Manufacturing in Britain: A Survey of Factors Affecting Growth and Performance

An ISR Economic growth & performance study

This book provides a concise, comprehensive account of factors affecting manufacturing growth and performance in present day Britain.

It begins with a review of general trends and issues before turning to individual firm and industry cases. The study examines new product developments, market trends, and economic environmental influences. It analyzes plant-level managerial and organizational aspects of production. Finally, it considers political-legal, educational and training, and other wider socio-cultural influences on manufacturing growth and performance.

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1. Manufacturing in Britain: an Overview of Factors Affecting Growth and Performance

Introduction* Manufacturing growth and performance: a special case of general business-economic growth and performance* Economic influences on manufacturing* Manufactured goods markets and demand trends* Technological development and product innovation* Management and production organization* Manufacturing industries: cases* The manufacturing labour market, employment, and education and training* The political and legal environment* Investment and the growth and performance of firms*

2. General Economic Influences on Manufacturing

Introduction* General economic influences on growth and performance* The economic-market environment* Economic studies of British manufacturing productivity* Size of firms, competitiveness, and performance*

3. Manufactured Goods Markets and Demand Trends

General market and marketing influences on manufacturing* Trade and markets in manufactured goods in the UK* Case studies of markets and demand trends in: Footwear, clothing, and textiles* Food and drinks* Printed and published materials* Motor vehicles* Engineering products* Chemicals* Information and communications technology products* Buildings and building materials*

4. Technological Development and Product Innovation

Introduction: the benefits of new technologies* Recent technology and productivity improvements in US manufacturing* Technological development in British industry* The development of new products and markets* External market-economic influences on innovation* The case of the textile machinery industry* Internal organizational factors facilitating innovation* Personnel factors* Finance and innovation factors*

5. Management and Production Organization

Modern industrial organization, growth, and performance* Theories and research* Changes in company structures and operations with development* “Lean” manufacturing: the Toyota production model* Manufacturing and industrial organization in modern Britain* Manufacturing efficiency and management* The determinants of managerial performance* Marketing and marketing management* Production organization and labour* Labour productivity* International comparisons* Part-time, tele-, and professional contract working* Performance-related pay* Foreign manufacturing firms in Britain*

6. Manufacturing Industries: Cases

Chemicals * Textiles and clothing* Mechanical engineering* Electronics* Food, drinks, and tobacco* Building and building materials* Papermaking* Motor vehicles* Pharmaceuticals*

7. The Political and Legal Environment

Introduction: the negative consequences of political enterprise* Political-economic liberalization* Liberalizing reforms in the political-legal environment in Britain* Current industry concerns* The impact of government policies and legislation in: Food, drink, and tobacco industries* Textiles and clothing* Capital goods* Construction and building materials* Motor vehicles and components* Pharmaceuticals*

8. The Labour Market, Employment, and Education and Training for Manufacturing Jobs

Introduction: problems in attracting and retaining manufacturing labour in Britain* The UK engineering labour market* The importance of salaries and other benefits in attracting, motivating, and retaining employees in Britain* Educational and training reforms aimed at encouraging more school leavers and college graduates into manufacturing*

9. Capital Investment and the Growth and Performance of Firms

Introduction: the contribution of investment to business growth and performance* Types and sources of capital* Venture capital* Economic aspects of investment and enterprise growth and performance* Investment and the growth and performance of firms in engineering* Engineering firms and the stock market* How engineering firms have sought to increase their profitability, investment returns, and thus attractiveness to stock market and other investors* Investment and the growth & performance of firms in:Chemicals* Pharmaceuticals* Motor vehicles* Food processing* Construction and civil engineering* Textiles and clothing* Foreign investment and enterprise development*


Print book

Third revised edition 2003. New impression 2011

ISBN 9780906321300

128 two-column pages


Price £74.95 including free postal delivery


E-book price £15.39 (British pounds 15.39)

E-book ISBN 9780906321614

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Sample passages

Over the years, Britain had attracted a far greater amount of direct foreign investment than had any other European country. However, membership of the EU bloc was imposing various dysfunctional business-economic laws, policies, and anti-competitive agreements on UK-based manufacturers. These had raised overall production costs and reduced the ability of the country to compete for foreign investment with other places around the world.

The EU bloc had sought to protect itself against lower cost foreign competition by means of common external tariffs and other trade barriers. However, domestic and international political-economic pressures were gradually forcing these down.

Currently, the trade argument for British membership of the EU bloc is weak. The general economic and political case for withdrawal from this minimum cost imposing, anti-competitive and anti-democratic cartel is strong.

It is most unlikely that the rest of Europe would cease to trade with an independent UK or seek to impose sanctions (etc.). Outside the EU, Britain could free-up its food imports and other aspects of external world market trade and scrap numerous costly bloc-imposed regulatory and fiscal burdens. Doing so would inevitably trigger competition amongst European governments to provide the most favourable political-legal environments for industry and investment – to the general benefit of the Continent and the rest of the world… (page 8)

Nonetheless, the factors that reduce production operational costs and ease market entry on the part of small firms can do the same on the part of large firms. Big firms can just as easily obtain the equipment to produce in economical small runs and set up in new product fields. Large firms might offer customized speciality products alongside their established mass product lines. Their existing facilities and resources will often give them low start-up and running costs. It might take them a while to re-deploy their production technology, expertise, and organizational capabilities to the new venture. However, once they have made their move, significant economic advantage could lie with large-scale firms in the markets concerned… (pages 18-19)

Major general factors affecting the market for engineering products are:

· overall levels of investment and growth in manufacturing industry;

· foreign exchange rates;

· taxation and tax allowances;

· interest rates; and

· government regulation and deregulation.

This market comprises several major sectors. There are significant differences between household consumer, industrial-commercial, mechanical, and electrical-electronic (etc.) engineering product markets. However, household expenditure as well as investment by firms directly or indirectly affects the sales of all products.

Beyond the domestic economy, world trade and economic activity levels have a major impact. Such things as interest and exchange rate changes affect engineering markets both directly and via the wider economy.

In recent years, the demand for electronics products has grown much faster than that for traditional mechanical products. In Britain, service firms and industries are now much larger than manufacturing and these have been investing heavily in advanced information, communications, and other electronic technology. A number of mechanical engineering firms have experienced weak overseas demand for their products and had trouble in competing on price despite sterling depreciation (etc.). However, the demand for computers and microelectronics components has been buoyant.

There has been a boom in personal computers and a large-scale take-up of new information technology in factories, offices, schools, colleges, and hospitals (etc.). In the defence equipment sector, demand has steadily shifted from mechanical ordnance to electronic hardware. Meanwhile, deregulation of the telecommunications industry has substantially increased competition and overall demand for new equipment.

At the end of the 20th century, British companies were spending about $65 billion annually on information and communications technology. Their North American counterparts were spending twelve times as much (around $800 billion p.a.).

In the case of large Anglo-American companies generally, direct spending on ICT amounted to about 8% of total business costs on average but this rose to 20% in banking and retailing. About a quarter of all this expenditure went on upgrading existing technologies. Apart from this, other major objectives of the investment were to reduce labour costs and aid the development of new products and services. However, one survey found that chief executives could only measure the cost effectiveness or direct contribution to profits of about one-third of their corporation’s ICT spending…(pages 23-24)

In Britain, what relatively little subsidies the government provided industry in the 20th century had various unintended dysfunctional consequences. Subsidies were usually selective or discriminatory – and therefore advantaged the recipients at the expense of competitors. They tended to be unproductive and unprofitable in real terms – thus absorbing scarce resources that firms could have better employed elsewhere. Government money went to advanced and viable firms as well as old uneconomic enterprises. However, the government mainly awarded production and R&D contracts to larger, established firms and industries. New small enterprises typically got nothing. However, the latter were usually in the forefront of radical technical-product developments from which long-run economic growth would actually come.

In the late 20th century, the European Union bloc authorities were seeking to expand their programme of official grants and loans to civil industrial R&D projects. They wanted to divert subsidies from agriculture into manufacturing and/or build up bloc companies and R&D efforts in competition with those of America and Japan. Continental European countries with dirigiste traditions (such as France) were especially keen to see the bloc more active in this area. However, World Trade Organization rules prevented any neo-mercantilist subsidies that distorted international trade and investment flows.

Rather than state subsidies, technological development in industry benefits from low standard rates of business taxation and generous tax allowances for investments in new plant, equipment, and products. Technical-product development does not flourish in industries in which competition and consumer choice is weak. Thus, if monopoly state enterprises are still in operation, their privatization will facilitate innovation… (pages 37-38)

The main real factors behind high Japanese productivity are things like technological development, sizeable investment in other resources, and careful and systematic attention to efficiency and cost-reduction in technical-production, distribution, and areas. Japanese companies have been comparatively receptive to new ideas and working methods. They have tended to have capable production managements concerned with both quality control and the better design of less costly products. On this last score, many Japanese designers have had extensive and direct knowledge of production – resulting in products that are not just good looking and technically reliable, but also relatively easy to produce with less labour, assembly time, and factory space inputs.

Many world-leading companies with established high reputations and buoyant demand for their products have set up manufacturing subsidiaries in Britain. Many have located on greenfield sites and employed green labour without experience of traditional British trade union restrictive practices (etc.). They have often introduced flexible working arrangements from scratch. They have also typically not had to replace established complicated output-based payment systems by measured day-work or skill-based systems. Nor have they had to get involved in the general renegotiation of rates, or experienced the general problems in overhauling traditional technical-production systems.

In the case of Japanese manufacturing plants set up in Wales for the production of TVs and other domestic appliances, the workers employed have often been female school leavers prepared to carry out high precision assembly work under intense time pressure for relatively low wages. Other plants have set up in areas of relatively high male unemployment. Even so, the labour turnover of Japanese plants in Wales has been comparatively high.

Overall, Japanese companies in Britain have been more successful in manufacturing than in financial and other service industries in which levels of employee individualism, mobility, and commitment to personal advancement are high… (pages 61-62)

● The research and development of new medical drugs is a high-cost, high-risk activity.

The vast majority of new compounds investigated do not actually work. Many years often elapse from initial experiments and discoveries, through the testing of likely new products, to final marketing.   Patents only run for a certain number of years. When they expire, competitor firms who have contributed little or nothing to the research and development process can enter the market with copied products. Even after successful product launch, firms may still have to engage in extensive and expensive marketing to make new drugs a commercial success.

In the pharmaceuticals industry, direct exports mainly comprise patented and speciality drugs. Domestic production is typical where traditional basic products are concerned. It is also often more economical for pharmaceutical firms to set-up local subsidiaries or license foreign firms to supply their products rather than engage in direct selling.

In the British industry currently, antibiotics, tranquillisers, heart drugs, anti-viral, and cancer drugs are major focuses of R&D efforts.

The high costs and risks involved in producing new drugs mean that independent specialist pharmaceutical businesses have a high failure rate. Most of the major commercial drugs manufacturers are parts of groups involved in producing other things – from industrial chemicals, through toiletries, to cough and cold remedies and other over-the-counter preparations that do not require a medical prescription. Deep investment pockets are often required in this industry. Nevertheless, new small firms are regularly emerging. Established companies in chemicals and other related industries are still regularly getting involved in pharmaceuticals. Despite the high business failure rate, a considerable amount of external equity capital continues to flow into the biotech sector annually… (page 71)

The manufacturing and marketing of drugs is subject to considerable official regulation.

Safety testing and evaluation of the efficacy of new drugs is rigorous in Britain as in other Western countries. On top of this, patent laws, official protection against counterfeiting, and national health service purchasing are major political-legal influences on the pharmaceutical industry.

Meeting the official regulatory requirements is expensive. Changes in laws and regulations can affect the commercial life, sales volumes, and profitability of pharmaceutical products overnight. High propensities for civil litigation and heavy damages for illness or injuries caused by products further increase the level of business risk.

Finally, general government health policies and expenditures affect the industry. The British government is by far the biggest customer of the pharmaceutical industry via the National Health Service. Meanwhile, official restrictions on the public advertizing and sale of products mean that pharmaceutical companies are highly dependent on the recommendations and prescriptions of individual practitioners to generate sales… (pages 83-84)

No matter how well educated and trained its workforce is, no firm can alter the fundamentals of the economic and political environment in which it operates. Most British engineering firms fall into the small and medium-sized enterprise category. They make modest profits, and operate in relatively competitive and uncertain markets. Firms that are unable to offer competitive salaries, career advancement opportunities, or a reasonable degree of security will always tend to experience recruitment problems.

To grow and prosper in the longer term, firms may have to get out of their present line of business altogether and into another form of activity. Even then, their labour recruitment problems may not ease. Fast growing, innovative firms tend to generate new jobs and skill requirements that they then have to fill.

At the macro-level, investing more in education will not solve fundamental economic problems or overcome political obstacles to business growth and performance. Investing more capital alone will not even remedy deficiencies in existing educational and training facilities. Firms may fund academies, go into partnership with local schools, or offer individual students work experience and college scholarships. However, they cannot overcome general shortages of maths and science teachers or stop politicians meddling in the running of schools and over-burdening curricula with irrelevant subjects (etc.)… (pages 88-89)

In Britain, the open non-protectionist attitude towards foreign company takeovers and mergers is part of a general pattern of openness and competitiveness in economic affairs.

The British labour market is comparatively flexible. There are many more part time, self-employed freelance and 24/7 shift pattern workers in Britain than in Continental European countries such as France and Germany. Less employment red tape, lower payroll tax burdens, and more flexible working have been a major attraction to foreign company employers.

However, Britain’s success in attracting direct foreign investment has caused envy and resentment elsewhere.

One of the main objectives of the EU authorities has been to create a so-called level playing field across the bloc – i.e., to equalize official business advantages/disadvantages across national borders. On balance, EU membership has worsened the political-economic environment and general attractiveness of Britain as a location for international business and investment. Various regressive Continental laws and policies have entered into Britain because of EU membership. Britain continues to be by far the most attractive place in the EU for inward investment. However, the overall favourableness of the UK as a place for conducting business, attracting foreign investment, and competing internationally has declined in terms of various key global indices.

One major factor in the deteriorating political-legal environment has been increased labour market and employment regulation. The Blair Labour government elected in 1997 imposed a high minimum wage tariff barrier to labour market entry/employment and ended Britain’s opt-out from the EU Social Chapter that imposed a string of regressive laws, policies, and cost obligations on British employers… (page 116)