Business leaders call for the government to rebalance UK economy by supporting leaner, cleaner manufacturing

Monday 9 October 2017
Angela Francis Angela Francis Chief economist020 7630 4526afrancis@green-alliance.org.uk

The British Chamber of Commerce, the TUC and the North West Business Leaders Team are among the UK’s leading business organisations which have joined with the think tank Green Alliance to urge the government to support more resource efficient manufacturing. They say it is needed to close the UK’s regional productivity gap and ensure good jobs stay in the UK. [1] 

The government’s budget watchdog, the Office of Budgetary Responsibility, is expected to take a much more pessimistic view of productivity in future, as it is due to announce that its economic forecasts have been too optimistic over the past seven years. This makes a focus on productivity and rebalancing the economy even more vital. [2]

Manufacturing contributes 15-20 per cent of the economy in UK regions experiencing low productivity. Although this includes some of the UK’s most productive firms there is a long tail of poor performers contributing to the problem.

Around half of manufacturers’ costs are on resource inputs. In the past ten years the best manufacturers across the country have cut their energy use by 50 per cent, but the majority have only managed a reduction of 10-15 per cent. 

Between 2003 and 2015 there was a 24 fold increase in institutional investors asking and acting on information about resource risks. The government can help manufacturers via the industrial strategy by providing a long term view of these risks and an understanding of the role of technology in improving efficiency, through the use of alternative materials, optimised processes and recovered materials.

In a joint statement five leading business organisations and the think tank Green Alliance are calling on the government to use its forthcoming industrial strategy to raise the baseline performance of all UK manufacturers on resource efficiency. This has the potential to add £10 billion to the profits of the manufacturing sector, increase productivity, support growth in the North and Midlands, where manufacturing is more dominant, and keep good jobs in the UK.  

A report by Green Alliance, Lean and clean: building manufacturing excellence in the UK, proposes a new manufacturing upgrade programme with procurement criteria, to encourage and reward more resource efficient production.

Angela Francis, senior economist at Green Alliance, 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.”   

Juergen Maier, chief executive, Siemens UK and chairman, North West Business Leadership Team, said:
“A successful and balanced economy must be both sustainable and resilient. Manufacturers in the North West recognise our role in securing and optimising our use of resources. We are working to address fundamental questions regarding the reliability of our energy supply, sufficiency of food production and the resilience of our water supply. These resource issues not only offer the key to future security, but also open up significant productivity gains if government and business place these opportunities at the heart of our future industrial strategy.”

Steve Evans, director of research, Institute for Manufacturing, University of Cambridge said: “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.”

Mike Spicer, director of research and economics, British Chamber of Commerce said:
“Manufacturers across the UK tell BCC that they are faced with rising input costs that threaten their competitiveness.  As the most successful firms know, improving resource and energy efficiency is essential to meeting that challenge. A comprehensive upgrade programme for manufacturing, taken forward by the new industrial strategy and supported by government would be a welcome step in the right direction.”

Dr Joanne Wade, ceo, Association for the Conservation of Energy
“UK energy productivity improved by 15% between 2010 and 2016, but this is not enough to ensure that our businesses are fit for the future.  The industrial strategy provides the opportunity to set out an energy and resource productivity agenda that will close the gap and help manufacturers across the country to deliver maximum added value to the economy”

Paul Nowak, deputy general secretary, TUC said:
“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.”
 

Contact
Angela Francis (available for interview)
Senior economist, Green Alliance
afrancis@green-alliance.org.uk
Direct line: 020 7630 4526

Notes

[1] Lean and clean: building manufacturing excellence in the UK is published today by Green Alliance

[2] The OBR is expected to take a more permanently pessimistic view of productivity in upcoming economic forecasts, following seven years during which forecasts have been overly optimistic. This will have major implications on public finances going forward. See: https://www.thetimes.co.uk/article/growth-outlook-raises-fears-of-public-finances-bloodbath-6895lw7nn

In April, 2017, Green Alliance published a collection of essays from respected thinkers from politics, business, trade unions and academia on the kind of economy the industrial strategy should be building and the role low carbon and resource efficiency can play called Industrial strategy fit for the future: Perspectives on building a competitive UK economy