The myth of the UK’s manufacturing decline

Insight from property expert Nigel Lewis

Nigel Lewis looks at why demand for factory premises is rising despite the industry supposedly stagnating.

There are times in the world of finance broking when everything seems to be about warehousing. This attitude is created, you could argue, by the recent rise of e-commerce and its voracious hunger for sheds.

What’s less talked about is UK manufacturing, which is often referred to in terms of its decline and rarely portrayed as a sector in need of finance for new premises. But this story of decline is not true, in my view.

First, the basics. Manufacturing remains an important part of the economy. It employs 2.5 million people, accounts for up to half of the UK’s exports and creates an annual Gross Value Added of approximately £150 billion, which is the ninth largest in the world 1.

One common misconception comes from the fact that manufacturing as a percentage of the UK economy has reduced from approximately 30% during the 1970s to 10% today. But that’s a 'reflection of gains made by other industries, particularly the services sector, rather than significant falls in manufacturing output', the government says 2.

And rather than facing a bleak future, there are grounds for optimism. For example, many observers expect manufacturing that was previously lost to China to begin re-shoring in the coming years as China’s factories lose their competitive edge and production ‘returns home’ to western countries 3. And Britain’s ranking as a manufacturing base also improved recently from 18th to 15th in the world, ahead of Germany

Another game changer has been e-commerce, which is forcing manufacturers to acquire premises closer to their markets. The advent of ‘next day’ online shopping is changing everything in manufacturing and, at a recent CBRE conference, nearly 90% of the delegates agreed that technical innovations will see major changes to the location of production over the next five years 4.

But demand for premises can be sector specific – not all manufacturers are doing well. The Annual Manufacturing Report 2016 5 revealed the most successful. This includes aerospace, which is 'growing ten times faster than the UK economy', the report says, as well as the automotive, chemical, pharmaceutical, energy, furniture, plastics and food & drink manufacturing sectors.

This has had a knock-on effect for property. The Royal Institute of Chartered Surveyors recently revealed that demand for industrial premises is at its highest for 16 years 6 and that, between October 2014 and October 2015, take up for industrial property reached three million sq ft, outperforming both retail and office space. I think that’s plenty of reason for manufacturing to look ahead with confidence.

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