Manufacturing could be worth up to 19% of UK economy

Published:  09 October, 2015

The UK economy is growing strongly and is rebalancing healthily, with investment and productivity increasing, but we must raise our game on exports, CBI chief John Cridland said in a major economic speech recently. He explained that taking the wider impact of manufacturing into account, the CBI estimates that the sector could account for 19% of the UK economy, double the share implied by national accounts.

He warned however of the damage that measures such as the mandatory National Living Wage could have on UK employment.

Speaking at King’s College London to an audience of business leaders, senior economists, Government officials and politicians, the CBI Director-General outlined how the UK economy is rebalancing.

He said: “This recovery hasn’t been over-reliant on consumer spending and there has been some rebalancing of activity towards investment. We’ve seen rebalancing away from the public sector towards the private sector, away from unemployment towards employment, and we’ve also seen some rebalancing within the services sector itself.”

Cridland examined the reasons why exports and productivity growth have been slow, arguing that the latter is not a ‘puzzle’, as the nature of the financial crisis determined the pace of the recovery.

He also highlighted three significant rebalancing challenges: on exports, productivity and raising living standards. While welcoming the Government’s action on productivity, he suggested the Government needs to exercise caution on the National Living Wage: “I've talked to many CEOs who feel they may now have to make changes to their business models, which could result in fewer job and progression opportunities.”

Cridland added that a revision is needed to the Government’s productivity plan, to tackle the vocational education gap by reforming qualifications for 14-18 year olds, and highlight an omission – the importance to the UK’s economy of medium-sized businesses.

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