03 Dec 2015
The need to improve industrial productivity has become something of a given in our economic development debate. You’ll find the issue at the centre of the Scottish Economic Strategy along with political emphasis on reducing inequality as part of the answer.
But what if we also paid more attention to the regrowth of our manufacturing base?
For years we’ve assumed that we can’t compete with lower wage economies and that we’re better focused on high value design or on brand development, whilst leaving the actual making of the product to someone else, usually in Asia or Eastern Europe.
But alongside our productivity challenge we have an export deficit and a poor record in business research and development. Some 80% of Europe’s exports and research and development depend on manufacturing. Making more products for trading round the world could make a difference to all three issues.
I was intrigued to be asked to join a conference last week hosted by the Northern Italian region of Friuli Venezia Giulia in its biggest town, Udine. Friuli is dominated economically by a dense network of SMEs with a heavy emphasis on manufacturing, including food and drink and furniture. They care about the economics of manufacturing a great deal.
Two contributions especially caught my attention; one by Peter Marsh, previously a long serving Financial Times journalist and now an author specializing in new trends in manufacturing; the other by Professor David Bailey of Aston University.
Together they laid out the potential for a rebirth of manufacturing in developed economies. Demand is becoming more specialised. Customers are seeking out more personalised goods, and technologies such as 3D printing and laser-cutting machines are beginning to make it possible to respond without the need to achieve economies of scale.
Reshoring of once outsourced manufacturing processes is beginning to happen in the US. Increasing wages, lower transport costs and high quality control costs for offshore production have helped to boost the share of manufacturing in both the US and Europe economies since 2008.
Both Bailey and Marsh hold out the prospect that new enabling technologies are making it possible for even very small companies to become competitive in making innovative products. That becomes even more likely when customers want to get closer to the design and manufacturing process, almost co-creating their ideal car or chair with the manufacturer.
Might we debate whether Scottish companies could follow the example explored in Udine?