It might often be exaggerated but the steeper decline of manufacturing in the UK relative to many other advanced nations is real enough. Unit wage costs are significantly higher in nations like Germany, Sweden, Finland and France where labour and product markets are also more stringently regulated.
“Other nations have been much more successful in building models that support long-term investment; workers have direct input into decision making, finance is more knowledgeable and supportive, political commitment is strong and enduring. Other EU member states retain much higher proportions of procurement spend domestically and give more to manufacturing in state aid”.
“…there are no quick fixes under any constitutional scenario. The factors explaining Scotland’s relatively steep decline in manufacturing are systemic, with deeply embedded economic, institutional, historical and cultural roots. At risk of stating the obvious, it is how additional powers are patiently applied to overcome these problems that will determine manufacturing’s long-term future in Scotland.
“It’s not credible to assume that constitutional change in and of itself will boost manufacturing output and jobs. Global economic forces have acted to reduce manufacturing’s share in all advanced economies. These forces, particularly the rate of productivity growth due to technological and process innovation, will continue to constrain jobs growth whether Scotland is independent or not. Bad domestic policy may help explain Scotland and the UK’s relative performance but it’s very far from the whole story.
I then noted that:
“Maybe the greatest opportunity is constitutional change precipitating radical change in Scotland’s business culture. Freed from the dead hand of the City, it’s possible to see a new manufacturing and innovation eco-system developing in which firms can grow organically with committed – public and private – funding partners. As investment horizons widen, management and policymakers may start to see the benefits in an approach which works for employees, communities, suppliers and customers as well as shareholders.”
However the analyses of why industrial decline has been steeper in the UK than other nations and what might be done to reverse the trends are pretty inadequate. More words are expended on the benefits (all justified) accruing from a ‘strengthened’ manufacturing sector than on how it might be strengthened in the first place – and, pertinently, exactly how additional powers flowing from independence might be applied in this respect.
But it’s the refusal to take on the role of finance that’s most problematic. Although Policy Choices argues that the interests of the City have been catered for to the detriment of manufacturing, there is no developed assessment of the failure of UK finance to support industry or of the disproportionate amount of resources (e.g. STEM graduates) it absorbs.
The White Paper could have been much, much bolder on structural reform of the banking sector, new public investment vehicles and how they might be funded and corporate governance reform. Models of independence or enhanced devolution which seek to retain or replicate essential elements of the current system (e.g. predominant role of finance) are very unlikely to deliver manufacturing growth. It’s interesting that one of the few clear policy priorities of the Scottish Government remains cutting corporation tax; a policy that’s likely to prove actively detrimental by further embedding short-termism and pressurising the investment subsidies which benefit manufacturing over finance.
Stephen Boyd - STUC
[STUC discussion papers on manufacturing 2007 and 2011. Presentation to National Economic Forum 2010]