Friday 21 June 2019

Manufacturing refreshes the parts that other industries cannot reach

Kate Hills' blog post "Why the value of UK manufacturing is underestimated" summerises a new report - "INSIDE THE BLACK BOXOF MANUFACTURING:CONCEPTUALISING AND COUNTINGMANUFACTURING IN THE ECONOMY A report prepared for the UK Department for Business, Energy and Industrial Strategy By Jostein Hauge and Eoin O’Sullivan".

Summerising the summery.

1. Manufacturers buy services like pattern-cutting which are not bought by other kinds of business. So pattern-cutting, in a way, is part of manufacturing; it would go if manufacturing went. And manufacturers buy normal services as well.

2. There is no database of UK manufacturers,

(a) so a business that used to make things in the UK but now just brands them or commissions them can count as a manufacturer in the stats. The Office of National Statistics takes the data from their accounts at Companies House.

(b) smaller businesses tend not to get counted. Those which are not registered for VAT aren't counted by the governments' own back-room statisticians. A report for The Crafts Council found them, but the office for national statistics does not. So
(i) there are loads of un-counted manufacturers circulating money round parts of the economy
(ii) including manufacturing-specific services that could better be called manufacturing.

Compare this with the conventional wisdom, usually paid-for by some unpopular industry which lobbies government a lot and has paid Oxford Economics to write a report. Each report says that "Fashion" (meaning fashion retail) or Olympic sport, of Heathrow, contributes a vast amount to the OK economy because the money flows-around. Of course it does. When I studied economics, each pound circulated about three times before going abroad or being saved. So if you want to make an industry sound good, you define it widely and then commission Oxford Economics to add-up its turnover and multiply by three, and say "nail salons contribute £35 billion to the UK economy and so deserve special help from government". Fashion retail, for example, funds the PR industry according to the Value of Fashion report.

What an economist ought to be interested in is the part of the economy that circulates money to the right other bits of the economy, and not to China or tax-haven accountants. Obviously, this is part of the economy like building or manufacturing or mining that deals in physical objects in the UK and people who process. In other words, manufacturing. Just as Heineken refreshes the parts that other beers cannot reach, manufacturing refreshes parts of the economy that other





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