The call from EEF, the manufacturers’ organisation, comes on the back of new research showing the evolution of manufacturing sub-sector productivity growth against key international competitors before and after the financial crisis, including where the problems and opportunities for growth now sit.
The research shows that manufacturing is the engine to drive productivity growth across the whole economy having beaten whole economy and services productivity growth in the past. In addition, in the run up to the financial crisis the sector beat the manufacturing productivity growth of Italy, Spain and Germany.
However, looking under the bonnet shows that the performance of manufacturing sub-sectors has diverged since the financial crisis with productivity growth across the sector flat-lining. A focused policy response is now urgently needed from government, it adds.
Says EEF chief economist Lee Hopley: “We’ve known about the productivity problem for some time with various attempts made to try and fix it across the whole economy. Productivity growth matters for wages and international competitiveness yet ten years on from the start of the financial crisis these attempts have not delivered a major shift and we need to tackle the challenge in a different way.
“Manufacturing offers a good area to get gains on productivity growth. The Industrial Strategy Council should now be created urgently and put to task to identify how the overall strategy can improve productivity in those industrial sectors where it has lagged.”
According to the report, Unpacking the Puzzle, there is not one factor that can completely explain the productivity performance of all manufacturing sub-sectors so a targeted solution is needed.
Alongside the Industrial Strategy Council finally being set up, EEF is also calling for four specific additional measures as part of the industrial strategy to be delivered before the Parliamentary summer recess.
- In response to growing frustration, provide clarity on the purpose of sector deals and better project management of those in train. This should include kick starting the promised Made Smarter Commission.
- Effective Local Industrial Strategies require the foundation of formal governance arrangements. We need a devolution framework setting out what is on offer, and what governance is needed to unlock it.
- The White Paper committed to a new strategy for export promotion and business responded to the call for evidence. Details of this new strategy should be published ahead of recess.
- The Spring statement announced an upcoming call for evidence on the UK’s long tail of less productive firms. Industry wants to see a post-purdah push on where government action is needed.
EEF intends to use the research as a starting point for in-depth analysis of manufacturing sector productivity over the summer before producing an extensive report in the autumn. This will contain policy recommendations for the Autumn Budget.