Manufacturing is still our beating heart

Manufacturing & Distribution

We were having a chat over an unlocked-down lunch earlier this week about which sectors we see as good for corporate finance work in the next few years.  Doubtlessly, the CF story of 2020 and 2021 has been software and tech services.  Prices being paid have been mind boggling in some cases.

However, as the economy continues to warm up, manufacturing will once again represent a great investment opportunity for UK PLC, private equity and overseas investors.  This great article shows just how important manufacturing still is to the UK economy.

The article says: The ONS attributes the sustained growth to a better quality; more skilled workforce; a shift in production from low to high productivity goods; improvements in automation and technology; increased investment in R&D, and a more integrated global economy. One of the most critical UK manufacturing statistics is the total value of UK manufacturers’ product sales, which was £396.6 billion in 2019, a fall of 1.2% compared with £401.4 billion in 2018.

UK Manufacturing Statistics according to Make UK (formerly EEF), UK manufacturing currently:

  • employs 2.7 million people – earning an average of £32,500
  • contributes 11% of GVA
  • accounts for 45% of total exports – totalling £275bn
  • represents 69% of business research and development (R&D)
  • provides 13% of business investment

Although the contribution of manufacturing to GDP has declined on paper, many of the services provided to manufacturers which would have once been considered part of manufacturing – such as catering; cleaning; building services; security; logistics and so on – are now allocated into different areas of the economy.

However, those contributions are directly reliant on manufacturing for continued business and could actually be considered as a part of manufacturing’s GDP input. As such, many are calling for the true value of manufacturing to be recognised, a move which would see the widely cited figure of 10% of GVA more than doubling to 23% and would greatly impact the overall UK manufacturing statistics.

Just think, we have world-leading businesses in:

  • Aerospace – £31bn
  • Automotive – £72bn
  • Chemicals and Phama – £15bn
  • Construction – >£92bn
  • Defence – £24bn
  • Electronics – £78bn
  • Energy – £6bn
  • Food an Drink – £22bn
  • Nuclear – £1.25tn over next few decades
  • Plastics – £24bn
  • Security – £9bn
  • Steel (yes, it is still there) – £5bn
  • Space – £11bn
  • Textiles – £12bn

What a list!! – No wonder we at Polestar remain excited about working with manufacturing companies.

Despite the decline since the 1970s, when manufacturing contributed 25% of UK GDP, the UK is currently the ninth largest manufacturing nation in the world.

By Charles Whelan on 29/07/2021