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Coalition must back manu-services as vital force for manufacturing revival

Authors: The Work Foundation Tom Phillips

14 March 2011

Under embargo until: 00.01hrs 14 March 2011

Coalition must back “manu-services” as vital force for manufacturing revival

Following George Osborne’s call for a “manufacturing revival”, a report published next week (14 March) by The Work Foundation argues that if the Coalition is to safeguard the future of UK manufacturing, it must go beyond the traditional view that manufacturing is just about “making things”. The emergence of manu-services – combinations of innovative products with value-adding services – now provides a prime opportunity for the UK to become a world leader in manufacturing. The report shows how the government must act now to unlock the huge growth potential of manu-services by placing it at the heart of its growth agenda.

The UK can no longer compete internationally in terms of production alone without severe reductions in wages and living standards. However, UK manufacturers now earn 15-20% of their revenue from services. The rise of this manu-service business model has the potential to create jobs and ensure the future of UK manufacturing in an increasingly competitive global market.

The report demonstrates that while the UK currently trails behind countries such as Germany, Japan and France in hi-tech manufacturing, its biggest strength now lies in the ability to integrate services into complex manufacturing processes. Evidence suggests that 28% of UK manufacturers have now moved into this area, driven by the changing structure of the global manufacturing industry and the demands of increasingly sophisticated customers.

“The idea that the UK simply needs to get back to ‘making things’ reflects an outdated view of the manufacturing industry,” said Andrew Sissons, report author. “From mobile phones to aeroplanes, today’s manufacturers don’t just sell products – they sell solutions, experiences and outcomes. This area now offers a major opportunity for the UK to increase its manufacturing exports and overcome its severe strategic trade gap, moving it decisively towards a rebalanced economy.”

“Far from being in a state of decline, UK manufacturing is well positioned to lead the world through a manu-services expansion. Both larger firms such as Rolls-Royce and smaller niche companies such as FeONIC and Red Spider Technology have embraced this innovative business model. But with emerging economies such as China and Russia investing heavily in this area, the UK cannot afford to get left behind.

“Manu-services play to Britain’s strategic strengths: a highly skilled workforce, a strong service sector and excellent universities and institutions. Only 42% of manufacturing jobs in the UK are now in production. This is much lower than in countries such as France and Germany and reflects the growing level of employment provided by key manu-services areas, chiefly research, design and marketing and servicing of products.

“Companies such as Apple provide a good model for growth in this area. For example, iPods are assembled in China but only 5% of the value is captured there. The bulk of Apple’s profits are achieved through its design, branding and intellectual property.”

More than making things: A new future for manufacturing in a service economy goes on to warn that while this is an area that plays to the UK’s strengths, manu-services provide a significant challenge for businesses. Government policy must ensure that firms are not held back by associated risks, capital requirements and transitional problems posed by the shift to manu-services.

Andrew Sissons added, “To secure the UK’s place as a world leader in manu-services, the government must place them at the heart of its policy agenda. Manu-services mark a significant gap in government policy, and the Coalition should invest resources in developing an evidence base and detailed understanding of how UK business can benefit from this business model. A manu-services agenda would have two key elements: first, creating world-class networks of universities, banks and business support that can drive innovation in services and business models; and second, tackling the barriers to growth specifically faced by manu-service firms.”


Click here for the report’s full policy recommendations  

Ends

Notes to editors
  1. More than making things: A new future for manufacturing in a service economy by Andrew Sissons is available at www.theworkfoundation.com on publication and from the media team in advance.
  2. Andrew Sissons is available for interviews and briefings.
  3. The report is part of the Knowledge Economy research programme which is sponsored by BAE Systems, BIS, British Council, Design Council, EDF Energy, IPA, Microsoft, NESTA, Rolls-Royce and the Technology Strategy Board.
  4. The Work Foundation is the leading independent authority on work and its future. It aims to improve the quality of working life and the effectiveness of organisations by equipping leaders, policymakers and opinion-formers with evidence, advice, new thinking and networks. In October 2010, Lancaster University acquired The Work Foundation, forming a new alliance that will enable both organisations to further enhance their impact.

Media enquiries:

Tom Phillips
0207 976 3554 tphillips@theworkfoundation.com

Nasreen Memon
020 7976 3507 or 07825 527 036 nmemon@theworkfoundation.com