UK manufacturing industry in deep recession UK Manufacturing Index of Production
110
105
105
100
100
95
95
90
90
85
85
80
80
75
75
70
70
millions
Index of output 2001=100 (millions)
Seasonally adjusted index of production, 2001 = 100
110
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08
Source: Reuters EcoWin
There is a real danger that over twenty per cent of the output of UK manufacturing industry might be lost before this recession is over. The Guardian reports that “closures, short‐term working and the mothballing of plants led to a drop of more than 5% in UK manufacturing production in the final quarter of 2008, according to data from the Office for National Statistics.” Manufacturing output has now fallen by 10.5% in 10 successive months from the peak in February 2008. The signs of a deep downturn in what remains of our industrial heartlands are all there to see. Profitability has been squeezed – the net rate of return is already lower than it was during the 1990‐91 recession. Employment is contracting and at some time this year the number of people classified as working in manufacturing will dip below 3 million – just 12 per cent of the employed labour force. The net trade deficit in manufactured products has continued to widen despite the possible benefits of a cheaper pound. One problem is that the weaker currency increases the costs of importing component parts but in a recession, producers find it difficult to pass on these costs to their own customers, hence a decline in profit margins. www.tutor2u.net Manufacturing production accounts for just 18 per cent of UK real national output. Employment in UK Manufacturing Industry
7.0
7.0
6.5
6.5
6.0
6.0
5.5
5.5
5.0
5.0
4.5
4.5
4.0
4.0
3.5
3.5
3.0
3.0
80
82
84
86
88
90
92
94
96
98
00
02
04
06
millions
Person (millions)
Millions, seasonally adjusted
08
Source: Reuters EcoWin
Trade in Finished Manufactured Goods
2.5
2.5
0.0
0.0
-2.5
-2.5
-5.0
-5.0
-7.5
-7.5
-10.0
-10.0
-12.5
-12.5
-15.0
-15.0
-17.5
-17.5
80
82
84
86
88
90
92
94
96
98
00
02
04
06
billions
GBP (billions)
Trade balance (Exports - Imports) £ billion per quarter, source: ONS
08
Source: Reuters EcoWin
www.tutor2u.net Net Rate of Profit for Manufacturing Businesses
Percentage rate of return
Net percentage rate of return on capital employed, seasonally adjusted
16
16
15
15
14
14
13
13
12
12
11
11
10
10
9
9
8
8
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
Source: Reuters EcoWin
Businesses operating at full capacity
Source: The British Chambers of Commerce, Full capacity survey data, quart
47.5
47.5
45.0
45.0
Net balance
Services
42.5
42.5
40.0
40.0
37.5
37.5
35.0
35.0
32.5
32.5
30.0
30.0
Manufacturing
27.5
27.5
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin
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