It is a truth universally acknowledged that Britain no longer makes anything. Regret for the death of British manufacturing has tinged economic commentary on Britain all my life. For generations, it has shaped the underlying assumptions of British political life too. Politicians have all taken the ‘melancholy, long, withdrawing roar ‘ of British industry for granted. ‘Never mind, we do services. Never mind, the City can hold up the rest. Look, the salmon have returned to the Tyne now all that nasty industry has gone.’
But this Lazarus, lamented if unloved, was never quite dead. More, he begins to stir.
The evidence is not easy to spot, but it is there. It shows up most dramatically in what’s being built. Britain has been quietly building factories faster than commercial premises for the last five years at least. Since mid-2021, private factory construction is up 73%, whilst construction of commercial space is up just 2.6%. But as the chart shows, although the post-pandemic explosive recovery is remarkable, it merely accelerates a trend of factory construction outpacing commercial space which has been constant since 2017 at least.
Also very quietly, growth in manufacturing has kept pace with GDP growth, with long periods of sustained outperformance, undercut by relatively short but sharp shocks.
Not all of this manufacturing outperformance has been on the back of Sterling weakness: manufacturing outperformed between September 2012 and June 2015, when the pound was at historically high levels. But its outperformance has been more-or-less consistent with Sterling between 1.20 to 1.40.
Perhaps one of the reasons the re-emergence of Britain’s manufacturing has gone under the radar is that the growth of factories and output has not generated many jobs. As the chart below shows, in recent times 12m manufacturing employment growth has only outpaced total employment growth once, between 3Q17 and 4Q18. Since 2010, total UK employment has risen by 4.33mn, or 13.8%, but manufacturing employment has risen by only 42k, or 1.6%.
Rising output with stagnant employment? This tells us quite emphatically that Britain’s manufacturing productivity is rising far faster than Britain’s general productivity. Perhaps this untold productivity success is the real reason why Lazarus stirs.