The paper 'Analysis of the British Economy" is a perfect example of a macro and microeconomics case study. There was a time when the United Kingdom was synonymous with manufacturing excellence. Many countries looked to the UK for machines and other manufactured equipment and the British industry itself served as a role model of sorts for countries that aspired to their own manufacturing success. Today, however, British manufacturing is a sad reflection of its former self and with icons of British manufacturing such as Rolls Royce and Rover already sold to foreign companies, it is clear that the industry has fallen far from its lofty heights; even so, there are those who believe that all is not lost and that there is a possibility of reviving the manufacturing sector in the United Kingdom once again. Historical success The post-World War II era has often been highlighted as one of the high points for British manufacturing.
In particular, there was a post-war boom between 1945 and 1952 that has garnered a lot of attention (Higgins 2003, p52). The competitors of the United Kingdom in the postwar years, in terms of productivity, seems to have lagged behind that of the UK.
However, “ the latest evidence shows that whereas these had average labor productivity of just 90.6 percent of the UK average in 1950, by 1980 their average trading performance exceeded that of the UK by just under 40 percent” (Higgins 2003, p52). In addition, trading performance in the manufacturing sector was not very good as the UK’ s share of world exports of manufactured products declined from 25.5 percent in 1950 to 10.2 percent in 1980. At the same time, “ between 1955 and 1980 import penetration in the manufacturing sector increased from eight to 30 percent” (Higgins 2003, p52).
A balanced picture, however, is necessary. A study of the long-run profitability of the British manufacturing sector, suggests that the picture is not as bad as it might seem, at least, up to 1992. This is particularly the case for certain manufacturing sectors. According to Cameron and Proudman (1998), “ the industries with above-average productivity tend to remain the same over time, particularly for TFP (Total Factor Productivity). For example, in all 23 years of the sample period, Computing and Pharmaceuticals are ranked first and second respectively in terms of TFP” (Cameron & Proudman 1998, p153). In fact, even today, manufacturers account for as much as 60% of the country’ s exports and as noted, following World War II, when manufacturing played a much greater part in the economy, it accounted for about “ 40% of the UK economy.
The sector also employs considerably fewer people than it used it. At the end of the 1970s, it employed just under a third of the total UK workforce.
And in the last year alone, an estimated 150,000 manufacturing jobs were lost” (The facts about UK manufacturing http: //news. bbc. co. uk/1/hi/business/1861801.stm). Signs of decline In the 1970s, there were already signs that the UK manufacturing sector was not as robust as it could be. Some of the explanations given at the time had to do with input price shocks, the increasing attention paid to services, and lower capital investment. While some claim that the apparent decline was actually mismeasurement, Cameron (2003) “ In the 1970s, it is often argued, institutional rigidities, strong trade unions, lax competition policies, corporatist government interventions and a slowdown in technological advance led to a growth slowdown” (Cameron 2003, p122).
All of these factors might have played a role. It is also possible that in a very small way, production from Japan, which was the first of the Asian countries to make its mark in the field of manufacturing had slowly begun to affect other markets. In Cameron’ s assessment, “ When input prices rose in 1973 and 1974, there was a downward bias to an upward bias in measured valued added growth.
The trend rate of growth fell by around a third in the 1970s, and much of that fall can be attributed to a slowdown in the rate of growth of R& D capital. Again, this reversed to some extent in the 1980s, leading to higher trend growth, helped by de-unionization” (Cameron 2003, p136). More likely, the above factors mentioned by Cameron (2003) worked together with other factors, such as the impact of the Asian Tigers of South Korea, Taiwan, Hong Kong, and Singapore. In any case, as the publication "Sectoral Overview of the Economy 2009) reveals, "Since 1970, the structure of the British economy has changed in three principal ways.
The share of financial and business services has grown from 12 percent of GDP to around 20 percent. The share of manufacturing has fallen from 34 percent to just over 20 percent. " (http: //www. archive. official-documents. co. uk/document/dti/dti-comp/chap3.htm).
‘British Manufacturers Must Show the World They Mean Business.’ 2009.
PR Newswire, Jan 29.
'Sectoral Oveview of the Economy - Competitiveness Forging Ahead,'
http://www.archive.official-documents.co.uk/document/dti/dti-comp/c3- 24.htm] Retrieved March 30, 2009.
Cameron, Gavin. 2003. Why Did UK Manufacturing Productivity Growth Slow Down
in the 1970s and Speed Up in the 1980s? Economica, 70, (277), p121-141.
Cameron, Gavin & James Proudman. 1998. Growth in UK manufacturing between
1970-92. Bank of England Quarterly Bulletin, 38(2), p145.
‘Lessons from East Asian NICs’ Export Success.’ 1990. The
International Executive, 31(6), p43.
Lindsay, Craig. 2003. A century of labour market change: 1900 to 2000,
Labour Market Trends, 133-144.
“The facts about UK manufacturing.” 2002. BBC News Online, 18 March.
[Retrieved March 30, 2009]