1. The Changing Shape of UK Manufacturing Joe Grice, Director and Chief Economist

2. Outline Why is productivity important? Manufacturing output, employment and productivity Potential reasons the increase in manufacturing productivity: A better quality workforce An improvement in the information technology base A change in the composition of the UK manufacturing industry Investment in research and development Capital deepening A more integrated global economy Productivity growth by export status Productivity growth by firm ownership

3. Current price Gross Value Added per hour and hourly wage Source: Labour Productivity Measures from the ABSLabour Productivity Measures from the ABS :

4. Labour productivity (output per hour) 1948- 2013, (1948=100) Source: Labour Productivity (ONS) :

5. Whole economy and manufacturing output and workforce jobs Source: Index of Production (ONS), Gross Domestic Product (ONS) & Labour Market Statistics (ONS) :

6. PRODCOM sales growth, (average annual growth, 2002-2013, %) Source: UK Manufacturers’ Sales by Product(PRODCOM) :

7. Reduction in manufacturing jobs between 1979 and 2013 (%) Source: Labour Productivity Statistics (ONS) :

8. Contributions to change in Gross Value Added, 1994-2012 Source: Multi-factor Productivity (ONS) :

9. Labour quality by industry (1993=100) Source: Quality Adjusted Labour Input (QALI) :

10. Percentage of manufacturing hours accounted for by qualification Source: Quality Adjusted Labour Input (QALI)

11. Percentage of manufacturing hours accounted for by age Source: Quality Adjusted Labour Input (QALI)

12. Contribution to manufacturing sub- industries productivity growth Source: Labour Productivity (ONS) and Labour Market Statistics (LMS)

13. Average annual labour productivity growth by ICT maturity Source: Annual Respondents Database (ARD): Annual Business Survey (ABS), E-commerce survey, and Community Innovation Survey (CIS)

14. Job flows out of the manufacturing industry: 2002 to 2013 Source: Labour Force Survey Microdata

15. Net capital stock and output per hour Source: Capital Stock and Labour Productivity

16. Research and development expenditure as a proportion of turnover, % 201020112012 Manufacturing3.33.63.4 Services0.2 0.1 Food products and beverages; Tobacco products0.40.5 Textiles, clothing and leather products0.1 Pulp, paper and paper products; Printing; Wood and straw products0.1 Refined petroleum products and coke oven products65.77.6 Chemicals and chemical products32.22.6 Pharmaceuticals31.735.533.8 Rubber and plastics0.60.70.8 Other non-metallic mineral products0.6 0.4 Casting of iron and steel1.31.61.7 Non-ferrous metals1.81.41.1 Fabricated metal products except machinery and equipment0.40.5 Machinery and equipment2.93.23.3 Computers and peripheral equipment9.29.910.1 Electrical equipment4.23.93.7 Consumer electronics and communication equipment11.617.327.6 Precision instruments and optical products; photographic equipment4.75.45.6 Motor vehicles and parts3.444.4 Other transport equipment1.1 Shipbuilding4.65.64.7 Aerospace87.77.5 Other manufactured goods0.9 Source: UK Business R&D Publication (ONS)

17. Average annual labour productivity growth by exporting status (% per annum, 2001 to 2010) Annual Respondents Database (ARD): Annual Business Survey (ABS), E-commerce survey, and Community Innovation Survey (CIS)

18. Average annual labour productivity growth by firm ownership, (% per annum, 2001 to 2010) Annual Respondents Database (ARD): Annual Business Survey (ABS), E-commerce survey, and Community Innovation Survey (CIS)

19. Conclusion Manufacturing productivity has risen across a broad range of sub-industries, from textiles to pharmaceuticals. Due to steady output growth and a noticeable fall in employment. A range of factors are having an impact – such as labour quality and capital deepening. This presentation has been designed to inform and encourage the debate around manufacturing productivity – not provide a comprehensive and definitive explanation.