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A UK without manufacturing

Permanent low-pay economy looms under Brexit
Hajera Blagg, Friday, April 29th, 2016


Economics professor Patrick Minford came out yesterday (April 28) to say that “if we left the EU, it seems that we would mostly eliminate manufacturing.”

 

But, Minford – who was a major proponent of Margaret Thatcher’s economic policies in the 1980s – says this wholesale elimination of manufacturing post-Brexit “shouldn’t scare us”. In fact, we should welcome it.

 

If Minford is right, what, then, were to happen if all UK manufacturing eventually disappeared?

 

For one, 2.6m jobs would be gone. Manufacturing accounts for nearly half of all our exports at 44 per cent. Business research and development in the UK would take a massive hit, as 69 per cent of R&D is spent on manufacturing. We’d say goodbye to our position on global tables – we now stand 7th in the world in terms of manufacturing output.

 

Although the services industry dominates the present UK economy, manufacturing still represents 10 per cent of our GDP and is a major contributing factor in driving productivity – a key measure in the long-term health of the economy and working people’s living standards.

 

Unlike services, which Minford said we should embrace as we give up on the business of making things, manufacturing provides well-paid, highly skilled jobs. Average annual wages in manufacturing stand at nearly £31,000, compared to only £26,500 in services.

 

But the future health of manufacturing in the UK is, many experts have warned, very much dependent on the UK’s continued membership in the European Union (EU).

 

EEF, the UK’s manufacturing association, notes that the EU accounts for 18 per cent of global output – and the UK sells 50 per cent of all its exports to the EU. The EU is also a major driver of innovation in the UK – it invests £11bn each year on innovation programmes, of which 15 per cent is invested in the UK.

 

What’s more, the leading destination for foreign investment in the EU is the UK.

 

The future of the UK’s exports and imports of manufactured goods is inextricably linked to continued membership in the EU – in 2012, the value of imports of manufactured goods from the EU to the UK stood at £158bn, while the value of exports from the UK to the EU stood at £104bn.

 

Manufacturers are united in their belief that the UK is better off remaining in the EU.

 

A recent EEF survey shows that 84 per cent of UK manufacturers believe being part of the EU is a positive aspect of the UK business environment.

 

The survey also showed that an astounding 50 per cent of manufacturing companies would be less likely to increase investment if the UK were to leave the EU.

 

Trade deals

Earlier this week, leaders of some of the UK’s top engineering firms, including Airbus, Siemens and Rolls-Royce among others, signed a letter presenting their case for staying in the EU.

 

“British engineering is deeply integrated with global markets and companies,” the letter read. “If Britain votes to leave the EU, the period of uncertainty about the terms on which access to these markets would be granted would be a threat to the sector.

 

“Brexit would be a loss of automatic access to the EU market. Negotiating new trade agreements would take time, during which our trade would be damaged.

 

Unite assistant general secretary Tony Burke agreed.

 

“Brexit supporters are of the naïve opinion that negotiating trade deals can be easily done if we leave the UK,” he explained. “We have no experience negotiating big trade deals outside of the EU – they often take years to negotiate. What will do in those five or more years before trade deals are agreed?”

 

Burke highlighted US president Barack Obama’s recent statement that the UK would necessarily go to the back of the queue in any trade deal with the US if it were to leave the EU.

 

“If we aren’t in the EU, we won’t have the power of being in a market of 500 million people, we’ll be in a market of only 60 million,” Burke said. “What do you think the US will do when they want to do a trade deal with us? They won’t negotiate with us – they’ll just send us an email and tell us to sign on the dotted line. We won’t have any say.”

 

‘Recipe for disaster’

Burke agreed with Minford’s assessment that manufacturing would be all but eliminated if the UK left the EU, but while Minford says the services industry can easily replace manufacturing, Burke argued that this is a recipe for disaster.

 

“No modern, developed country can exist without having a strong manufacturing base,” he said. “We can’t be successful only by selling everybody insurance.

 

“We would have a permanent zero-hours, low-skill, low-paid economy –a Brexit which destroys manufacturing would mean a complete and utter race to the bottom.

 

“Once those high-skill, high-wage jobs in manufacturing are gone, they don’t come back,” he added. “And those UK workers looking for good jobs will move overseas and they’d take their skills with them – we’d be losing the best and the brightest.”

 

Burke urged workers in the manufacturing sector who will be casting their ballot in June to consider their own interests and the future of their children.

 

“Someone working in the manufacturing sector now who votes to leave would be a like a turkey voting for Christmas,” he said. “In a Brexit scenario, manufacturing companies will take decisions about investment that will not necessarily be in our favour.

 

“When skilled jobs in manufacturing will be harder to come by, it would reduce pay and conditions throughout the sector even more.

 

Work protections

Burke highlighted, too, that the employment protections many of us take for granted are afforded to us by our membership with the EU.

 

“If your company gets taken over by another company – which happens often in manufacturing – you’ve got rights from the EU which would eventually go if we voted to leave. Rights to equal pay, four week holiday entitlement on average pay and protections for part-time and agency workers would all be affected.

 

“Shift work is common in manufacturing and throughout the UK economy – the EU gives us specific rights which means we can’t be forced to work long hours and moreover you’re entitled to breaks between your shifts and breaks while you’re in work. These too, would go out the window.

 

“The important thing to remember for workers now considering which way they’ll vote is that it’s not just about the present, it’s also about the future and their children’s future,” Burke added.

 

“The decision to stay in or leave the EU will have monumental consequences for the future shape of our economy – do we want a world with better, skilled jobs for our children who are protected in the workplace, or one in which we’re in freefall in a race to the bottom?”

 

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