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Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
Real Output Textiles Halved
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Real Output Textiles Halved

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    • 1. What’s the future of manufacturing in the UK?
    • 2. Iain Ferguson CBE Chief Executive Securing the future for UK manufacturing? Tate & Lyle PLC
    • 3. Securing the future for UK manufacturing?
    • 4. Rigorous economic data <ul><li>Rigorous economist! </li></ul>‘ It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest’
    • 5. Share of wallet UK household expenditure (1971  100) Spend in food has increased… but by less than the overall increase in income Source: Duffy, 2003 122 167 227 235 138 137 117 105 Food & non-alcoholic drink Total 0 50 100 150 200 250 1981 1991 2001 2002
    • 6. Share of wallet Source: Duffy, 2003 Spend in food has increased… but by less than the overall increase in income 64.30 61.60 61.40 64.99 Average UK weekly household expenditure on food and non-alcoholic drink at 2002/3 prices £ Food & non-alcoholic drink Total 0 100 200 300 400 1974 1984 1994/5 2002/3 % of Total Spend 0% 10% 20% 30% 291.19 295.10 346.30 402.9 22.3% 20.8% 17.8% 16.0%
    • 7. Food and Drink manufacturing sector Primary Processing for example: Milling Refining Slaughtering/rendering Roasting/drying ……………………………… . Final Stage Processing for example: Baking Ready meal preparation ……………………………… . Sales £67.6bn Purchases from UK agriculture £11bn Additional Costs for example: Labour Energy Packaging Plant and Equipment Utilities and Services Distribution Other (including profit) £44bn Imports of raw materials and semi-processed products £12.6bn Source: Food & Drink Federation; input-output analyses, Office for National Statistics, 2004 Foodservice £66.8bn Retail £72.8bn Of which exports £8.9bn
    • 8. Market potential 30,858 13,925 - 13,758 11,658 - 11,512 9,245 - 9,201 7,303 - 7,260 4,360 - GDP € billion
    • 9. Food, Drink & Tobacco sector distribution 19,600 889 - 879 575 - 543 356 - 351 223 - 221 11 - Output € billion
    • 10. UK overseas shipping costs Source: Kaukiainen (2003) Transport has become cheaper in recent times 100% 49.3 56.2 38.8 56.8 27.1 22.9 1872/4 1911/3 1952 1968/9 1979 1990 2001
    • 11. UK performance by sector Sources: Feinstein, 1999; OECD, 2004 Real output: Food output rose, Textiles halved 2000 = 100 76.7 88.6 94.6 101.6 82.3 141.7 169.8 168.5 1970 1979 1989 2002 Food, drink & tobacco Textiles, leather & footwear Productivity: both Food & Textiles saw improvements 2000 = 100 52.4 64.5 88.2 106.9 43.1 56.6 69.7 107.3 1970 1979 1989 2002 Industrial employment: de-industrialisation of the UK % all employment (UK) 48.9 43.8 24.2 1950 1971 2002 Employment numbers: Food has declined, Textiles collapsed 1000’s 1180 906 614 231 509 575 736 784 1970 1979 1989 2002
    • 12. UK revealed comparative advantage Sector performance Source: Proudman & Redding, 1998; updated using ITC, 2004 1 = average export trade performance 0 0.5 1 1.5 2 2.5 Textiles, Leather & Footwear Pharmaceuticals Aerospace Food, Drink & Tobacco 1970-74 1980-84 1990-93 1998-2002
    • 13. UK revealed comparative advantage Details of Food, Drink & Tobacco Source: Proudman & Redding, 1998; updated using ITC, 2004 1 = average export trade performance 0 0.5 1 1.5 2 2.5 3 3.5 Milk products Flour & starch Sugar & sugar confectionery Chocolate Animal feed Margarine Edible products n.e.s Non-alcoholic beverages Alcoholic beverages Tobacco products 1998-2002
    • 14. Taxonomy of success 100 = average export trade performance Technology R&D Highly skilled sector Sales to final consumers (fewer links in chain) Textiles Drugs & medicines Aircraft Beverages Tobacco Food H L H H H L H L H L H H H L H H M M
    • 15. Case study: Textiles <ul><li>Cut costs </li></ul><ul><li>International competition was much more cost effective </li></ul><ul><li>Used scale to try to insulate itself from international competition </li></ul><ul><li>Dramatic decline </li></ul>
    • 16. Accession to the EU of East European countries Market access (distance to GDP, miles) 1761 2172 1548 833 857 1617 1279 Best Access Worst Access Source: Crafts, 2004 Wage costs ($/h) UK The Netherlands Spain Greece Czech Republic Hungary Poland 5.2 12.5 13.5 24.4 24.8 4.9 5.5 Lowest Highest Technology achievement index 0.41 0.44 0.48 0.63 0.61 0.46 0.47 Lowest Highest
    • 17. Harnessing the forces of globalisation <ul><li>Possibilities for vertical disaggregation </li></ul><ul><li>Invest in the parts of the process where we add value </li></ul><ul><ul><li>Match our successful taxonomy </li></ul></ul><ul><ul><li>Proximity to distribution </li></ul></ul><ul><ul><li>Consumer knowledge </li></ul></ul><ul><li>Offshore what can be done best elsewhere </li></ul>
    • 18. The real economics of offshoring * Estimate based on historical U.S. re-employment trends $1 previously spent in U.S., now offshored 0.45 $1.45 – $1.47 $1.00 0.3 0.67 0.47 0.33 » … delivers value to location of offshore business … brings new savings & returns to U.S. … … creates new value from re-employing U.S. labour* … … and makes the global pie that much bigger Source McKinsey Global Institute
    • 19. National labour market flexibility Least flexible Most flexible 0 1 2 3 4 5 6 7 8 Czech Republic The Netherlands USA Denmark Hungary UK Austria Greece Spain Poland France Germany 7.060 6.831 6.121 5.542 5.163 5.103 3.871 3.851 3.731 2.867 2.469 1.192
    • 20. Looking forward for food manufacturing <ul><li>Food manufacturing is insulated from globalisation, but not immune </li></ul><ul><li>EU enlargement, reduced transport costs & faster communications present opportunities for vertical disaggregation </li></ul><ul><li>Offshore manufacturing where costs benefit </li></ul><ul><li>Retain operations in UK that require proximity, skills/technology & consumer understanding </li></ul><ul><li>Flexible labour regulations ensure the whole UK economy will benefit from offshoring </li></ul><ul><li>We should not resist these opportunities </li></ul>
    • 21. Looking forward for food manufacturing <ul><li>We can face the future with confidence! </li></ul>
    • 22. Final word: Adam Smith <ul><li>‘ If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it off them with some part of the produce of our own industry employed in a way in which we have some advantage’ </li></ul>
    • 23.  
    • 24. What’s the future of manufacturing in the UK?

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