Manufacturing Industry Turnover

Introduction

Manufacturing turnover is defined as total sales and work done. This is calculated by adding to the value of sales of goods produced, goods purchased and resold without further processing, work done and industrial services rendered and non-industrial services rendered. Information on total turnover provides a useful alternative measure to the simple employment headcount that is often used to assess local industrial structure and performance. Traditionally the trend in industrial production has been broadly indicative of the state of the business cycle though with the increasing importance of service industry output within the economy, this has been rather less so over recent years.

Manufacturing Turnover in Lancashire

In 2002 the Lancashire NUTS-2 area had total manufacturing industry turnover amounting to £12.4bn or £106,600 per head. This was equivalent to 2.8% of the UK total (Table 1).

Over the longer term turnover trends also have cyclical tendencies that in the case of a relatively small geographical area like Lancashire tend to be more pronounced than in the nation at large (Figure 1). There was a cyclical peak in the sub-region's manufacturing industry turnover in the early 1990s prior to the onset of the national recession. This was compounded locally by a simultaneous and unprecedented downturn amongst many of the engineering sectors linked especially with the major aerospace and defence industry restructuring programmes as companies adjusted to severe MoD procurement cut-backs as well as to enhanced global competition in a shrinking civil aviation market. The impact was sharp and immediate with local manufacturing turnover falling by nearly a quarter in 1992. Transport Equipment (mainly aerospace and motor vehicles) turnover alone fell by about a half and in excess of 10,000 direct defence industry jobs were lost through plant closures and downsizing.

Recovery over the early 1990s was at first fitful but was spread over a wide range of industrial sectors. The cyclical fortunes of the aerospace industry again made a strong positive contribution to turnover but for nearly all manufacturing sectors 1998 marked the peak of the upturn when total manufacturing turnover in Lancashire stood at an all-time high of £14.1bn. High interest rates and the international strength of Sterling combined with intense overseas competition impacted painfully on manufacturers from this year with returns on capital falling rapidly, particularly on those sectors most exposed to international trade. Between 1998 and 2000 total turnover in Lancashire manufacturing industry fell by £2.2bn or 15% and remained broadly flat over the course of 2001-02. Manufacturing turnover nationally also saw little real change 1998-2002.

Manufacturing Turnover by Industry, 1998-2002

The proportion of total manufacturing turnover accounted for by the various broad industry groups in Lancashire is illustrated in Figure 2. The extraordinary importance of the Transport Equipment sector to Lancashire's manufacturing base is clearly in evidence. With annual turnover averaging £4.5bn over the five years 1998-2002 this sector contributed well over a third of Lancashire's manufacturing total by value – a sum more than three times as much as the second-ranking Food & Beverages industry which had a 11% share. Probably in excess of 80% of the Transport Equipment's turnover was attributable to the aerospace industry with most of the remainder accounted for by motor vehicles.

In practice, the contribution of the Transport Equipment industry to the local economy is rather exaggerated when expressed in terms of turnover. The industry has always been a large purchaser of components, sub-assemblies and other equipment as well as of non-industrial services and the tendency towards out-sourcing have increased markedly over the past decade and more as primes have focused more on core and higher value added activities, buying in other requirements via extensive supply chains. Total purchases by the Transport Equipment industry in Lancashire amounted to an average of over £2bn over the period. Whilst this will have contributed to turnover, a high proportion of these purchases will have been from outside Lancashire.

Manufacturing Turnover by Sub-Region, 1998-2002

The major characteristics of manufacturing turnover within and between the two County sub-regions of West and East Lancashire are shown in Table 1. Whilst data suppression because of confidentiality constraints masks the full picture for Lancashire West, it is evident that the Transport Equipment sector (mainly aerospace but also including a substantial motor vehicles component) is the dominant player in the sub-region in terms of its contribution to manufacturing turnover. Between them Transport Equipment and Nuclear Fuels, etc contribute more than a half of the sub-region's total manufacturing turnover with second-ranking Food & Beverages some way behind accounting foe 11% of manufacturing turnover. The East Lancashire manufacturing base is rather more diversified and shows less domination by one single or small group of industries than the west of the County. Transport Equipment is again the largest industrial group by turnover with a 16% share but several others, including Textiles, Paper, Printing & Publishing, Rubber & Plastics, Chemicals and Fabricated Metal Products are also of significance.

Manufacturing Turnover by Districts, 1998-2002

The spatial distribution of manufacturing turnover across the Lancashire sub-region by district authority as an annual average 1998-2002 is shown in Figure 3. It ranges from a high of over £3.1bn in Fylde with its substantial nuclear fuel and aerospace interests, equivalent to nearly a quarter of Lancashire's total, to just £304m in Chorley, representing 2.4% of the County total

This page was compiled by Peter Kivell.

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