. The future of UK according to Price Waterhouse Coopers report, in its website ‘UK manufacturing is not dead and it will survive the current downturn… if properly leveraged, could move the UK manufacturing sector from “surviving” mode to “thriving”.’ References Emma Clark, 2002, ‘The death of British Manufacturing’, BBC NEWS, 21 March, viewed 27 August 2010, http://news.bbc.co.uk/2/hi/business/1871493.stm 2002, ‘The facts about UK manufacturing’, BBC NEWS, 18 March, viewed 27 August 2010, http://news.bbc.co.uk/2/hi/business/1861801.stm Robert C. Hine & Peter W. Wright 1998, ‘Trade with low wage economies, employment and productivity in UK manufacturing’, The Economic journal, 108, no.450 viewed 27 August 2010, http://www.jstor.org/pss/2566194 David Nidham & Robert Dransfield 1995, Business Studies, 2nd edition, Stanley Thomes (Publishers) Ltd., United Kingdom Globalisation and the changing UK economy, 2008, Department of Business Enterprise and Regulatory Reform, viewed on 27th August 2010, ‘Economy of the UK’, Wikipedia, viewed 27 August 2010, http://en.wikipedia.org/wiki/Economy of the United Kingdom ‘The future of UK manufacturing: Reports of its death are greatly exaggerated’, n.d., Price Waterhouse Coopers, viewed 27th August 2010, Read More

CHECK THESE SAMPLES OF Decline of the UK Manufacturing Sector Over the Last 40 Years

Effect of Recession on the UK Fashion Clothing Retail Sector

For all these retailers, the impact of the recession was a combination of a decline in the business performance sometimes from the last quarter of 2008 to the 1st quarter of 2009, and a drive to do business in other countries like North America, Europe, and Asia.... The paper "Effect of Recession on the UK Fashion Clothing Retail Sector" analyzes the statistics and other official reports about UK Fashion Clothing Retailers and the impact of the recession on them, to validate or refute news reports and other research works found over the Internet....
44 Pages (11000 words) Dissertation

Economic Contribution of UKs Manufacturing Sector

The present paper addresses the progress of the manufacturing sector over the years between 1970 and 2010 by illustrating its economic and social contribution to the economy of the UK.... Since capital formation is held identically equal to the investment in capital, it could be implied that the uk manufacturing sector did not contribute proportionally to the amount being invested in it.... Inward investment in uk manufacturing sector of UK is found to be fluctuating over time, as it falls down to a lower value from 1986 to 1991 and then improved to a positive value from 1991 to 1996 and to a further higher value in 2001....
7 Pages (1750 words) Essay

The Manufacturing Sector of the UK

Towards the late 1970s, the labour force proportion working in the uk manufacturing sector was about 7 million but in 2005 the number of employees was at 3.... The paper "The Manufacturing Sector of the uk" highlights that deindustrialization has been the main factor causing the fall in the UK's manufacturing sector.... The sector of manufacturing held the highest number of workers in the labour force of the uk and the output used to be very high....
10 Pages (2500 words) Essay

Aircraft Maintenance Training Needs in Both The Commercial and Light Aviation Sectors of the UK

The interest of this dissertation under the title "Aircraft Maintenance Training Needs in Both The Commercial and Light Aviation Sectors of the uk" is to ascertain the needs of aircraft maintenance training in both the commercial and light aviation sectors in the UK.... The aerospace industries which is at the forefront of wealth production worldwide, and continue to be of crucial importance to the economic strength of the uk rely on skills in a sound understanding of engineering and science areas relating to aircraft design and manufacture....
45 Pages (11250 words) Dissertation

The UK Manufacturing Industry

The pioneer in the industrial revolution is now experiencing a downturn in its manufacturing industry for the last 40 years.... The "the uk manufacturing Industry" paper analyzes the reasons that led to the industrial decline in the UK.... the uk manufacturing industry has been facing an acute shortage of proper management practices.... Poor skills and lack of technical education are other important factors that are responsible for the decline in the manufacturing industry of the uk....
5 Pages (1250 words) Term Paper

The Decline of UK Manufacturing Over the Last 40 Years

This case study "The Decline of UK Manufacturing over the last 40 years" attempts to identify and analyze the reasons for the decline of UK manufacturing over the last 40 years.... But, the UK manufacturing sector has been manifesting obvious signs of decline over the last 40 years and this has caused a number of economic issues in the UK including structural unemployment and deficit balance of payment.... This research paper is an attempt to identify and analyze the reasons for the decline of UK manufacturing over the last 40 years....
5 Pages (1250 words) Case Study

Is North America's Manufacturing Industry Doomed in the Global Economy

Sirkin et al (2011) argue, "China's overwhelming manufacturing cost advantage over the U.... It is true that the North American manufacturing sector may not reach its old glory but at the same time, North American manufacturing is not going to doom either.... If the US manufacturing sector is affected due to its higher labor cost then the situation may reverse if the labor costs at other producing centers also rise and that is what has begun occurring....
6 Pages (1500 words) Literature review

Britains Decline in Manufacturing

It is the economically stronger countries like the USA, Germany, and Japan that have experienced increases; this suggests that the decline in manufacturing in the uk is not due to inevitable economic processes like economic maturity.... It argues that the market in the uk has been crowded out by the public sector which has experienced a large increase since World War II.... owever, while the 'crowding out' thesis provides a convenient answer to the decline of manufacturing in the uk, the evidence supporting the theory is not that strong....
8 Pages (2000 words) Report
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us