Evolution of the Lancashire economy
There are no discrete steps in the evolution of the Lancashire economy, but four key events can be identified: the demise of the textile industry, the Second World War, the early 1980s manufacturing recession, and the development of a broad economic base. The second event in particular continues to shape the local economy as the original reason for the establishment of sites that provide many of Lancashire's present day high value manufacturing jobs. Moving on into the 21st Century and to the present day, the local economy continues to evolve in response to new technologies and emerging markets.
The textile industry
The textile industry was at its zenith in the county in first quarter of the 19th century and, in many Lancashire manufacturing towns, accounted for 80% and more of all local employment. At its peak, the sector both defined and dominated local economic activity to a degree scarcely imaginable today.
The industry's contraction over the course of much of the 20th Century was relentless, posing huge structural and social issues for the communities affected. Symbolically, "King Cotton" lost its premier industrial employment position in the County in 1979. This demise has been of historic proportions and it is probable that there are very few geographical areas of such a size that have ever undergone the contraction of its single basic industry on such a scale as that experienced by the Lancashire textile industry. A number of Lancashire's towns still have the unmistakable physical stamp of this earlier manufacturing era, however, this remarkable industrial legacy continues to be used for purposes that include tourism (such as Weaver's Triangle), housing, and commercial and retail sites (such as India Mill and Oswaldtwistle Mills) and that can attract significant visitor numbers.
Second World War
Economically the Second World War was also a defining period for Lancashire. Under government direction, large numbers of strategic industrial activities were established or relocated to the region. These included large chemicals and munitions plants employing tens of thousands of people and many new kinds of activities across a whole range of sectors that were not previously present in Lancashire, including central government white collar activities. Perhaps above all else, Lancashire became a pivotal centre of aircraft and aero-engine production. The county's unique aerospace expertise stretches back to the UK's first commercial aircraft manufacturer, AV Roe & Company, established in 1910 in what is now Greater Manchester.
Post-war, much of these activities were scaled back but many employers remained, forming the basis of a major and remarkable diversification of the economy that helped to ameliorate the continued decline of the textile industry. This welcome diversification was done on a scale that simply would not have been possible under normal peacetime conditions. It could be interesting to speculate what kind of future might have faced Lancashire had it not had the benefit of this process. Of particular note was the establishment on a war-time site of Springfields, a major nuclear fuel manufacturing facility that was the first plant in the world to make nuclear fuel for commercial power stations, giving Lancashire a stake in this new science-based industry.
Over time, the retention of an important local aerospace capability has resulted in Lancashire becoming a large and strategically important centre of aerospace production. This is reflected in the North West Aerospace Alliance which represents approximately 25% of the UK aerospace industry with over 200 member companies, many of which are based in Lancashire.
The 1980s manufacturing recession
The third important defining event was the manufacturing recession of the early 1980s. The recession that hit manufacturing at this time was of an altogether different order from the decline of textiles. Over the space of just 2 to 3 years, whole sectors of industry we had taken for granted simply disappeared.
Few industries remained unchanged during this period, with coal mining and the fishing industry significantly affected. This period likewise saw the demise of both large plant man-made fibres production and the manufacture of textile machinery. The vehicles sector was also seriously impacted. There was a virtual collapse in export markets, with Leyland Trucks, once the largest and most profitable commercial vehicle manufacturer in Europe, pushed into a steep decline.
Other manufacturing sectors that were very adversely affected by the early 1980s recession include leather and leather goods, and chemicals and chemical products, which had its roots in Lancashire in the presence of local raw materials (particularly large salt deposits) and had links with the textile industry. In all, nearly 60,000 jobs disappeared from Lancashire's manufacturing sector at this time - a fall of more than a quarter and a larger loss than the whole of the previous 25 years.
The unemployment rate in Lancashire shot up to 16%, with some manufacturing-dominated towns having rates of 30% or more. The overall share of manufacturing employment in the economy was reduced to under a third.
The development of a broad economic base
The recession years were very difficult for the Lancashire economy and the social and economic costs imposed on a large section of the workforce were dire. In retrospect, these changes and unwinding of previously large industrial clusters represented a sharp acceleration to the long-term fundamental shift in the nature and structure of the local economy.
Lancashire nowadays has a number of large major employers in both the public and private sectors, but the defining characteristic of today's economy is no longer the domination by very large vertically integrated enterprises. Now, nearly 90% of local businesses are small, employing fewer than 10 people.
Whilst much reduced in size, manufacturing still retains a key presence today, providing almost one fifth of GVA wealth creation and more than an eighth of total employment in Lancashire. The manufacturing base has an important high-technology content, and a big portion of this is contained within the aerospace and associated industries. Despite this, there remains a historical structural bias towards lower growth, more mature, lower value added activities across a wide range of Lancashire manufacturing and service sectors.
Almost 80% of employees in Lancashire are now allocated to the various service sectors – including wholesale retail and trade, health and social work, education, accommodation and food services, professional, scientific and technical activities, and administrative and support service activities, public administration and defence, and transport and storage.
Lancashire is one of England's largest shire counties and still contains an important agricultural sector. Overall, across Lancashire, livestock dairy farming accounts for the majority of land use amongst commercial agricultural holdings. However, due to the top-grade soil and environment in West Lancashire, farming land used for fruit, vegetable and salad production in this authority accounts for up around 96% of the Lancashire total and 72% of the North West total.
Page updated 5 January 2026