Modest ambition

In response to another question linked to skills, Dr Cable said: "Manufacturing was allowed to decline too far and the skill base with it." Okay, so based on that observation and the rebalancing line of the current coalition, perhaps there is a GDP percentage figure for manufacturing that the business secretary might offer as indicative of a rebalanced economy? Machinery pitched in: "Manufacturing is said to be about 10% of UK GDP. Rebalancing implies that that will become greater, rather than less. When would you expect such a reversal; so growth?" Dr Cable: "Well, it was happening. We saw manufacturing growing more rapidly than the economy as a whole last year, although, in the last few months, it has been in remission. But I would expect to see that trend [faster relative growth] over the next few years." As to what a sensible rebalanced proportion of the economy manufacturing might be, the business secretary had this to say: "Setting targets doesn't really make any sense... But I would certainly expect, and hope, that the manufacturing sector grows as a share of the economy, although it is totally unrealistic to think about the mid-teens; but we are not setting hard and fast targets." So mid-teens is "totally unrealistic", and I can't say I disagree. In a previous Comment, I calculated what a particular percentage growth meant, as reflected in terms of multiples of Rolls-Royce's turnover. That approach is both instructive and illuminating. UK nominal GDP (unadjusted for inflation) in 2010 was £1,350 billion (£1,350,000,000,000). One percent of that is £13.5 billion. Rolls-Royce's turnover in 2010 was £11 billion, in round numbers. So to get to 15% of GDP for manufacturing, we'd need just over six more Rolls-Royces. Of course, manufacturing's share can also grow, if other sectors shrink. And, according to The Economist, that's what happened between 2009 and 2010, as financial services fell back. This happened across many countries, in fact, including Germany, Italy, France and the US, with the UK's rebound looking to have been the weakest of this group. "Rebalancing" sounds good and we can hope and strive for great things, but the reality, it seems, is likely to be only a modest, albeit very welcome change. First published in May 2012