Margaret Thatcher ruined the British manufacturing sector, right? Well, probably wrong. While it fell from 25.8% of GDP to 22.5% under the Thatcher government, the general increase in GDP meant that the size of the sector increased significantly.
There was another fall during the seven years of the Major government to 20%, but in the 12 years since 1997, it has fallen to ... 11%. Bearing in mind that a significant proportion of that capacity is actually food processing which is likely to be processed near the point of consumption because food doesn't travel as well as, say, ball bearings or machine tools, and we can see that it has fallen far faster under Labour, who as we all remember were critical of the size of the industrial base when they came to power.
Of course a simple look at Labour policies shows the reason, favouring the film industry, R&D (not tied to UK production) and the offshore shipping industry with investment allowances not permitted to the rest of business whilst reducing the rate of capital allowances and eliminating finance leasing. It is hardly surprising that there has been no investment in industry, and its relative importance in the economy has halved under Labour.
4 comments:
Good stats for the armoury - but where did you get them from?
Labour economic policy seems to favour production of children in 'poverty', 'inequality' and an army of people to try and rectify the situation offset by the taxation of anything that moves, blaming the tories, then borrowing to make up the difference and the final solution of cranking up the printing presses.
The "Sudden Stop" link was very interesting. It would fall within my reckoning of potential risk events. Looking at the item on Britain's fiscal situation in The Market Oracle today, it would fit into that pattern. But when?
Couple of points:
The service economy (particularly the financial services part of the economy) has been one of the main beneficiaries of the Labour years from an ec growth perspective. Thus it is unsurprising that from an economy wide perspective, the manufacturing share of GDP has declined in the face of rampant Fin Services growth.
Secondly, Labour's term has seen the significant rise of the Chinese economy as the replacement manufacturing centre of choice for virtually all low-tech products. This has been a global phenomenon and can hardly be attributed to Labour.
Third, this is an illustration of a move towards a high-skill economy (IT, etc). Not necessarily a bad thing.
Interested to know where you get the stuff on capital allowances etc. Not that I am refuting these points, more interested in the detail.
"Interested to know where you get the stuff on capital allowances etc. Not that I am refuting these points, more interested in the detail."
It's part of what I do for a living, sourcing and structuring funding what is left of British (and European) industry (so maybe I should have declared an interest).
Moving to a high skill economy sounds good, but doesn't seem so smart when every other developed economy is doing the same.
20 years ago we had an advantage because 100% of our workforce speaks English, elsewhere it was much lower. Nowadays the gap is much smaller and imported.
Keynesian economics don't work when most of our manufactured goods are imported. The government spends money on services and the recipients spend it on imported iPods and BMWs and the only stimulus to the economy is the reatiler's margin with the rest going offshore.
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