Scotland’s wide-ranging manufacturing industry plays a central role in sustaining and growing our economy. It’s a broad church accommodating industries from chemicals to food & drink, textiles and shipbuilding.
Forty years ago the sector represented around 40% of the economy and accounted for around 30% of all employment. These days, it accounts for 12% of the economy with just 9% of the workforce – around 190,000 people.
But it packs a huge punch. Manufacturing is a real wealth generator for Scotland, delivering over 50% of our international exports and 54% of our expenditure on research and development. Those employed by our manufacturing companies are at the heart of a high-skill, high-wage economy with earnings in the manufacturing sector 30% higher than average. It is where our innovation happens – the lifeblood of future business opportunities.
Although our foundations are strong, to really compete on the world stage and maximise the economic return from our efforts and capabilities, we need to build a strong case for investment in order to drive the game-changing productivity improvements required.
Investment in Scottish manufacturing has fallen behind the rest of the UK and the UK is behind our European competitors. To move us towards the first quartile of productivity when compared to OECD countries, we need an additional £6.5 billion of capital spend in our industry.
There needs to be a determined and intense focus on further improving our productivity, and one of the ways to achieve this is through investment in new technology. The best products are often made using technology and automation that reduces cycle time, increases quality and therefore maximises businesses productivity.
High-value, high-quality products that have provenance and performance are in demand globally. Carefully considered investment decisions allow businesses to scale up their output, maximise margins and deliver performance and value to customers. The appropriate use of technology and automation allows products to be made in advanced economies such as Scotland’s. This in turn drives up the volume of commercial opportunities when coupled with brand development and innovation. Re-shoring volume back into Scotland is now happening, and this is being driven though investment and automation.
The recently-launched Manufacturing Action Plan – A Manufacturing Future for Scotland, seeks to re-imagine and re-position manufacturing here in Scotland. The more businesses we have making innovative products, providing ancillary services and expertise and competing successfully on the world stage, the more prosperous our country will become.
The Action Plan is based on a commitment to raising productivity through increased investment and innovation coupled with visionary leadership. We need the most talented individuals who will inspire industry to integrate new technology and innovation, adopt new methods and processes, and truly internationalise their businesses.
In light of the UK EU referendum results, this is more important than ever. Scotland voted to remain in the EU and the Scottish Government is now seeking to negotiate with EU institutions and other EU member states to explore all options to secure Scotland’s interests.
In the meantime, Scotland is currently firmly in the EU and trade and business should continue as normal to maintain the country’s position as an attractive and a stable place to do business.
Scottish Enterprise's immediate priority is to ensure we and our partners do everything possible to support Scottish businesses as negotiations continue and the new economic landscape evolves.
The global appetite for our products and services has not diminished and Scottish Enterprise is here to help businesses grasp the opportunities and overcome the challenges ahead, building productivity in order to respond to current and future opportunities, come what may.
Industry and the public sector must work together to encourage and build an environment that supports the case for investment, start the productivity journey, and build a culture of continuous improvement.
As Paul Krugman, the Nobel Prize winning economist said: “productivity in the short run does not amount to very much; in the long run it means everything”.
