De-industrialisation: Made in Britain

The 1980s were a heady decade. The economy boomed, output soared, unemployment tumbled. Only Britain's manufacturing sector missed the party. While overall economic growth touched Japanese-style highs, manufacturing output hardly increased at all, averaging a dismal 0.5% per annum. Over the same period, UK factories shed jobs relentlessly. Not even the wild excesses of the Lawson years could do more than temporarily interrupt the decline in the manufacturing base.

Today, the picture is bleaker still. Three years of recession have hit manufacturers particularly hard. During the exchange rate mechanism (ERM) era, high interest rates and an overvalued exchange rate hurt capital-intensive industrial companies and eroded their export competitiveness. With freedom from the ERM straitjacket coinciding with the collapse of key export markets in recession-hit Europe, no one is expecting an early pick-up in activity.

Views over the health and prospects of the manufacturing sector are sharply divided. Many argue that so-called 'de-industrialisation' is an inevitable stage of economic development and that public concern over the demise of smokestack industry reflects misplaced sentimentality. Critics retort that the speed and scale of Britain's de-industrialisation is uniquely and damagingly rapid, requiring urgent policy action to head off impending disaster. Like most well-worn controversies, clear thinking is clouded by a fog of misinformation, misconception and downright ignorance. hat the issue deserves further attention is, however, not open to question.

'The "industrial base" is the "secondary" sector of the economy that produces tangible goods,' explains Professor Mike Hardy, consultant at Lancashire Enterprises. 'The so-called "primary" sector produces raw materials like agricultural goods and minerals and the "tertiary" or service sector produces services like retailing and distribution.' Hardy points out that, while the terms industrial base and manufacturing sector are often used interchangeably, the latter is technically a subset of the former. 'The secondary sector is dominated by manufacturing, but it also includes energy production and construction,' he adds. 'When people speak of de-industrialisation though, they are invariably referring to the manufacturing sector.'

Table 1 shows the main categories of production within the manufacturing sector.(Table 1 omitted) It reveals that, in all cases, employment was sharply down between 1981-91, with only three of the 14 sectors (chemicals, electrical engineering and paper) matching the performance of the service sector in terms of...