Potential rebuilding of industries in the UK post COVID-19 epidemic.

[RT4038]

In many British firms, workers and management still have a "them and us" mentality, maybe a throwback to the British class system, rather than the 1970s? In Europe companies are more often run by cooperation between workers and management, with workers involved in decision making, owning shares in the company and there being a smaller pay gap between those at the bottom and those at the top. German companies can raise capital from regional banks, regional government and regional stock exchanges, rather than via the City as in the U.K. We British should have learnt a lot from the way things are done abroad in the 40+ years that we were in the EU, but we didn't and I can't see that changing any time soon.

Our form of adversarial politics (with opposing sides threatening what they are going to 'do' to the other at election time, and is another manifestation of this 'them' and 'us') doesn't exactly give confidence in long term investment decisions either. We are much more American than German in outlook.

Both systems have their pros and cons, but you can't cherry pick the best of both, which makes changing from one to the other difficult and unlikely.

 

[RT4038]

No, we don't do it now because we go for whatever is cheapest, and to hell with the wider economy, or indeed the security of supply.

Yes, but that is the way we do things, for all sorts of reasons, many to do with our experiences in the past. If there was really a financial advantage to the wider economy (and that view will be tempered by which part you mean), one of the political parties would be espousing changes to achieve, but I am not sure any of them really are?
The 'wider economy' and 'security of supply' implies not the most financially advantageous, which again goes back to a reduction in prosperity.

 

[underbank]

Things were very different in the 70s. The UK manufacturing sector was largely labour intensive, which of course, became too expensive due to wage rises etc around that time. It made sense to move production to countries with cheaper labour.

But, now, manufacturing is a lot more mechanised/automated/computerised and far fewer humans are needed in a lot of processes. That should open the doors for a lot more manufacture in the country where it's bought/used.

Just look at the food manufacturing in the UK. The Heinz and Kelloggs and Walkers factories with 24/7 production lines where there is barely a human to be seen. That's mass production, still able to produce vast quantities of cheap goods. That kind of production stayed in the UK because it couldn't easily be off-shored due to transportation costs, etc. Just shows what can be achieved. No reason at all why lots of other high volume low value production couldn't be made in the UK along similar methods. It's the same with bog rolls and tissues - loads of UK plants doing the processing and manufacture - again due to the high cost of transport, but again, another high volume, low value industry.

We really should be able to massively expand the automated production back into the UK. Of course, for manufacture that requires a lot of human input, then the relatively high UK wages are still an issue, but if people want a "hand made" item, they should get used to paying more for it.

 

[RT4038]

Things were very different in the 70s. The UK manufacturing sector was largely labour intensive, which of course, became too expensive due to wage rises etc around that time. It made sense to move production to countries with cheaper labour.

But, now, manufacturing is a lot more mechanised/automated/computerised and far fewer humans are needed in a lot of processes. That should open the doors for a lot more manufacture in the country where it's bought/used.

Just look at the food manufacturing in the UK. The Heinz and Kelloggs and Walkers factories with 24/7 production lines where there is barely a human to be seen. That's mass production, still able to produce vast quantities of cheap goods. That kind of production stayed in the UK because it couldn't easily be off-shored due to transportation costs, etc. Just shows what can be achieved. No reason at all why lots of other high volume low value production couldn't be made in the UK along similar methods. It's the same with bog rolls and tissues - loads of UK plants doing the processing and manufacture - again due to the high cost of transport, but again, another high volume, low value industry.

We really should be able to massively expand the automated production back into the UK. Of course, for manufacture that requires a lot of human input, then the relatively high UK wages are still an issue, but if people want a "hand made" item, they should get used to paying more for it.

So if it is possible and economical in the factories that you mention, why are 'lots of other high volume low value production' not being made in the UK? If it makes economic sense, it would be. Therefore, either there isn't any more production that is suitable (either because the UK volume is not sufficient for economic production, or the labour cost is more of a factor than you are imagining) or there are other existential costs (taxes, regulatory etc etc) that make offshore production and then importing more economic.

 

[yorksrob]

So if it is possible and economical in the factories that you mention, why are 'lots of other high volume low value production' not being made in the UK? If it makes economic sense, it would be. Therefore, either there isn't any more production that is suitable (either because the UK volume is not sufficient for economic production, or the labour cost is more of a factor than you are imagining) or there are other existential costs (taxes, regulatory etc etc) that make offshore production and then importing more economic.

Put simply, because we only look at the headline price of an item and ignore the costs of off-shore production.

The cost to the economy of money not going to domestic workers to spend, the strategic costs of relying on outside supply chains for essential equipment and the geo-political costs of dependance on authoritarian regimes.

 

[Hadders]

I'm all for UK sourcing where it makes sense to do so but sometimes UK production isn't the best.

Take UK car manufacturing in the 1970s. Austin Allegro levels of quality anyone? All produced by 'quality' British management and workers.

I think not.

 

[deltic]

What would be the effect of legislation which, for example, forced the NHS to only buy stuff made in Britain by British companies which only pay British taxes? Whilst the cost may be higher, it's better for the environment (due to much reduced transportation distance, and not being made in China using coal-fired electricity) and would grow the economy. The question is, is the increased cost matched by the economic growth.

The effect would be a massive reduction in trade as other countries started doing the same - protectionism would rise and the whole world would be worse off.

 

[yorksrob]

I'm all for UK sourcing where it makes sense to do so but sometimes UK production isn't the best.

Take UK car manufacturing in the 1970s. Austin Allegro levels of quality anyone? All produced by 'quality' British management and workers.

I think not.

I think for higher end products, it's good to have an element of choice and competition. For cars, as an example, it would be good to have a choice between a car designed and produced domestically, one maybe designed elsewhere and manufactured here, and perhaps some imports.

For basic necessities which can be churned out, we should be churning them out domestically.

 

[yorksrob]

German companies can raise capital from regional banks, regional government and regional stock exchanges, rather than via the City as in the U.K. We British should have learnt a lot from the way things are done abroad in the 40+ years that we were in the EU, but we didn't and I can't see that changing any time soon.

This is a very good point. The City of London seems to be less interested in developing the regional economy, which puts domestic businesss at a disadvantage.

That said, after the 2008 financial crash, there was a proposal put forward to build a sort of development bank specifically to fill this gap. Sadly it didn't come to anything.

 

[JonathanH]

I'm all for UK sourcing where it makes sense to do so but sometimes UK production isn't the best.

Take UK car manufacturing in the 1970s. Austin Allegro levels of quality anyone? All produced by 'quality' British management and workers.

I think not.

I really don't think that just because we produced some products in the 1970s which are now derided, we would necessarily make the same mistakes today. There are well publicised thoughts about the operation of British Leyland in the 1970s. It would be hard to recreate those circumstances today.

 

[underbank]

I'm all for UK sourcing where it makes sense to do so but sometimes UK production isn't the best.

Take UK car manufacturing in the 1970s. Austin Allegro levels of quality anyone? All produced by 'quality' British management and workers.

I think not.

That was 50 years ago. Things are very different now.

 

[underbank]

This is a very good point. The City of London seems to be less interested in developing the regional economy, which puts domestic businesss at a disadvantage.

That said, after the 2008 financial crash, there was a proposal put forward to build a sort of development bank specifically to fill this gap. Sadly it didn't come to anything.

UK Banks and The City have been poor for business for decades. I remember when I started my accountancy career nearly 40 years ago and businesses were saying how difficult it was to get funding for new ventures. The City is more interested in betting on companies and commodities, rather than actually helping them grow.

 

[yorksrob]

UK Banks and The City have been poor for business for decades. I remember when I started my accountancy career nearly 40 years ago and businesses were saying how difficult it was to get funding for new ventures. The City is more interested in betting on companies and commodities, rather than actually helping them grow.

Indeed. This phenomenum was identified in Will Hutton's "The State We're In" about twenty years ago. I suspect that nothing's changed.

 

[RT4038]

Put simply, because we only look at the headline price of an item and ignore the costs of off-shore production.

The cost to the economy of money not going to domestic workers to spend, the strategic costs of relying on outside supply chains for essential equipment and the geo-political costs of dependance on authoritarian regimes.

The 'quid pro quo' of the cost of money not going to domestic workers to spend, is that the money which is going to domestic workers producing stuff for export will not be available (presuming that if we are happy not to import, we are also happy for other countries not to import our stuff?)
The strategic costs of relying on outside supply chains and the geo-political costs of dependence on authoritarian regimes are all airy-fairy money. There will be no security of supply while raw materials for this production have to be imported (as most of ours are worked out, or too expensive) , and I don't think we would be self-sufficient on our food supply either?
Not sure why we should burden ourselves with worrying about authoritarian regimes - achieving your economic model would turn ourselves towards that direction.
In your model the countries which have abundant raw materials (or cheap access to them) will be those with economic hegemony. Bit like the UK in the days of empire.

 

[RT4038]

That was 50 years ago. Things are very different now.

Things are very different now, because of the global economy and the introduction of worldwide competition. Start turning that back with protectionism and we'll start turning back towards the 1970s again. The underlying cultural conditions are still there.

 

[Bletchleyite]

The effect would be a massive reduction in trade as other countries started doing the same - protectionism would rise and the whole world would be worse off.

Is that actually true? If each country manufactured its own stuff, carbon emissions would drop massively.

That said, that could be achieved another way - return to using sail as a method of propulsion.

 

[RT4038]

UK Banks and The City have been poor for business for decades. I remember when I started my accountancy career nearly 40 years ago and businesses were saying how difficult it was to get funding for new ventures. The City is more interested in betting on companies and commodities, rather than actually helping them grow.

You are right. This does not only affect the City though. Individuals are also more interested in making a 'pile' and selling to the highest bidder, rather than going for ongoing business. These attitudes permeate our society, are probably part of our culture, and will be difficult to change without destroying our wealth.

 

[cactustwirly]

I think for higher end products, it's good to have an element of choice and competition. For cars, as an example, it would be good to have a choice between a car designed and produced domestically, one maybe designed elsewhere and manufactured here, and perhaps some imports.

For basic necessities which can be churned out, we should be churning them out domestically.

No I would prefer a choice, and you only get that from European imports.
Cars built and designed in the UK are **** tbh. The build quality from JLR is very disappointing, especially for such a premium brand.
Cars built in Europe, such as in Belgium and Germany are a lot better.

 

[RT4038]

Is that actually true? If each country manufactured its own stuff, carbon emissions would drop massively.

That said, that could be achieved another way - return to using sail as a method of propulsion.

It is difficult to see how every country has the market size to economically produce everything, aside from the need to cart small quantities of all raw materials around the place.

 

[yorksrob]

The 'quid pro quo' of the cost of money not going to domestic workers to spend, is that the money which is going to domestic workers producing stuff for export will not be available (presuming that if we are happy not to import, we are also happy for other countries not to import our stuff?)
The strategic costs of relying on outside supply chains and the geo-political costs of dependence on authoritarian regimes are all airy-fairy money. There will be no security of supply while raw materials for this production have to be imported (as most of ours are worked out, or too expensive) , and I don't think we would be self-sufficient on our food supply either?
Not sure why we should burden ourselves with worrying about authoritarian regimes - achieving your economic model would turn ourselves towards that direction.
In your model the countries which have abundant raw materials (or cheap access to them) will be those with economic hegemony. Bit like the UK in the days of empire.

All I can say is that Germany (yes them again) have managed to avoid becoming an authoritarian regime (during the post war period at least) and they also seem to have a balance of import and export which doesn't involve them being denuded of industry.

In case you haven't noticed, countries with access to abundent raw materials already have economic hegemony. By running down our manufacturing capability, we only add to that hegemony. The thing that can be said about raw materials is that they tend to come from more than one area, so in most cases there is a competition between countries to sell them. If we make our own PPE for example, there are a wide range of countries producing oil for plastic to choose from - more so than for the finished products.

 

[yorksrob]

No I would prefer a choice

Isn't that what I said ?

 

[yorksrob]

It is difficult to see how every country has the market size to economically produce everything, aside from the need to cart small quantities of all raw materials around the place.

But it's ok to cart small quantities of finished products all over the place ?

 

[brad465]

Put simply, because we only look at the headline price of an item and ignore the costs of off-shore production.

The cost to the economy of money not going to domestic workers to spend, the strategic costs of relying on outside supply chains for essential equipment and the geo-political costs of dependance on authoritarian regimes.

I'm glad someone else sees the issue of authoritarian regimes as a means to change economic behaviour. The big one related to that is if we gave renewable energy a real boost in this country we would not rely on the proportion of oil coming from all the OPEC Countries, Russia and whatnot.

With regards to cheaper labour abroad it might be cheaper, but in a number of countries their workers' rights and conditions are abysmal and we should not be allowing this to go on. Yes we cannot make everything we need, but their is also the saying "buy cheap, buy twice"; if anything we make is more expensive, but the quality is better, there maybe a saving in the long run.

Making as much money as possible without a care for some of the immoral expenses and/or geopolitical issues referenced in both points above is why this has been allowed to continue for so long, especially when most of the money generated goes into the hands of very few, who often hide it away in tax havens as well, but that's another matter entirely.

 

[yorksrob]

I'm glad someone else sees the issue of authoritarian regimes as a means to change economic behaviour. The big one related to that is if we gave renewable energy a real boost in this country we would not rely on the proportion of oil coming from all the OPEC Countries, Russia and whatnot.

With regards to cheaper labour abroad it might be cheaper, but in a number of countries their workers' rights and conditions are abysmal and we should not be allowing this to go on. Yes we cannot make everything we need, but their is also the saying "buy cheap, buy twice"; if anything we make is more expensive, but the quality is better, there maybe a saving in the long run.

Making as much money as possible without a care for some of the immoral expenses and/or geopolitical issues referenced in both points above is why this has been allowed to continue for so long, especially when most of the money generated goes into the hands of very few, who often hide it away in tax havens as well, but that's another matter entirely.

Yes indeed, I agree very strongly with the point about renewable energy.

In terms of textiles, as an example, I agree that we are probably paying too little for these. Given that they are generally manufactured in low income/resource poor countries, there is undoubtedly a development advantage of trading with them which outweighs other factors. However, we should insist on better pay and working conditions as the quid pro quo for this business. That would involve paying a bit more for them.

 

[RT4038]

All I can say is that Germany (yes them again) have managed to avoid becoming an authoritarian regime (during the post war period at least) and they also seem to have a balance of import and export which doesn't involve them being denuded of industry.

In case you haven't noticed, countries with access to abundant raw materials already have economic hegemony. By running down our manufacturing capability, we only add to that hegemony. The thing that can be said about raw materials is that they tend to come from more than one area, so in most cases there is a competition between countries to sell them. If we make our own PPE for example, there are a wide range of countries producing oil for plastic to choose from - more so than for the finished products.

But we are not German or in Germany. After WW2 there was a major change in the make up of German society and cultural values. It was a result of their comprehensive defeat and partition. We have not had that to anything like the same degree. We do not do consensus politics. We do not do social contracts. We do know the price of everything and the value of little. I am sure that if we were crushed into the ground, we would also change. But I think I would rather not go via there thank you.
In normal circumstances the PPE market in the UK is small, and the items not conducive to mass production 24/7 without human intervention. Producing here would be more expensive, and that would mean the NHS (amongst others) offering less services for their budget.

 

[RT4038]

I'm glad someone else sees the issue of authoritarian regimes as a means to change economic behaviour. The big one related to that is if we gave renewable energy a real boost in this country we would not rely on the proportion of oil coming from all the OPEC Countries, Russia and whatnot.

With regards to cheaper labour abroad it might be cheaper, but in a number of countries their workers' rights and conditions are abysmal and we should not be allowing this to go on. Yes we cannot make everything we need, but their is also the saying "buy cheap, buy twice"; if anything we make is more expensive, but the quality is better, there maybe a saving in the long run.

Making as much money as possible without a care for some of the immoral expenses and/or geopolitical issues referenced in both points above is why this has been allowed to continue for so long, especially when most of the money generated goes into the hands of very few, who often hide it away in tax havens as well, but that's another matter entirely.

You may well be right, but if it costs more to produce in the UK it will cost more for UK consumers to buy; this will then affect UK consumers prosperity and send it back to 1970s levels (the last time we made most things here). If you're OK with that then fine, but I am not sure the rest of the population will vote with you.

 

[yorksrob]

But we are not German or in Germany. After WW2 there was a major change in the make up of German society and cultural values. It was a result of their comprehensive defeat and partition. We have not had that to anything like the same degree. We do not do consensus politics. We do not do social contracts. We do know the price of everything and the value of little. I am sure that if we were crushed into the ground, we would also change. But I think I would rather not go via there thank you.
In normal circumstances the PPE market in the UK is small, and the items not conducive to mass production 24/7 without human intervention. Producing here would be more expensive, and that would mean the NHS (amongst others) offering less services for their budget.

I simply do not accept that we cannot learn to work better just because of the outcome of a war seventy years ago.
I do not accept that we should not try to improve the way our economy works, just because haven't done so before, or indeed because our country hasn't been "crushed into the ground".
I do not accept that our country not slavishly adhearing to every aspect of laissez-faire ideology would automatically plunge the world into economic disaster, when plenty of other countries don't and the sky hasn't fallen in.
I do not accept that other European countries or their workers are inherantly better suited to high quality manufacturing, for no other reason than that we have systematically neglected the sector for the last forty years.

 

[RT4038]

Yes indeed, I agree very strongly with the point about renewable energy.

In terms of textiles, as an example, I agree that we are probably paying too little for these. Given that they are generally manufactured in low income/resource poor countries, there is undoubtedly a development advantage of trading with them which outweighs other factors. However, we should insist on better pay and working conditions as the quid pro quo for this business. That would involve paying a bit more for them.

We won't insist on better pay and working conditions, because we don't want to be paying a lot (not a bit) more for them. The wealth of this country has been built on cheap labour - our own up to 1960s, our slave trading, the subjects of our Empire - more recently the Far East and Eastern European economies. It is myopic to think that we can have the same level of prosperity whilst paying ourselves handsomely for manufacturing.

 

[yorksrob]

We won't insist on better pay and working conditions, because we don't want to be paying a lot (not a bit) more for them. The wealth of this country has been built on cheap labour - our own up to 1960s, our slave trading, the subjects of our Empire - more recently the Far East and Eastern European economies. It is myopic to think that we can have the same level of prosperity whilst paying ourselves handsomely for manufacturing.

Presumably "because we're not Germany" seems to be the basis of your argument.

 

[RT4038]

Presumably "because we're not Germany" seems to be the basis of your argument.

I think that every country in the world has a particular set of values and culture, usually shaped by centuries of history. No two countries have exactly the same, but some will appear similar often due to shared history in some way.
In some countries the values and culture have been shaped by a cataclysmic event (revolutions in France, USA, Russia etc; German defeat) and others by particular episodes in their history (racial tension in South Africa; establishment of Israel etc).
Each country's individual values and culture are interconnected, and it is usually not possible to separate out an individual characteristic and apply it to a different country, without having to transpose other interconnected characteristics as well.
In the UK our values and culture have been shaped by history; we have had no social cataclysmic event in recent times, which has left us as, inter alia, a trading nation with an ingrained class system (modified from earlier years, but still 'them' and 'us') and an individual money making culture. Taking the German economic model to the UK, without bringing the German social and cultural characteristics [which we can't, unless by authoritarian means, because of different histories], just will not work.
This is why I say 'because we're not Germany'.

I expect there are Germans wanting to bring some aspect or another of UK values and/or culture to Germany, who will face exactly the same difficulties, as there will be an interconnected item to get it to work that they definitely do not want!
No country's values and culture are inherently all bad; they are just different. Major changes would only come about by an event destroying the current cultural order , which I would rather not live through. In the meantime we have to adapt what we've got where possible (with all the vested interests) and live with the rest.

A minor example, but nonetheless indicative: How many times have we heard the press clamouring for the Swiss or Japanese to take over the running of our railways, so the trains will run to time? Without the interconnected values and cultures of that country being applied to all interfaces with the railway, they will make very little difference at all.