Why Yorkshire must now engineer a manufacturing revival – John Mills

Manufacturing is crucial to the UK's recovery, writes John Mills.Manufacturing is crucial to the UK's recovery, writes John Mills.
Manufacturing is crucial to the UK's recovery, writes John Mills.
COVID-19 has not been kind to Yorkshire. Nor, for a long time, has UK economic policy. Too many people feel left behind. They don’t believe that the economy is run in their favour.

Not only in Yorkshire but in other regions in the North, many communities feel discontented with their prospects. They no longer believe that the next generation will be more prosperous than they are.

The big underlying problem is the collapse of UK industry. As late as 1970, almost a third of our national income came from manufacturing. Now it is less than 10 per cent.

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Yorkshire always depended much more than London and the South East on industry, and the consequence of the decline of most of UK manufacturing has been the main reason for the widening prosperity gap.

Are Boris Johnson and Rishi Sunak doing enough to support UK manufacturing?Are Boris Johnson and Rishi Sunak doing enough to support UK manufacturing?
Are Boris Johnson and Rishi Sunak doing enough to support UK manufacturing?

The figures are stark. Office for National Statistics (ONS) data shows Yorkshire’s Gross Value Added per head – effectively a measure of average aggregate value created per person – was over 20 per cent below the national average and well under half the figure for London even before the arrival of Covid.

The difference in living standards between London and Yorkshire is less than this as a result of a variety of grants, transfers and subventions from the 
South to the North, but it is still significant.

But why isn’t Yorkshire standing on its own feet without these transfers? The answer is that the Yorkshire region does not have enough to sell to the rest of the world to pay its way without them. And the reason for this is deindustrialisation.

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Yorkshire does not have the natural advantages of geography, language, our legal system, and our universities that London-based services have. Instead, it depends on the manufacturing industry where straight competitiveness is crucial, and it probably always will be.

Chancellor Rishi Sunak.Chancellor Rishi Sunak.
Chancellor Rishi Sunak.

If Yorkshire is to be as prosperous as the rest of the county, therefore, it has to be competitive enough to engineer a manufacturing revival. Can this be done? Yes, but only by a radical change in economic policies.

The reason why we have deindustrialised to the extent we have is that we have let the exchange rate get far too high for most manufacturing to prosper in the UK. It has then become common sense to close down unprofitable production here and to import far too much from China and elsewhere.

This is what needs to change. We need to make it at least as profitable to site new manufacturing facilities in the UK – and particularly in our traditional industrial heartlands – than in China or in Germany.

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Indeed, we need to switch our whole economy away from depending on consumption, borrowing and imports, towards being driven by manufacturing, investment and exports. Then we can target some really impressive growth figures.

manufacturing holds the key to the North's future, writes John Mills.manufacturing holds the key to the North's future, writes John Mills.
manufacturing holds the key to the North's future, writes John Mills.

Careful calculations show that, if we had an exchange rate 20 per cent lower than we have at the moment, the UK economy could grow about two per cent faster cumulatively every year compared to what would happen if we carry on as we are. This would make us 20 per cent better off by 2030 than currently seems likely.

Why don’t we do this? It is because too many of our policymakers are stuck in the wrong mindset, supporting the wrong priorities.

Globalisation and liberalisation have been a boon for London but much more of a mixed blessing for the UK’s regions, including Yorkshire. A high exchange rate is not a big problem for services because most of them are not very price sensitive. The City likes a strong pound but it’s ruinous for industry.

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So, as we fight the uphill battle which is awaiting us on Covid-19 over the next few months, we need to make sure that we also raise our sights for the future.

Sooner or later, the pandemic will be behind us and we will be able to review our national priorities. If we want to see a prosperous future for the whole county and more equality between the regions, a manufacturing revival is far the best way of getting there.

Are we prepared to make the 
necessary policy changes to get this to happen? Time will tell, but if we don’t, expect the economy only slowly to recover from Covid-19 and for average disposable incomes in the UK to be 
quite possibly lower in 2030 than they were in 2019 or even 2007. We may 
well have a whole generation of wasted years.

A reasonable measure of reindustrialisation is the only way to avoid an economic, social, political and global disaster like this occurring.

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The whole country desperately needs to avoid this outcome, but especially regions like Yorkshire where, for a much more prosperous future, a lot more manufacturing is the only realistic solution.

John Mills is an economist, entrepreneur and author. He has just written his latest book, The Elephant in the Room, published by his think-tank The Institute for Prosperity.

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