The past and future of manufacturing: observations 2

In my previous blog, I pointed out that most developed economies had experienced a reduction in manufacturing employment in the last 20 years.

However, not all sub-sectors of manufacturing declined in the same way in all countries. The chart above shows the largest manufacturing countries in Europe (measured by number of total hours worked in 2018) and the change in hours worked by sub-sector (ordered from largest to smallest, measured by total hours worked in 1998). The detail itself is quite interesting, but I’d draw attention to three big-picture observations.

First, all the countries shown had their textiles and wood and paper products sectors shrink significantly. According to the McKinsey Global Institute report, “Globalization in transition: The future of trade and value chains”, the dynamics underpinning the dynamics of these two sectors were likely quite different, though. Textiles manufacturing is labour intensive and is therefore likely to have due to relatively high labour costs in Europe. Wood and paper products, on the other hand, are more regional in nature, and production has partly declined as the bulk of demand growth has shifted to emerging markets.

Second, with only a few exceptions, Western European countries’ decline has taken place across the various manufacturing sub-sector. This is particularly true for the UK and France, which saw a reduction in hours worked in every sub-sector, including in machinery, equipment and pharmaceuticals (where some other countries increased hours). Germany, too, has had its manufacturing employment shrink, but it did post somewhat increased hours in computers and electronics, machinery and equipment, petroleum products, transport equipment, and pharmaceuticals.

Third, Eastern European countries have picked up some of the manufacturing activity lost in the West. Poland grew several sub-sectors in the last 20 years, including some large ones, such as rubber and plastics, metal products, and other manufacturing (which includes, for example, furniture). In the Czech Republic, hours worked in the transport equipment sector almost doubled. [Not shown on the graph, but transport equipment also grew strongly in the Slovak Republic and Slovenia.]

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Tera Allas

Tera Allas

I help complex organisations make the right strategic decisions through innovative, insightful and incisive analysis and recommendations.

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