THE DEINDUSTRIAL REVOLUTION: THE RISE AND FALL OF UK MANUFACTURING, 1870-2010 Michael Kitson and Jonathan Michie WP 459 June 2014 THE DEINDUSTRIAL REVOLUTION: THE RISE AND FALL OF UK MANUFACTURING, 1870-2010 Centre for Business Research, University of Cambridge Working Paper No. 459 by Michael Kitson Centre for Business Research and Judge Business School, University of Cambridge Email:
[email protected] and Jonathan Michie Kellogg College and Department for Continuing Education, University of Oxford Email:
[email protected] June 2014 This working paper forms part of the CBR Research Programme on Enterprise and Innovation Abstract This paper considers the evolution of the manufacturing sector in the UK since 1870. It analyses the contribution of manufacturing to national income, employment and trade. From 1870 to 1960, manufacturing played a key role in the development of the economy, undergirding success in other sectors of the economy and securing rising living standards. The subsequent fifty years, from 1960, have witnessed a relative decline of the UK manufacturing sector – relative to other sectors of the economy, and relative to the manufacturing sectors in other countries. The paper considers the thesis that the relative decline of manufacturing is a natural outcome of the development of advanced economies, and the counter- arguments suggesting that decline of UK manufacturing reflected economic weaknesses and structural imbalances. We argue that in the case of the UK, the relative decline of manufacturing has indeed reflected deep-rooted structural problems. In particular there has been a chronic failure to invest in manufacturing, with the UK economy and investment being instead skewed towards short-term returns and the interests of the ‘City’.