Britain's manufacturing decline

Today's figures (pdf) show that UK manufacturing output is lower now than it was when New Labour took power in May 1997. During this time, output has by grown 30% in the US and by 14.1% in France. So, why is UK output lagging behind? Possible reasons include:
1. Brown's tax and regulate policies are strangling industry.  But this raises the question: why are the  allegedly more regulated Germans and French  growing faster?
2. Anglo-Saxon capitalism's focus on takeovers and short-term returns is restraining growth. So why is the US doing so well?
3. Measurement error. Maybe the ONS is over-sampling older shrinking firms and under-sampling growing ones. Or perhaps an over-statement of inflation causes nominal output to be deflated too much. However, official figures on output don't seem much out of line with the CBI's regular surveys of past output growth.
4. Monetary policy is restraining output. In 1997-2000, manufacturing was hit by a rising pound, although sterling has falllen back almost to 1997's level since then. However, real interest rates (based on producer price inflation) have been consistently higher in the UK than in the euro zone or US.  Perhaps, therefore, the benefit to manufacturers of a strong consumer have been offset by tighter monetary policy.
5. Britain's manufacturers are exposed to the wrong customers - too much to euro zone consumers, too little to Asia. In the last 12 months, only 2.7% of our exports went to Hong Kong, China, Taiwan and South Korea combined.
I honestly don't know what the answer is here. But I do know that if UK manufacturing can't grow now, when the global economy is strong, one wonders whether it ever can.

Comments

[Curious]

Morning Chris,

"I honestly don't know what the answer is here. But I do know that if UK manufacturing can't grow now, when the global economy is strong, one wonders whether it ever can."

Well, diminishing comparative advantage is forever decreasing our range of manufactured products. At this junction (that our country arrived at many years ago) a resilient world economy is almost irrelevant because we are competitively disadvantaged. Those countries that are at a competitive advantage will gain more from a resilient world economy.

The UK manufacturing industry will have to be highly specialised and sell high value added products, like gears for racing cars, but that will make a small impact on our economy, though it currently stands at around 15%. The times are even gloomier and - I'm sorry to say - will only get worse. Blame globalisation (which I am a proponent of).

On a separate mote, I responded to your efficiency bias article here:
http://culturefusion.blogspot.com/2006/04/efficiency-bias.html