How Britain Can Rebuild Manufacturing Power by Learning from Developing Nations
In 2017, vehicles received their final coats at Jaguar Land Rover's advanced manufacturing facility in Solihull, Birmingham. This image serves as a reminder of Britain's industrial heritage at a time when the nation faces crucial questions about its economic future.
The Stark Contrast Between British and Chinese Economic Paths
When Margaret Thatcher and Deng Xiaoping assumed power within months of each other during the late 1970s, both leaders embarked on transformative economic missions. Thatcher sought to reinvigorate British capitalism through deregulation and privatisation, while Deng launched his programme of reform and liberalisation under the banner of socialism with Chinese characteristics.
The subsequent decades have witnessed dramatically different outcomes for these two economies. China has evolved from what was essentially a peasant economy into a global industrial powerhouse, while Britain has steadily diminished as a manufacturing force and become dominated by service industries.
The Current Reality: A Service-Dominated Economy
Britain's economic landscape today presents a stark contrast to its industrial past. Services now account for approximately 80% of the British economy, representing a sector ten times larger than manufacturing. This shift has created significant structural challenges, particularly regarding productivity growth.
It is much harder to improve efficiency in labour-intensive service jobs than in factory positions, which helps explain Britain's persistently weak productivity performance since the 2008 financial crisis. The country's longstanding trade deficit in goods, ongoing since the early 1980s, further underscores this imbalance.
Three Crucial Lessons from China's Transformation
Prime Minister Keir Starmer's recent visit to China highlighted several important considerations for Britain's economic future:
- Manufacturing fundamentally matters for national prosperity. Britain cannot achieve sustainable economic success without rebuilding its productive base. The alternative to a thriving manufacturing sector isn't an economy of highly-paid knowledge workers, but rather a low-tech service economy dominated by finance.
- Rebuilding industrial capacity remains possible despite fifty years of decline. Britain possesses abundant untapped talent and resources, as demonstrated by Denmark's successful wind-turbine industry, which shows that small, wealthy Western nations can still achieve industrial success.
- Revitalising manufacturing requires monumental effort and sustained commitment. Even raising manufacturing's share of the economy from 8% to 10% of GDP would represent a significant achievement, requiring industrial strategies that persist beyond typical political cycles.
The Infrastructure and Policy Requirements
Any serious attempt to rebuild British manufacturing must address fundamental infrastructure needs. A thriving domestic steel sector represents just one essential foundation for broader industrial regeneration. Creating a dedicated economic ministry with sufficient authority to challenge Treasury orthodoxy could help drive the necessary investment, both public and private.
However, significant obstacles immediately present themselves. New British factories would face intense competition from established overseas manufacturers. A UK electric vehicle producer, for instance, would struggle to compete on price with cheaper Chinese models without government intervention.
Protective Measures and Strategic Intervention
The solution lies in adopting approaches commonly used by developing nations to nurture infant industries. These could include:
- Domestic content requirements for goods sold in Britain
- Buy British procurement policies for public contracts
- Subsidies and tax credits similar to those introduced by the Biden administration in the United States
- Strategic use of tariffs and other trade measures
China continues to employ such interventionist strategies despite becoming the world's second-largest economy, maintaining strict capital controls and continuing to pick winners in key industrial sectors.
A Necessary Shift in Perspective
The fundamental conclusion is clear: to rebuild its manufacturing base, Britain must begin viewing economic challenges through the prism of a developing nation rather than a developed one. This requires acknowledging that market forces alone cannot reverse industrial decline and that strategic government intervention is essential.
While Britain will never again become the workshop of the world as it was during the 19th century, a deliberate, sustained effort to rebalance the economy toward production could yield significant benefits. The pandemic's exposure of fragile global supply chains highlighted the dangers of over-reliance on imported manufactured goods, making domestic industrial capacity more important than ever for national resilience.
