Posted by guest blogger, David Raistrick, UK manufacturing industry leader for Deloitte, based in Leeds

Our global manufacturing competitiveness index reveals that the UK, US, Japan and Western European countries are expected to become less competitive over the next five years, as China, India and Korea maintain their leading positions. The UK is currently ranked 17 on Deloitte’s global competitiveness index and is expected to drop three positions to 20 in the next five years.

The report, compiled with the US Council on Competitiveness, ranks the countries considered the most competitive now and predicts their relative competitiveness in five years. It also lists the key drivers of competition in the global manufacturing industry, identifying talent led innovation as the highest ranking driver.

Asian giants China, India and the Republic of Korea lead the current competitiveness index and are expected to retain their top three rankings over the next five years. These countries have been emerging as global leaders in manufacturing for a number of years now, and this survey highlights the increasing dominance that the Chinese and Indian economies will continue to have over the remainder of this decade.

In contrast, the dominant manufacturing superpowers of the late 20th century are expected to become less competitive. Other Western European nations will be similarly challenged especially the Czech Republic, the Netherlands, Switzerland, Ireland, Italy and Belgium.

It is disappointing to see that the UK is ranked outside the top 10, positioned at number 17 in an index of 26. Further, it is predicted that the UK will drop three places over the next five years. The fact that both the US and Germany are ranked in the top 10 shows that the drivers of competitiveness are not just cost-based. Both the US and Germany have high wage costs and rigorous safety and environmental standards in place, similar to the UK, yet for example, the US is given a competitiveness score of 5.84, more than double the UK’s of 2.82.

It is vital that the new UK government works jointly with manufacturers to ensure they can improve their global competitiveness. The UK manufacturing sector is predominantly focused on emerging new technologies and high tech industry, we must continue to invest in and develop these areas. Given the significant proportion of UK GDP earned through our manufacturing base, and the number of people employed in this sector, any further slippage in our global competitiveness will have a real impact on the broader UK economy.

European policy strengths and weaknesses

Interestingly, when asked to identify national policies that they perceived as contributing to their country’s competitive business advantage or disadvantage, senior manufacturing executives said that Europe benefited from policies that strongly support infrastructure development (46.1%) as well as science and technology and innovation (43.4%), and intellectual property protection (42.1%). On the downside, European executives felt disadvantaged by labour laws and regulations (42.1%), as well as environment policies (36.8%) and energy policies (31.6%).

Drivers of global manufacturing competitiveness

When asked to rank the drivers of global competiveness, respondents listed access to talented workers capable of supporting innovation as the most important driver globally, with a score of 9.2 well ahead of the traditional factors typically associated with competitive manufacturing, such as labour, materials and energy.
Within the UK, we have seen a shift over the past decade away from our more traditional manufacturing base into high tech and cutting edge technology sectors. Our manufacturing sector is differentiated by our innovation – we must ensure that the industry and our government invest in our ‘brain trust’.
To download the 2010 Global Manufacturing Competitiveness Index, please visit www.deloitte.com/globalcompetitiveness.

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