Can Britain make it? [outsourcing

Abstract

At present, the British economy has been undergoing some difficulties in the manufacturing industry. This is because of three factors: (1) Britain had a very substantial and very rapid increase of value of the pound against the euro, (2) there was a step change in the intensity of competition in world market, and (3) the downturn in world markets that was clearly exacerbated by terrorist attacks and the uncertainty caused by the war in Iraq. This experience has not been easy, but Stephen Radley, chief economist with the EEF, believes the benefits are now beginning to come through. Manufacturers have substantially restructured themselves and are improving productivity at a very healthy rate, 6% or 7% per annum, so that we are now in a much more competitive position. Global competition is certainly still fierce, but exchange rates are more favourable than they were and the world market seems to be easing. The surveys have indicated that the rate of improvement in outputs is the best in seven years, so it does seems as though the outlook for manufacturing has improved substantially. There is a caveat to this generally optimistic position. Sustained improvement in the UK's manufacturing position depends on major sources of growth, notably the US and China, continuing to offer expanding markets over the next couple of years, and the EU showing signs of economic recovery.