The significance of manufacturing to the UK economy

Manufacturing is undoubtedly integral to the UK economy, with its direct, indirect, and induced impacts on employment and Gross Domestic Product (GDP). This has become exceptionally clear in the last week, following new insights from the MACH 2024 exhibition and the ‘True Impact of Manufacturing Report’.


A welder in protective gear using a handheld grinder on a metal beam, causing sparks to fly in a manufacturing workshop.

What is MACH 2024?


MACH 2024 is a week-long exhibition organised by the Manufacturing Technologies Association (MTA) and is considered “the UK’s national event for inspiring, innovating and connecting manufacturing”. It offers an ideal platform for exploring innovative manufacturing technologies and solutions, allowing attendees to experience recent industry advancements all in one spot.


The five-day MACH 2024 exhibition kicked off on April 15th at NEC, Birmingham. Here, the MTA launched the latest ‘True Impact of Manufacturing Report’ from Oxford Economics (OE), an update to the report previously published in 2018.

What is the ‘True Impact of Manufacturing Report’?


In its simplest terms, the 2024 ‘True Impact of Manufacturing Report’ is designed to explain and summarise how manufacturing has positively impacted the UK economy.


But that’s not the only thing the report discusses. While exploring the benefits of UK manufacturing, it also evaluates the economic impacts of mitigating factors on the manufacturing sector. These factors range from the recent global pandemic and Brexit to the significant increase in energy costs, global supply chain fragility and international conflicts.


Alongside the direct impacts of manufacturing, the report considers several other elements. It considers the ‘indirect’ impacts of UK-based supply chains and the ‘induced’ impacts—the latter caused by the way employees of manufacturers and their suppliers spend their wages and how manufacturing actually boosts the wider economy.


A man in a cap adjusts machinery in a manufacturing bottling factory with stainless steel tanks and boxes around him.

What did the report find?


So, what is the true impact of manufacturing on the UK economy?


Direct Impacts


Well, according to the 2024 report, the UK manufacturing sector is highly productive, has a significant impact on the economic landscape and is a vital source of high-wage jobs in the UK.


As conventionally measured in national accounts, it directly employs 2.6 million workers, producing £184 billion in UK GDP in 2022 and contributing 8% of GDP and 7% of employment. It also offers advanced pay compared to the UK average equivalent, with a median wage that is 11% higher.


Indirect Impacts


The report further explains that the sector’s impact on the UK economy goes beyond UK manufacturing companies.


This is due to the intricate network of UK-based supply chains and how they’re utilised. When manufacturers buy from these suppliers, indirect impacts affect all sectors of the economy, from procurement to logistics. After considering these indirect impacts and adding them to the equation, the report discovers that manufacturing supported £348 billion of GDP (15% of the UK economy) and five million jobs (14% of the UK total) in 2022.


But it gets more interesting.


Induced Impacts


Next, the report explores induced impacts. These refer to the result of the employees of manufacturers and their suppliers spending wages. So, when you put the direct, indirect, and induced impacts together, you get another way of estimating the sector’s impact.


Considering this, it’s estimated that its total impact on UK GDP in 2022 was a massive £518 billion. But what does that really mean?


The report explains that for every £1 million, the manufacturing sector directly adds to UK GDP. Still, it actually supports another £1.8 million across the wider economy through these indirect and induced multiplier effects. They go on to say that manufacturing supported 7.3 million jobs in 2022. Similarly, for each job in the sector itself, another 1.8 million are supported across other sectors of the UK economy.


This explains how the money generated by manufacturing isn’t limited to the sector itself. Instead, it branches out to help the economy grow in other areas.


A man operating machinery in a factory/manufacturing setting.

Additional findings


The report also introduces the idea that the manufacturing sector doesn’t solely support GDP and employment. Actually, it contributes to the UK economy in a plethora of ways, like R&D expenditure.


Did you know manufacturing accounts for a disproportionate share of R&D expenditure? The report explains that manufacturers made up 47% of business R&D investment in 2022.


That’s not all, though. It goes on to say that manufacturing produces a sizable source of export revenues for the UK. In 2022, manufactured goods contributed to more than a third of all UK goods and services exports. This equated to around 34.5%.


The engineering sub-sector sector also contributed just under £194 billion to UK GDP. This number included a direct amount of £66 billion from engineering firms alone and £128 billion from indirect and induced multiplier effects.


When you look at it in terms of employment, the engineering sector supported a staggering 3.1 million jobs with the employment of 963,000 individuals, sustaining 1.7 million jobs, including businesses in manufacturers’ supply chains and those supported by manufacturing employees’ spending.

Summarising what this all means


The report paints a clear picture of the manufacturing sector’s positive impact when looking back at the findings for 2022. It goes as follows:


When combining all the direct, indirect, and induced impacts, the manufacturing sector contributed approximately £518 billion to GDP and supported around 7.3 million jobs (both figures include capital goods). You can also take into account its contribution to R&D expenditure and the impact on the engineering subsector, as discussed in the section above.


With this data in mind, it seems clear that manufacturing still plays a significant role in supporting the UK economy. It is a critical industry when it comes to supporting UK citizens and businesses through the challenges of inflation and the rising cost of living.


A woman focused on her laptop, diligently working in a factory/manufacturing setting.

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