Manufacturing Structure and Performance
March 2008
Introduction
The Annual Business Inquiry (ABI) conducted by the Office for National Statistics provides key data about the structure and performance of manufacturing industry in Lancashire. The latest ABI is for 2005. Some of the key results of this Inquiry together with certain time-series changes (1998-2005) where available are summarised below in Table 1. Unless otherwise stated, financial data is expressed in constant 2005-based prices.
Number of Businesses
Each manufacturing plant or site is counted as a separate business unit. The number of manufacturing businesses enumerated in Lancashire in 2005 was 4,430, some 310 FEWER (-6.6%) than at its last cyclical peak in 1998. There was some modest business unit growth in Fabricated Metal Products, Electrical & Optical Equipment and Transport Equipment but a substantial reduction in the older sectors of Textiles, Apparel and Footwear and in Food & Beverages and Paper, Printing & Printing. The greatest numbers of manufacturing businesses are based in Blackburn, followed some way behind by Pendle; the least were in Fylde and Ribble Valley. The reduction in manufacturing business was greatest in Rossendale, down by a quarter and Blackburn with a reduction of a fifth, but business growth was strongest in Fylde and Wyre.
Total Employment
Including administrative, technical and clerical employees, operatives and working proprietors manufacturing employment stood at 102,200 in 2005 which was 36,600 LOWER (-26.4%) than in 1998, a reduction on a par with the UK average. The largest employing sector by far was Transport Equipment with employment levels nearly double those of the other high ranking Food & Beverages, Fabricated Metal Products and Chemicals. All broad sectors have seen a reduction in the employment headcount. The greatest job losses over the seven years were in Textiles & Textile Products, Leather & Leather Products (largely footwear), Electrical & Optical Equipment, Mechanical Equipment and Paper, Printing & Publishing. The largest manufacturing district by employment was Blackburn; the smallest were Chorley and Lancaster.
Total Turnover
Turnover is equivalent to total sales and work done. The total value of manufacturing industry turnover in Lancashire in 2005 was £13.8bn, DOWN by £527m (-3.7%) from its previous peak in 1998, but now apparently on an upward path again. This sum represented nearly 3.0% of the total UK manufacturing turnover. The largest single local industry by turnover in 2005 was Transport Equipment (principally aerospace with a further sizable contribution from motor vehicles). This industry group alone accounted for a third of the local manufacturing total, well ahead of Food & Beverages (14%), Paper Printing & Publishing (7.4%) and Fabricated Metal Products (7.4%). The smallest sectors were Leather & Leather Products and Wood & Wood Products. Annual turnover between 1998-2005 was down across a number manufacturing sectors, most notably in Textiles and Footwear and in Electrical & Optical Equipment, but against the grain, turnover increased in Food & Beverages, Non-metallic Mineral Products, Fabricated Metal Products and Other Manufacturing (mainly furniture). Manufacturing turnover in 2005 was highest in Fylde (largely aerospace related) followed by Blackburn and South Ribble and was lowest in Chorley and Lancaster.
Purchases
These represent the value of all goods and services purchased by manufacturing industry during the year. Manufacturing industry purchases in Lancashire in 2005 amounted to £8.4bn, DOWN in monetary terms from an earlier peak of £9.2bn in 1998, though part of this reduction was due to falling prices for many commodities, components, etc. rather than a volume fall. More recently the trend for purchases has been a rising one. The largest single purchaser by industry was Transport Equipment followed some way behind by Food & Beverages and Chemicals.
Gross Value Added
This represents the income generated by businesses out of which is paid wages and salaries, the cost of capital investment and financial charges before arriving at a figure for profit: it is a measure of the wealth created by industry. Being reasonably free of duplication in the way that, say, turnover or net output are not, GVA is reckoned to be the better indicator of the size of industry and its contribution to the wider economy. The sum for Lancashire in 2005 was £5.2bn, or 3.5% of the UK manufacturing total. This was nearly 17% ABOVE that created in 1998 and fractionally higher than its previous peak of £5.1bn in 1999. Other Transport Equipment (mainly aerospace) was again the largest single contributor accounting for more than a third of Lancashire's total manufacturing GVA, followed some way behind by Food & Beverages (a 9.7% share), Fabricated Metal Products (8.0%), Paper, Printing & Publishing (7.3%) and Rubber & Plastics (6.4%). By area GVA was highest in Fylde followed by Blackburn and South Ribble and lowest in Chorley and Blackpool. GVA per head (labour productivity) in Lancashire's manufacturing industry stood at £50,800 in 2005 which was 40% HIGHER than in 1998 and 10% ABOVE the UK manufacturing average. This strong out-turn was due largely to the high productivity aerospace weighting within the economy and the industry's move towards more mature programmes. Other than aerospace, only textiles, non-metallic mineral products and fabricated metal products have had productivity consistently above their national equivalents.
Total Wages and Salaries
These are shown before the deduction of income tax and contributory pensions. The total for Lancashire in 2005 was £2.6bn, or 18% LOWER than at its last peak in 1998, largely reflecting the downsizing of the manufacturing workforce. This sum was equivalent to £25,600 per head which was 11% GREATER than in 1998 but in absolute terms about 3% BELOW the national average wage rate. The highest earnings industry by a large margin was Transport Equipment with average wages and salaries per head more than double the lowest paying Leather & Leather Products industry. Average earnings were highest in Fylde District where they were more than half as high again as in the lowest paying Blackpool.
Net Capital Expenditure
This represents the value of annual expenditure on plant, machinery, vehicles, new buildings, land and existing buildings less income from the disposal of such assets. Regional development grants and selective financial assistance are included. Investment activity in Lancashire accelerated over the early 1990s peaking at an all-time high of £626m in 1998 but FELL sharply thereafter to £336m by 2005 (-46%) though this was slightly less than in the UK at large. The greatest amount of investment expenditure in 2005 was by the Food & Beverages sector followed by Paper, Printing & Publishing, Chemicals and Transport Equipment. It was lowest in Leather & Leather Products and Electrical & Optical Equipment. Per capita, investment in 2005, at £3,300 per head was a quarter LOWER than in 1998 but still stood around the UK manufacturing average. Net capital expenditure per head in 2005 was greatest in Food & Beverages followed by Chemicals and Mom-metallic Mineral Products. By district investment per head was greatest in Wyre followed by South Ribble and West Lancashire.
| 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |
|---|---|---|---|---|---|---|---|---|
| Number of Businesses | 4,747 | 4,675 | 4,681 | 4,662 | 4,508 | 4,439 | 4,485 | 4,433 |
| Total Employment | 138,710 | 129,860 | 129,400 | 117,460 | 115,900 | 112,820 | 108,250 | 102,150 |
| Total Turnover (£m) | 14,331 | 13,112 | 12,135 | 12,622 | 12,484 | 12,894 | 13,196 | 13,803 |
| Purchases (£m) | 10,859 | 9,221 | 8,587 | 8,768 | 8,687 | 8,939 | 8,842 | 8,345 |
| Gross Value Added (£m) | 4,442 | 5,140 | 4,801 | 4,834 | 4,808 | 4,968 | 5,041 | 5,187 |
| Wages and Salaries (£m) | 3,191 | 3,185 | 3,036 | 2,872 | 2,934 | 2,809 | 2,761 | 2,618 |
| Net Capital Expenditure (£m) | 626 | 445 | 399 | 362 | 420 | 405 | 385 | 336 |
| Gross Value Added per head (£) | 32,000 | 39,600 | 37,100 | 41,200 | 41,500 | 44,000 | 46,600 | 50,800 |
| Wages and Salaries per head (£) | 23,000 | 23,400 | 23,500 | 24,400 | 25,300 | 24,900 | 25,500 | 25,600 |
| Net Capital Expenditure per head (£) | 4,500 | 3,400 | 3,100 | 3,100 | 3,600 | 3,600 | 3,600 | 3,300 |
| Wages and Salaries as % of GVA | 54.3 | 53.1 | 54.5 | 52.7 | 56.6 | 53.8 | 52.6 | 50.5 |
| Net Capital Expenditure as % of GVA | 12.7 | 7.8 | 7.4 | 6.7 | 8.2 | 7.8 | 7.3 | 6.5 |
| GVA as % of Turnover | 31.0 | 39.2 | 39.6 | 38.3 | 38.5 | 38.5 | 38.2 | 37.6 |
| Note Constant 2005-based prices | ||||||||
| Source ONS - Annual Business Inquiry | ||||||||
The Manufacturing Business Stock
The late 1990s/early 2000s was a generally difficult period for a large part of the manufacturing sector facing the strength of Sterling and tough overseas price competition and this is reflected in the annual count of businesses registered for VAT. At the start of 2007 there were an estimated 3,830 manufacturing businesses registered for VAT in the Lancashire NUTS-2 area representing 9.3% of the total VAT business stock. This number was 300 fewer than in 1994 (when manufacturing businesses constituted 11.1% of the stock) representing a net fall of 7.3% over the period. This was rather less than the 10.8% fall recorded in the wider North West Region but higher than the 6.4% reduction recorded in the UK. The position marked a significant shift from the pattern of the 1980s when there was a substantial increase in the number of manufacturing businesses. The rate of new manufacturing business formation in Lancashire over the 1994-2007 period, amounting to an average of about 275 per annum, was consistently below that in the UK at large but the County enjoyed a slightly higher business survival rate. The overall change in the size of the manufacturing business stock in Lancashire masks some wide differences in relative performance between districts which are illustrated in Figure 1.
Manufacturing Employment
Returning to the employment structure of manufacturing, some feel for the continuing relative importance to the sub-region of manufacturing and that of its constituent sectors may be given by ranking them according to an Index of Specialisation. As shown in Table 2 this compares industry employment in Lancashire to the national industry employment share. An index of 100 indicates that a particular industry has the same weighting within the Lancashire economy as it has in Great Britain; the greater the share of employment in Lancashire in an industry compared to the national average, the greater the index.
| Industry Division | Lancashire Employees | Index of Specialisation (GB=100) |
|---|---|---|
| Other Transport Equipment | 17,300 | 539 |
| Coke, Petroleum Products and Nuclear Fuel | 1,700 | 336 |
| Textile Industry | 4,900 | 310 |
| Pulp, Paper and Paper Products | 3,800 | 240 |
| Furniture and Other Manufacturing | 7,400 | 208 |
| Wearing Apparel and Fur | 1,200 | 171 |
| Rubber and Plastic Products | 7,300 | 166 |
| Chemicals and Chemical Products | 6,500 | 149 |
| Fabricated Metal Products | 9,800 | 138 |
| Food Products and Beverages | 11,300 | 124 |
| Leather and Leather Products | 400 | 123 |
| Office Machinery and Computers | 600 | 123 |
| Motor Vehicles, Parts and Accessories | 4,400 | 118 |
| Other Machinery and Equipment | 6,800 | 112 |
| Recycling | 400 | 110 |
| Wood and Wood Products, etc | 1,800 | 103 |
| Other Non-Metallic Mineral Products | 2,100 | 92 |
| Electrical Machinery and Apparatus | 2,200 | 84 |
| Publishing, Printing, etc. | 5,700 | 81 |
| Medical, Precision and Optical Instruments | 1,500 | 60 |
| Radio, Television and Communications Equipment | 700 | 52 |
| Basic Metals | 800 | 51 |
| Tobacco products | 0 | 0 |
| All Manufacturing Industry | 99,000 | 149 |
| Source ONS - Annual Business Inquiry | ||
Overall, manufacturing industry can be seen to be about 50% more important to Lancashire in terms of its jobs contribution than it is to the national economy. Sixteen out of the 23 industrial divisions had a greater degree of specialisation in Lancashire compared with Great Britain in 2006 (i.e. an index greater than 100). Between them, these industries account for some 85,600 jobs or 87% of all manufacturing employee jobs in the sub-region. The same industries in Great Britain comprise 74% of national manufacturing employment.
Other Transport Equipment, the sub-region's largest single industrial employing group by a large margin had the greatest degree of specialisation: relatively in terms of its jobs impact it was more than five times more important to Lancashire than to the national economy. The aerospace component of this sector alone had an index of specialisation close to 800 indicating a remarkable degree of local concentration in this important high value/high tech industry. Despite its many years of steady contraction, the old staple, Textiles, also continues to have a strong local representation. Paper & Paper Products, Rubber & Plastics and Fabricated Metal Products have grown steadily more important locally over recent years but Leather & Leather Products (mainly footwear) has slipped back sharply as local employment in this sector has collapsed. The printing and publishing and electrical and electronic sectors too have seen some diminution in both their relative and absolute importance in Lancashire over recent years. Industries with a comparatively poor local presence include a number of sectors, often with "high tech" characteristics such as Telecoms, etc. Equipment and Medical, Precision & Optical Instruments. The Office Machinery & Computers section has enhanced its position recently though the number of employee jobs involved is not large.
Major Manufacturing Sectors in Lancashire
The minimum level of detail provided by the Annual Employment Survey is by the Standard Industrial Classification "class headings". In total the SIC lists about 240 separate manufacturing class activities. For various technical reasons information at this detailed level may not always be reliable and should therefore be treated with caution. Subject to this qualification and the need to combine some related activities because of confidentiality restrictions, Table 3 lists the larger manufacturing activities in Lancashire in terms of their employee numbers.
| SIC | Sector | Lancashire Employees | % of Lancashire Manufacturing | % of Great Britain Manufacturing |
|---|---|---|---|---|
| 3530 | Aircraft and spacecraft | 16,700 | 16.9 | 3.2 |
| 2222 | Other printing nes | 2,600 | 2.7 | 4.1 |
| 2852 | General mechanical engineering | 2,500 | 2.6 | 3.1 |
| 3611 | Chairs and seats | 2,500 | 2.5 | 0.9 |
| 2523 | Plastic builders' ware | 2,200 | 2.3 | 1.9 |
| 2524 | Other plastic products | 2,200 | 2.2 | 1.8 |
| 2910 | Mechanical power machinery | 2,100 | 2.2 | 2.1 |
| 2920 | Other general purpose machinery | 2,100 | 2.1 | 3.2 |
| 1581 | Bread, fresh pastry goods and cakes | 1,900 | 1.9 | 2.4 |
| 3430 | Motor vehicle parts and accessories | 1,900 | 1.9 | 2.4 |
| 2210 | Publishing | 1,800 | 1.9 | 5.2 |
| 1582 | Rusks, biscuits and preserved pastry goods | 1,700 | 1.7 | 1.1 |
| 2950 | Other special purpose machinery | 1,700 | 1.7 | 1.8 |
| 1511 | Production and preserving of meat | 1,700 | 1.7 | 0.6 |
| 2300 | Coke, petroleum products and nuclear fuel | 1,700 | 1.7 | 0.8 |
| 2811 | Metal structures and parts | 1,600 | 1.6 | 1.8 |
| 3420 | Motor vehicle bodies, etc | 1,400 | 1.4 | 0.7 |
| 2416 | Plastics in primary form | 1,400 | 1.4 | 0.6 |
| 1513 | Meat and poultry meat products | 1,400 | 1.4 | 1.9 |
| 1740 | Made-up textile articles | 1,400 | 1.4 | 0.9 |
| 2875 | Other fabricated metal products nes | 1,400 | 1.4 | 1.2 |
| 1754 | Other textiles nes | 1,200 | 1.3 | 0.3 |
| 1590 | Manufacture of beverages | 1,200 | 1.3 | 1.4 |
| 1584 | Cocoa, chocolate and sugar confectionery | 1,200 | 1.2 | 0.7 |
| 3614 | Other furniture | 1,200 | 1.2 | 1.2 |
| 1820 | Wearing apparel, etc | 1,200 | 1.2 | 1.0 |
| 2430 | Paints, varnishes. inks. Etc | 1,200 | 1.2 | 0.6 |
| 3615 | Manufacture of mattresses | 1,100 | 1.2 | 0.3 |
| 2030 | Builders' carpentry and joinery | 1,100 | 1.1 | 1.5 |
| 2820 | Tanks, radiators and boilers, etc | 1,100 | 1.1 | 0.4 |
| 3162 | Other electrical equipment | 1,100 | 1.1 | 0.8 |
| 3410 | Motor vehicles | 1,100 | 1.1 | 2.5 |
| 3310 | Medical and surgical equipment | 1,000 | 1.0 | 1.1 |
| 2121 | Paper and board packaging | 1,000 | 1.0 | 1.0 |
| 2521 | Plastic plates, sheets, tubes and profiles | 1,000 | 1.0 | 1.1 |
| 2452 | Perfumes and toiletries | 1,000 | 1.0 | 0.6 |
| 2451 | Soap and detergents, cleaning, etc. preparations | 1,000 | 1.0 | 0.5 |
| 2522 | Plastic packaging goods | 900 | 0.9 | 0.9 |
| 2510 | Rubber products | 900 | 0.9 | 0.9 |
| 2124 | Wallpaper | 900 | 0.9 | 0.1 |
| 3660 | Miscellaneous manufacturing | 900 | 0.9 | 1.1 |
| 1720 | Textile weaving | 900 | 0.9 | 0.3 |
| Source ONS - Annual Business Inquiry | ||||
Industrial Specialisations
The large companies and concentrations of manufacturing industry that once characterised and so dominated economic activity in Lancashire - most notably those sectors associated with the textiles and allied industries - are long gone. Nonetheless, some smaller concentrations or clusters of industrial activity remain in which Lancashire retains a major national presence or a high degree of specialism. These clusters are important, often creating a critical mass of growth, collaboration, competition and opportunities for investment. Not only do they provide a pool of expert labour, to some degree they also tend to create mutually self-supporting institutions of co-operation and expertise, often of an informal nature in which ideas are swapped and developed. They create rivalries between neighbouring firms and generate locally supportive services and activities. Indeed, some economists argue that such networks are the ultimate source of competitive advantage for an economy and that it is hard for a competitor from elsewhere to reproduce single-handedly the combination of skills and incentives that exist in such a cluster.
Table 4 highlights those sectors of industrial activity in which Lancashire accounts for 10% or more of total national employment (against a total all-industry County share of 2.3% of GB employees). Some of these sectors are tiny in terms of numbers employed or firms engaged and in no sense represent a "cluster". Others are, however, significant and include industries like wallpaper manufacture (60% of the nation's jobs across many separate companies) and a number of closely related textile and apparel sectors from weaving to finishing and making-up, etc.
In absolute terms, by far the largest single concentration in Lancashire today, accounting for more than a fifth of national production and a similar share of direct employment, is the aerospace industry. This has all the characteristics of a well-developed industrial cluster, comprising both large and small company OEMs across a range of capabilities and a large network of sub-contractors, supply services and support organisations across the County. Indeed, probably up to 100 companies are directly or indirectly strongly dependent on the aerospace market. The Standard Industrial Classification (SIC, 2003) is not a market-based classification and many of these companies are classified under activities other than "aerospace"such as mechanical or electrical engineering, technical services, material suppliers, etc. and so do not even figure within the statistics given below.
| SIC | Sector | Lancashire as % of Great Britain |
|---|---|---|
| 2124 | Manufacture of wallpaper | 63 |
| 1721 | Cotton-type weaving | 24 |
| 3530 | Manufacture of aircraft and spacecraft | 18 |
| 1723 | Silk-type weaving | 17 |
| 2822 | Manufacture of central heating boilers | 15 |
| 3615 | Manufacture of mattresses | 15 |
| 1754 | Manufacture of other textiles | 14 |
| 1821 | Manufacture of workwear | 13 |
| 2330 | Processing of nuclear fuel | 12 |
| 2231 | Reproduction of sound recording | 12 |
| 1730 | Finishing of textiles | 12 |
| 2954 | Manufacture of machinery for textiles, apparel, etc | 11 |
| 1751 | Manufacture of carpets and rugs | 10 |
| 3611 | Manufacture of chairs and seats | 10 |
| 1511 | Production and processing of meat | 10 |
| Source ONS - Annual Business Inquiry | ||
This page was compiled by Peter Kivell.
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