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Britain performing worse than most of OECD, IPPR report reveals

Foundation industries - like steel, metal and chemical production - have flat-lined during the economic recovery, with employment still 100,000 lower compared with before the recession, an IPPR report has found.

 
IPPR says that Britain is now unique as a major developed economy in having such a small and struggling core materials sector. It found that Britain has performed worse than most of the OECD and is near the bottom of the EU league. Globalisation is partly responsible, but stronger performance in other developed countries show that Britain can do better, according to IPPR.


 
The report, launched this morning, says there is more that Government can do to boost the sector, and even small improvements in competitiveness can add billions to gross output and create tens of thousands of extra jobs.


 
The report, called ‘Strong Foundation Industries’ found that the British foundation industry manufacturing has suffered a deeper contraction in the recession than the rest of the economy, and remains below 2008 levels. It says that the state of metals and chemicals manufacturing cannot be blamed entirely on globalisation, especially when the UK is compared to our EU and OECD competitors (The UK foundation as a share of the economy has fallen by 43% since 2000, compared with 21% for the OECD as a whole and just 10% in Germany).

 

UK foundation industry production is concentrated outside of London and the Southeast, and held up better following the recession when located in closer proximity to key customer firms in strategic industry such as aerospace and care manufacturing, according to the report.

 

The report also found that a further 1% increase in demand for domestic production of basic metals, chemicals and fabricated metals – perhaps coming as a result of increased demand for exports or reduced competition from imports – could be worth around £2.3 billion in gross output and an extra 19,000 jobs among foundation industries and their suppliers. Negative growth in demand could have the equal and opposite effect.

 

The report makes a number of recommendations, such as:

 

  • Action to ensure a level playing field on trade and energy costs with European competitors; 
  • To boost investment and improve productivity, it recommended repurposing the Regional Growth Fund to target investment in the supply chains that are supported by foundation industries, such as aerospace, automobiles and pharmaceuticals. 
  • To support industry clusters it recommend renewing the Advanced Manufacturing Supply Chain Initiative and plugging foundation industries into the UK’s Catapult innovation network
  • Rather than allowing firms to go bust that have a potentially viable future, the UK should introduce a ‘right to buy’ for employees, ensuring our industrial capacity isn’t permanently lost during a period of global economic turbulence and spreading ownership in the process.  

 

Mat Lawrence, IPPR research fellow, said,Britain’s manufacturing has been in the doldrums for decades and took a massive hit in the 2008 recession. Worryingly, our metals and chemicals sector hasn’t recovered since and now faces even more competition from countries like China and Russia. It would be comforting to put this all down to globalisation, but the sad fact is that Britain is doing worse than most of the rest of Europe and the OECD so clearly something is going badly wrong. 

“The good news is there are many initiatives that government and industry can take to boost manufacturing, which we list in our report, and that even small increases in this sector can add billions to the economy and tens of thousands of jobs. Most importantly, we need to do more to increase both public and private investment in the sector to boost productivity, and improve the integration of foundation industry firms into expanding industrial clusters such as aerospace and car manufacturing.”

Alfie Stirling, IPPR research fellow, said, “Analysis shows the metals industry doesn’t operate in a perfect market: global investment in new steel facilities, for example, is disproportionately concentrated in regions that are currently significant net importers of steel, as well as being increasingly financed through the public sector. This suggests that geopolitics and the strategic desire from countries for self-sufficiency is shaping future investment and production decisions.  In other words, despite the UK apparently wedding itself to a laissez-faire approach, the real world is not one of pure market theory.”
 

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