Manufacturing renaissance in industrial regions? Investigating the potential of advanced manufacturing for sectoral and spatial rebalancing.
Lead Research Organisation:
University of Southampton
Department Name: Sch of Geography & Environmental Sci
Abstract
The recession from 2008, and the persistent sectoral and spatial imbalances in the recovery, have provoked political calls to 'rebalance' the economy. According to Government representatives, Britain needs to 'reindustrialise', to rediscover its talent for manufacturing. Strengthening manufacturing in the Midlands and North will aid economic stability, raise productivity, and promote a more even distribution of growth. It has been argued that traditional industrial regions should develop new types of high-technology, 'advanced' manufacturing activities.
Such calls for rebalancing have triggered a major debate on whether the British economy can in any way 're-industrialise'. Optimists point to resurgent clusters of manufacturing industries. Others are sceptical and argue that British manufacturing has been undermined by the 2008 recession, long-term weaknesses and an unsupportive institutional context. In this view, supply chains in British manufacturing are now too thin, fragmented and sparse to support industrial renewal on the scale required. There is evidence to show uneven regional trends in manufacturing, especially between the North and South of Britain and, according to some, advanced manufacturing is growing at a much faster rate in Southern England due to its research intensity and proximity to high-technology institutions. There is a pressing need to know how, and how far, industrial regions in Britain are developing advanced manufacturing.
Relatively little is known about any potential regional manufacturing renaissance and the significance of location. There are several hypotheses. Some argue that advanced manufacturing develops best in specialised clusters and in local 'ecosystems' in which firms benefit from shared capabilities, resources, spill-overs and intermediaries. Others emphasise broader-scale external economies across sectors, so that location in cities and regions with a wide range of growing industries is more important to manufacturing performance. There is also debate about the degree to which location in traditional industrial regions aids or hinders advanced manufacturing. In a 'phoenix industry' view, manufacturing can be revived in traditional industrial regions by networks of small firms and by the diversification and branching of new sectors. This project tackles these questions. It places the performance of advanced manufacturing firms in the context of changes in supply chains and examines whether there is increasing specialisation of regions and locations in particular tasks, roles and functions rather than in entire industries.
This project will examine the geographical, organisational and economic dynamics of four key manufacturing industries: electrical, computing and optical equipment; aerospace; pharmaceuticals; and motor vehicles. The project would proceed in three connected stages. The first stage would be to use and combine existing micro-data sources to examine the central issues on the relationships between manufacturing performance and location and investigate the key determinants of firm growth, performance and innovation in these industries. The project will use and combine several data-sets to provide a detailed analysis of change since the early 1970s. The second stage of the project will carry out a postal and online survey of firms in the four industries. This will explore the relationships between location and firm performance in more depth. For each industry, the survey aims to compare a set of firms within traditional industrial regions (in the North, Wales, Scotland or Midlands) with a similar group of firms in Southern regions. The final stage of the project will focus on manufacturers in these industries in four Midlands/Northern regions (selecting one region where each industry is well represented). In these areas, it will use firm interviews and focus groups to discuss findings, and identify and sound out key policy lessons and implications.
Such calls for rebalancing have triggered a major debate on whether the British economy can in any way 're-industrialise'. Optimists point to resurgent clusters of manufacturing industries. Others are sceptical and argue that British manufacturing has been undermined by the 2008 recession, long-term weaknesses and an unsupportive institutional context. In this view, supply chains in British manufacturing are now too thin, fragmented and sparse to support industrial renewal on the scale required. There is evidence to show uneven regional trends in manufacturing, especially between the North and South of Britain and, according to some, advanced manufacturing is growing at a much faster rate in Southern England due to its research intensity and proximity to high-technology institutions. There is a pressing need to know how, and how far, industrial regions in Britain are developing advanced manufacturing.
Relatively little is known about any potential regional manufacturing renaissance and the significance of location. There are several hypotheses. Some argue that advanced manufacturing develops best in specialised clusters and in local 'ecosystems' in which firms benefit from shared capabilities, resources, spill-overs and intermediaries. Others emphasise broader-scale external economies across sectors, so that location in cities and regions with a wide range of growing industries is more important to manufacturing performance. There is also debate about the degree to which location in traditional industrial regions aids or hinders advanced manufacturing. In a 'phoenix industry' view, manufacturing can be revived in traditional industrial regions by networks of small firms and by the diversification and branching of new sectors. This project tackles these questions. It places the performance of advanced manufacturing firms in the context of changes in supply chains and examines whether there is increasing specialisation of regions and locations in particular tasks, roles and functions rather than in entire industries.
This project will examine the geographical, organisational and economic dynamics of four key manufacturing industries: electrical, computing and optical equipment; aerospace; pharmaceuticals; and motor vehicles. The project would proceed in three connected stages. The first stage would be to use and combine existing micro-data sources to examine the central issues on the relationships between manufacturing performance and location and investigate the key determinants of firm growth, performance and innovation in these industries. The project will use and combine several data-sets to provide a detailed analysis of change since the early 1970s. The second stage of the project will carry out a postal and online survey of firms in the four industries. This will explore the relationships between location and firm performance in more depth. For each industry, the survey aims to compare a set of firms within traditional industrial regions (in the North, Wales, Scotland or Midlands) with a similar group of firms in Southern regions. The final stage of the project will focus on manufacturers in these industries in four Midlands/Northern regions (selecting one region where each industry is well represented). In these areas, it will use firm interviews and focus groups to discuss findings, and identify and sound out key policy lessons and implications.
Planned Impact
Rebalancing the British economy, both in industrial and geographical terms is a central economic agenda. Some degree of manufacturing renaissance based on the growth of advanced manufacturing in the regions is integral to this agenda. The project will examine the geographical dynamics and processes of change in four key manufacturing industries. It will examine the condition and performance of advanced manufacturing in different regions across Britain and provide evidence to inform the development of relevant policies and strategies. The impact strategy aims to raise awareness of the research, develop key stakeholder engagement, and deliver impact through beneficial knowledge exchange with firms, industry representatives and policy-makers nationally, within the devolved territories, and city-regions and LEP areas. The proposal has been reviewed and shaped by critical comments and advice from potential users.
The principal non-academic beneficiaries will be:
i. Public policy makers at both national and sub-national scales. It would assist local and central government to understand more about the causes of advanced manufacturing growth and productivity in different regions in Britain, and the implications for policy. The project would provide a valuable input to debates about the best design of regionally-sensitive industrial policy and the possible role of more place-based policies. It will be of use to city councils, Combined Authorities, Local Enterprise Partnerships, urban regeneration agencies, training providers, the Northern Way, Midlands Engine and other emergent 'powerhouse' and 'engine' organisations, national government departments, devolved administrations, and House of Commons and Lords Select Committees as well as think-tanks including the Centre for Cities.
ii. Firms and representative and industry/sectoral associations would gain further knowledge of changing trends in their industries, changes to supply chains, and the significance of location, agglomeration and spatial distributions with a view to shaping their strategies for innovation, productivity improvement and competitiveness. It would provide evidence on the needs and requirements of firms in these industries. It would increase public and industry knowledge about changes in manufacturing in different areas and lead to a better-informed assessment of the probable futures of these industries.
iii. Public and private partnerships and agencies/ consultants engaged in supporting and enabling advanced manufacturing growth would be provided with useful knowledge. The project would be of benefit to those engaged local, regional and urban economic development and responsible for the planning the supply of human capital and infrastructure investment. See letter of support from RTPI.
iv. International economic and industrial development institutions. There is also much interest in other countries in understanding more about the factors that determine the regeneration of old industrial regions and how advanced manufacturing can be nurtured and supported. The agenda is prominent in ILO, UNIDO, OECD and European Commission policy concerns. Funding of this project would facilitate future comparative international research and the investigators would be looking to develop an international programme of research on this topic.
The strategy will be delivered through the following activities: 1. User and beneficiary policy community building through development of research networks, including a dedicated website connected with a blog, Twitter feed, LinkedIn group; 2. Interim workshops bringing together academics, policy makers and industry representatives to present findings for comment and feedback; 3. Project Advisory Group meetings to advise and steer the impact strategy including academics and practitioners; 4. Policy reports and 3 (non-technical) summary documents and policy briefings 5. A conference combining both academic and policy communities.
The principal non-academic beneficiaries will be:
i. Public policy makers at both national and sub-national scales. It would assist local and central government to understand more about the causes of advanced manufacturing growth and productivity in different regions in Britain, and the implications for policy. The project would provide a valuable input to debates about the best design of regionally-sensitive industrial policy and the possible role of more place-based policies. It will be of use to city councils, Combined Authorities, Local Enterprise Partnerships, urban regeneration agencies, training providers, the Northern Way, Midlands Engine and other emergent 'powerhouse' and 'engine' organisations, national government departments, devolved administrations, and House of Commons and Lords Select Committees as well as think-tanks including the Centre for Cities.
ii. Firms and representative and industry/sectoral associations would gain further knowledge of changing trends in their industries, changes to supply chains, and the significance of location, agglomeration and spatial distributions with a view to shaping their strategies for innovation, productivity improvement and competitiveness. It would provide evidence on the needs and requirements of firms in these industries. It would increase public and industry knowledge about changes in manufacturing in different areas and lead to a better-informed assessment of the probable futures of these industries.
iii. Public and private partnerships and agencies/ consultants engaged in supporting and enabling advanced manufacturing growth would be provided with useful knowledge. The project would be of benefit to those engaged local, regional and urban economic development and responsible for the planning the supply of human capital and infrastructure investment. See letter of support from RTPI.
iv. International economic and industrial development institutions. There is also much interest in other countries in understanding more about the factors that determine the regeneration of old industrial regions and how advanced manufacturing can be nurtured and supported. The agenda is prominent in ILO, UNIDO, OECD and European Commission policy concerns. Funding of this project would facilitate future comparative international research and the investigators would be looking to develop an international programme of research on this topic.
The strategy will be delivered through the following activities: 1. User and beneficiary policy community building through development of research networks, including a dedicated website connected with a blog, Twitter feed, LinkedIn group; 2. Interim workshops bringing together academics, policy makers and industry representatives to present findings for comment and feedback; 3. Project Advisory Group meetings to advise and steer the impact strategy including academics and practitioners; 4. Policy reports and 3 (non-technical) summary documents and policy briefings 5. A conference combining both academic and policy communities.
Organisations
Publications
Harris J
(2020)
The Covid-19 crisis and manufacturing: How should national and local industrial strategies respond?
in Local Economy: The Journal of the Local Economy Policy Unit
Harris R
(2019)
Does spatial proximity raise firm productivity? Evidence from British manufacturing
in Cambridge Journal of Regions, Economy and Society
Pike A
(2020)
Coping with deindustrialization in the global North and South
in International Journal of Urban Sciences
Sunley P
(2021)
Renewing industrial regions? Advanced manufacturing and industrial policy in Britain
in Regional Studies
Sunley P
(2022)
Industrial policies, strategy and the UK's Levelling Up agenda
in Local Economy: The Journal of the Local Economy Policy Unit
| Description | The project has investigated the evolution of advanced manufacturing across Britain to provide a better evidence-base for public understanding and policymaking. The project has examined the geographical, dynamics of advanced manufacturing (AM) industries across the UK, focusing on several sectors in particular: aerospace; pharmaceuticals; chemicals; motor vehicles; electrical equipment; machinery; defence /weapons and ammunition; medical instruments; and transport equipment. Using novel data on GVA and employment by NUTS 2 regions and Local Authority Districts, for these industries over several decades the project documented the long-term evolution of AM across British regions. The first achievement is to provide a detailed overview of the changing spatial distribution of these sectors. Some of the results have been surprising. Spatial concentration fell in the majority of AM industries up until 2000, but it has risen since as these industries have consolidated and retrenched in particular locations. Despite this, AM output has continued to shift away from dense, large cities to semi-urban and smaller cities. In general, traditional industrial regions (TIRs) have lost ground relative to other regions. A finding that challenges the current UK government's 'levelling up' agenda. Local Authority Districts in such TIRs have lost share, relative to other areas, in terms of AM output and employment. The project shows that there have been significant differences both between industries and types of region. Types of engineering-based (synthetic knowledge) manufacturing- such as aerospace, motor vehicles and some defence-related manufacturing - have until recently been expanding in some TIRs. Such regions provide significant reservoirs of assets, skills and capabilities for these industries. This applies most notably to the East Midlands, and to a lesser extent in West Midlands and Wales; while there has been little expansion in other TIRs (e.g. Yorkshire, South Western Scotland, and North East). In contrast, industries characterised by science-based (analytic) knowledge (especially pharmaceuticals, and computers, electronics and optics) have performed much less well and been more unstable in TIRs. The majority of growth of AM has been driven by FDI which has tended to prefer non-TIR locations. AM growth across the country also shows only weak relationships with the measured Research Intensity of regional economies, which has important implications for policy debates around the promotion of innovation and R&D across the UK. The second achievement has been to examine whether AM firms are clustered and whether this raises their productivity. Most of the extant empirical evidence on spatial concentration in the UK has employed measures that suffer from areal unit problems. The project constructed new plant-level indices of spatial proximity derived from postcode district data, to measure the extent of spatial concentration and its impact on total factor productivity. Separate indices of spatial concentration were calculated to take account of distances to plants in the same industry and distances to plants in 'related' industries, as well as different distance decay factors. The extent to which, and where, clustering occurs was found to vary considerably across AM sectors. The results indicate that, in most AM sectors, spatial concentration has a negative impact on productivity in small plants and a positive effect in larger plants. Large plants are likely to benefit more from localised knowledge spillovers due to their higher levels of absorptive capacity. This suggests that the absorptive capacity of many Small and Medium Enterprises (SMEs) is a key constraint so that proximity to other firms and innovation centres by itself is not enough to facilitate the diffusion of new practices and technologies. A third achievement has been to use three regional case studies (East Midlands, Scotland's Central Belt and Lancashire) and a firm survey to examine whether firms in AM sectors see themselves as members of coherent clusters and regional ecosystems, and whether they believe that they have effective local institutional and policy support. The project found that small firms often do not often benefit significantly from local supply chains and ecosystems, but often rely more on cross-regional and national supply chains and customers. The localised and decentralised economic development institutional and policy framework across Britain certainly contained several examples of successful initiatives to support AM, but it is a complex and uneven patchwork with many holes and gaps. In England, some Local Enterprise Partnerships are more responsive to the needs of AM, and there are examples of LEPs and regional industry organisations collaborating successfully. However, most LEPs have been underfunded and lack the resources required to provide the specific and specialist support to help firms develop and grow. In our research, the push towards localised policy intervention has created coherence and co-ordination problems in support for manufacturing, particularly in terms of investment, developing supply chains, tailoring skills policy development, and in infrastructure investment. Guided by national economic strategy in Scotland, there is a specific strategy for manufacturing with a particular emphasis on its definition of AM - 'high value manufacturing'. This strategy has guided the evolution of an extensive framework of support organised around key investments in leading institutes and geographical concentration around an advanced manufacturing hub and priority programmes addressing many of key cross-cutting issues for AM across the Central Belt and more widely within Scotland. Institutional and policy issues identified for the current approach include linking approaches in Scotland into UK policy and funding, addressing weak productivity and increasing internationalisation, reconciling cross-sectoral technological and sectoral approaches, managing the tension between geographical concentration and national Scotland-wide reach, addressing skills gaps and workforce renewal, supporting adaptation to industry 4.0, and mitigating Brexit uncertainty. Despite the significant investment in nationally-oriented Catapult Centres, many SMEs have found it difficult and costly to connect and to benefit from their innovation activities and services. Regional ecosystems, therefore, need a better balance between, and combination of, cross-sector, new-technology missions or 'grand challenges', with demand-led research focused on innovation that can be diffused and absorbed in specific sectors, places and supply-chains. Other types of diffusion-oriented innovation policy are more appropriate to raising the productivity of SMEs especially in TIRs. |
| Exploitation Route | The findings can be taken forward by other economic geographers, business scholars and local, regional and urban economic development specialists. The project raises some important questions about the importance of absorptive capacity in high-knowledge SMEs and how this develops in the context of particular places and regions. More intensive and internationally comparative research into how SMEs evolve and develop in conjunction with their markets, networks and supply chains would progress the results. The findings also underline the need to understand how spatial proximity interacts with other types of network proximity and supply chain development. The project has applied new and sharper measures of spatial proximity. Our findings suggest that spatial proximity is not adequate on its own to improve absorptive capacity in SMEs and more research on why this is and how SME capabilities can be supported through types of proximity would be useful. The results suggest that innovation activities focused on basic scientific research and lower Technological Readiness Levels do not automatically translate into spillovers that diffuse through supply chains and raise the productivity and competitiveness of smaller AM firms. More research on the processes that the diffuse and spread innovations through supply chains and how to overcome and counter the significant obstacles to their spread and implementation in different types of sites and industries would be valuable. These will be key elements in any integration of industrial and place-based based strategies at the subnational level across Britain and feed into the formulation of economic recovery strategies in the post-Brexit and post-pandemic context. The findings raise important questions about economic evolution in TIRs. In the British case, the development of many AM sectors, especially these with more scientific knowledge bases, has been unstable and these industries have been strong cyclical swings. Further research on the causes of the lack of resilience would take forward these issues. This is, of course partly due to the reliance on key foreign direct investors and more research into how other industrial regions in other countries have been able to more strongly embed investors and build more resilient AM ecosystems would develop the research. The attraction of foreign direct investors in future, especially highly capable suppliers, and the development of existing supply chains will both require a better co-ordinated and multi-scale industrial strategy with appropriate measures at local, regional and national scales. The research could also be taken forward by local, regional and urban economic development and policy studies communities. The findings show a disjuncture between the regional and cross-regional scales of AM firm operations, networks, relationships and knowledge flows, and the smaller geographical scale of many policy initiatives and support measures. The economic development framework defined by LEPs is clearly suited to high localised interventions such as developing an Innovation Centre and science or business parks, but has struggled to connect with the many firm activities and networks at broader spatial scales. While the move to Combined Authorities may help to remedy this disjuncture in some city-regions, it remains a widespread significant problem and it is hindering collaboration and co-ordination between agents and institutions. Using AM to address multiple objectives of increasing innovation and productivity as well as providing geographical equity and inclusion is proving a challenging balancing act in Scotland. More research into how policy support for AM can be better provided at broader regional and national scales would be valuable, and again, internationally comparative research is likely to be most valuable. |
| Sectors | Aerospace, Defence and Marine,Electronics,Pharmaceuticals and Medical Biotechnology |
| URL | http://www.manufacturing-regions.org.uk/ |
| Description | The findings have been used for several policy-focused reports, including a submission to the Treasury Select Committee Inquiry on Regional Imbalances and a report on AM to the Tees Valley Combined Authority. The research team also secured an ESRC Impact award, in collaboration with the Southampton Marine and Maritime Institute to transfer some of the lessons and findings of the research on local and regional manufacturing ecosystems to the Solent region, with the intention of informing the current initiatives to develop the Solent Marine Enterprise Zone (SolentMEZ). We also produced a Policy Briefing that was circulated through relevant channels, for example the LEP Network in England and Scottish Enterprise. In this Impact work, the findings were used as the basis for understanding the regional skills system for marine and maritime sectors, how this is being radically changed, and the need for policy support and collaboration and coordination at local, regional and national scales. This provided the basis for a report for the Solent MEZ, delivered in February 2020.This report highlighted the potential benefits of digital Made Smarter programme for SMEs that have been seen in other regions. It also argued that skills initiatives need to be embedded in other supporting investments to build an innovative ecosystem. The report also collated local information on skills provision and needs and highlighted the need for leadership and co-ordination and collaboration between firms and training providers. It helped to support the case for skills and training initiatives led by the SolentMEZ, and informed their skills and vocational education proposals. In this way some of the general lessons of the project on the character and policy needs of AM regional ecosystems were applied to the Solent marine case. |
| First Year Of Impact | 2020 |
| Sector | Aerospace, Defence and Marine |
| Impact Types | Policy & public services |
| Description | One Bank research seminar 13 December 2018 John Moffat 'The impact of clustering on total factor productivity in Great Britain' |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Professional Practitioners |
| Results and Impact | One Bank Research Seminar - 'The impact of clustering on total factor productivity in Great Britain' the presentation sparked discussions and questions from Bank of England staff and other stakeholders and helped to build practitioner economists' knowledge of the project and its findings. |
| Year(s) Of Engagement Activity | 2018 |
| Description | Policy Bref - Advanced manufacturing and local industrial strategies |
| Form Of Engagement Activity | A magazine, newsletter or online publication |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Policymakers/politicians |
| Results and Impact | A policy briefing based on early results and data from the project was sent to all LEPS via the LEP Network. |
| Year(s) Of Engagement Activity | 2019 |