Government must support resource efficient manufacturing to close North/South divide and unlock profit
The government must support more resource efficient manufacturing in the UK to redress the regional productivity gap and unlock up to £10 billion in profits, according to a group of UK business leaders.
Five leading UK business organisations - the British Chamber of Commerce, the TUC, the Association for the Conservation of Energy, the University of Cambridge’s Institute for Manufacturing, and the North West Business Leadership Team - have joined up with environmental think tank Green Alliance to push for a cleaner manufacturing sector.
The call comes as the government’s budget watchdog, the Office of Budgetary Responsibility, is expected to announce that its economic forecasts since 2010 have been overly optimistic.
In advance of the release of the government’s forthcoming industrial strategy, in a joint statement released today (9 October), Green Alliance and these leading business organisations call for the government to raise the baseline performance of UK manufacturers on resource efficiency, a move that has the potential to add £10 billion to manufacturing profits, support growth in the North and Midlands, and keep good jobs in the UK.
Referencing Brexit’s role in opening a conversation on the future of the UK economy, the statement reads: ‘We have stagnating wages, the productivity gap between North and South, and an overdependence on financial services. The Industrial Strategy should be addressing these structural problems.
‘There is a distinct and special role that manufacturing can play. Growing manufacturing productivity has the potential to provide good quality jobs, particularly in regions outside London and the South East, and to translate the UK’s strength as a knowledge economy into manufacturing excellence to rebalance the economy.’
‘Industrial resource efficiency is more than a cost management issue, it is also a strategic opportunity to reinvent the manufacturing sector to optimise energy and resource use and keep materials in productive use for longer.
‘This is where manufacturing and services can come together. UK expertise upstream, in research, design and engineering, and downstream, in logistics, marketing, and product services, needs to be focused on resource efficiency to build a UK manufacturing base fit for the future.’
‘Huge economic opportunities’ available
Currently, manufacturing makes up 15-20 per cent of economic activity in UK regions with low productivity, with around half of manufacturers’ costs, productive and unproductive firm alike, going towards resource inputs, while the majority of firms have only managed to reduce their energy usage by 10-15 per cent, though top performing manufacturers have been able to cut theirs by up to 50 per cent.
Between 2003 and 2015, there was a 24-fold increase in institutional investors asking for and acting on information about resource risks, and the organisations above are urging the government to help manufacturers via the Industrial Strategy to respond to these risks through the provision of a long-term view and an understanding of how technology can improve efficiency through the use of alternative materials, optimise processes and recovery of materials.
Commenting on the statement, Angela Francis, Senior Economist at Green Alliance, which recently released a report - ’Lean and clean: Building manufacturing excellence in the UK’ - proposing a new UK manufacturing programme, said: “The German and Japanese governments support their manufacturers to raise resource efficiency.
“The UK’s Industrial Strategy must help British businesses keep up if they are to retain their competitive advantage post-Brexit. There are huge economic opportunities here which could help to reinvent manufacturing in the North.”
Steve Evans, Director of Research at the Institute for Manufacturing, University of Cambridge, added: “Leading UK firms are already capitalising on the more efficient use of energy and materials to improve performance, but many others are not even aware of the resource risks they face or the opportunities for savings that would make them a business priority. The government’s Industrial Strategy should provide foresight and benchmarking for UK manufacturers to realise the untapped potential of resource efficiency and help build long term manufacturing competitiveness.”
Paul Nowak, Deputy General Secretary of the TUC, concluded: “Improving the energy and resource efficiency of British industry is not only a necessity, it’s a great opportunity. It will mean the kind of investment that creates great quality jobs, and closes regional gaps in productivity. And it will help keep British manufacturing competitive in the global economy, so it can be a source of great jobs in the future.”