A reader of this blog asked me recently in an email why the UK no longer seems to make things, and whether a country can really grow without a strong manufacturing base. It's a question that goes to the heart of economics, because it forces us to ask what we mean by growth.
For more than forty years, we have been told that Britain can thrive as a “service economy.” In particular, the idea that finance can drive our economy has been at the heart of government thinking; the City of London is supposedly the “Jewel in the Crown” of the UK economy. Rachel Reeves has said so in the last year. We were promised that the age of industry was behind us: that we could design, consult, and finance while others manufactured. It was supposed to be this that made us rich.
It has not worked out that way, or well. We have an economy that consumes more than it produces, imports more than it exports, and depends on inflating property and debt, as well as attracting the world's hot money, not least via our offshore tax haven satellites, to maintain the illusion of prosperity. The result is a country that has lost not only its factories but also its confidence in what real work and added value mean.
So, making things matters. But if we are to rebuild the economy, we must also broaden our understanding of what genuine growth requires. Real progress depends on the ability to make, care, teach, and share.
I have no doubt that manufacturing is not a relic of the past if what is made is needed, rather than a product designed to fulfil manufactured demand. Having made that assumption, manufacturing remains key to a resilient economy. When a country makes things that are important, it sustains networks of skill, design, and innovation. What is more, manufacturing generates multiplier effects that extend through supply chains and logistics into local economies. They provide apprenticeships, research, and stable work.
The disappearance of that capacity has left the UK dangerously dependent on imports. Worse, it has hollowed out the communities that once held industrial knowledge and pride in productive work. That loss cannot be measured in GDP, but it can be seen in boarded-up towns and eroded self-belief. It can also be seen in the rise of the far-right. They feed on the sense of hopelessness that manufacturing decline created in too many places.
And none of this was inevitable. Successive governments chose to prioritise financial services over manufacturing. They dismantled industrial strategy, abandoned regional investment, and left the market to decide, which really meant letting the City decide. Finance became the supposed engine of growth, but it drove short-term speculation rather than long-term investment.
The resulting dominance of finance has distorted the entire economy. Capital that might have gone into productive industry has been poured into property and mergers. Share buybacks replaced research; bonuses replaced wages. Banks lent against land, and not innovation. Good ideas, talent and opportunities went to waste as a result.
The outcome is the low-productivity, low-wage, high-cost Britain we see today. We have a continuing trade deficit and too few companies with the scale and resilience to lead global markets. Even those that do manufacture often lack the finance to expand, because our banking system does not support long-term productive investment. Their sale to overseas investors has, in fact, become Labour policy. They call it foreign direct investment, but it's selling the future, however it is dressed up, creating insecurity as a result.
Reversing that requires deliberate action in the form of public investment banks, regional funding mechanisms, and tax systems that reward reinvestment rather than extraction. The state must act as a partner in rebuilding industry, not a bystander, and that is possible. It just requires that a choice be made.
All that being said, the reader's question invites broader reflection. If manufacturing is essential, is it the only source of growth? The answer is very clearly no. That is because growth is about far more than the production of goods.
Wealth creation also happens whenever we improve the human and social fabric of society. Teaching a child, caring for the sick, insulating a home, researching a cure, or tending to an older person are all activities that add real value. They expand our collective capacity to live well.
Yet neoliberal economics has long treated such work as a cost rather than an investment. GDP counts a new car but not the unpaid carer. It values financial churn more highly than clean air or well-being. This is the distortion we must now correct.
Caring, educating, and maintaining the systems that allow society to function are not secondary activities. They are what make all the rest possible. A country that neglects health, skills, and community cannot sustain either innovation or industry.
The aim, then, should not be to produce more stuff but to build more capability. Real growth is about enhancing our collective competence, including our ability to solve problems, to create, and to sustain life within the planet's limits. That means investing in the people and institutions that underpin both industry and care: schools, universities, hospitals, energy systems, and social infrastructure. These are not drains on the economy, but are its foundations. A hospital or a university is as much a productive asset as a factory. Each creates knowledge, employment, and long-term social capacity. Each requires investment that only the government can coordinate.
If we think about growth this way, the old division between public and private becomes meaningless. What matters is whether activity adds to our shared capacity to thrive and increase the possibilities for meaningful, sustainable life.
This redefinition of growth demands a different kind of state. The government must not just regulate the market but participate in building the economy. It should invest, coordinate, and plan for the long term. That requires:
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Industrial strategy, to rebuild manufacturing and energy capacity.
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Investment in care and education to expand the human capital that underpins innovation.
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Green transition programmes, to ensure that production and consumption stay within ecological limits.
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Reform of finance, so that money serves society rather than extracting from it.
Such a programme would restore the sense that the economy exists to serve people, not the other way around.
We should, then, reject both the nostalgic dream of recreating old industrial Britain and the neoliberal myth that services and finance can replace real production. What we need instead is an economy that values every form of work that sustains life, whether that be the engineer's skill, the social worker's care, the teacher's guidance, or the researcher's imagination.
Growth, in that sense, is not an end in itself. It is the process by which a society becomes more capable, more compassionate, and more sustainable. We still have the people, the knowledge, and the creativity to do this. What is lacking is political imagination. It is time that changed. Manufacturing must be part of that story, but so too must the rebuilding of the social foundations on which all production depends.
Taking further action
If you want to write a letter to your MP on the issues raised in this blog post, there is a ChatGPT prompt to assist you in doing so, with full instructions, here.
One word of warning, though: please ensure you have the correct MP. ChatGPT can get it wrong.
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Well yes,we do need more manufacturing because finance alone is not a robust, resilient, basis for an economy. Increased manufacturing requires finance for investment. Our current banking system is reluctant to provide this, it prefers to make loans backed by real estate. Which comes back to previous posts about inflated house prices.
Whilst our financial “industry” can provide huge loans on property, which makes homes increasingly unaffordable, it does not lend to real industry. The amount lent for houses needs to decrease, not just so that houses become affordable but also so that money is invested in industry. Professor Steve Keen has suggested one way to do this.
How many UK companies including manufacturers, are still struggling to work round the harm caused by Brexit? In many cases, the survivors are now broken up into UK and new EU based subsidiaries simply to continue trading with our nearest neighbour. Tax that should have been paid to HMRC is now paid in EU countries and jobs are lost here and created beyond our shores just to keep trading. Items bought from around the world are no longer shipped into the UK for final assembly by UK if they are to be exported back into the EU. Production lines have had to be split to cover the domestic and EU market. Ten years on and UK businesses still don’t understand the rules for trading into Northern Ireland and from there into the EU.
How much money is being poured down the drain creating and running parallel regulatory systems which 99% mimic their EU equivalent but which have been re-branded UK sovereign entities just to appease the RW press and the Farages? Divergence from EU rules was supposed to have been the point of Brexit and yet in so many areas this hasn’t happened (for good reason) and we are just spraying money around pretending it has. This is the drain on the UK and until Labour are brave enough to say it out loud, the rot will continue.
There was an interesting comment I saw recently that the ‘Henry’ vacuum cleaner which is made down the road from me in Chard is cheap and reliable whereas the Dyson made abroad – isnt……..
I suppose of course thats what you get from a machine designed by a marine engineer to use inside boilers and whose makers have ‘insourced not outsourced’ manufacturing and only buy UK made components
Again a spin off from another industry that has multiplied its benefits to the UK
Paradoxically, the owner of the Henry brand was an ardent Brexiteer! I have two of them, formerly owned Dyson and Shark, Henry outperforms them easily.
[…] have already written about growth this morning and how I frame the issue, which is very different from how I think Rachel Reeves […]
The bankruptcy of the UK’s promotion of, and adherence to, a neoliberal agenda that resulted in the decimation of the industrial sector and the promotion of the service economy has had another consequence that was both predictable and deliberate. That is the destruction of trade union power which seemed to be a clear aim of the Hayek/Friedman approach which saw any form of collectivism as bad. The over emphasis of the role and importance of the City of London and a service economy seemed at the time to be misguided. I used to quip to colleagues (ironically in a part of the service sector [the legal profession]) during the eighties and beyond that the country cannot make a reliable living if its economy was nothing more than everyone metaphorically opening doors for each other – we had to still make things and sell them. But that required an identifiable and, more often than not, a unionised work force which is not what neoliberals wanted. The unions were not perfect but neither was British management.However the trade unions did act as a valuable counterweight to the power of capital. I was born and grew up surrounded by neighbours who mostly worked “up the Austin” at Longbridge and I well remember the “we want to work” workers demonstration in Cofton Park against Red Robbo who would call wild cat strikes at the drop of a hat. In my opinion he was a prime example of trade union excesses. But the workers were not responsible for the failings of management. Cast your mind back to those days and the crap cars that they came up with – the Austin Allegro with its square steering wheel, for example. I always felt then that we needed a more collaborative approach between management and unions (with union representatives at board level) with a common sense of purpose. However, at that time Milton Friedman was all the rage with his philosophy that a company’s sole purpose was to increase profits for its shareholders so any new approach was doomed from the start. It seems that the (headless) neoliberal chickens are coming home to roost and we seem to be locked into a never ending spiral of decline.
Much to agree with.
My father had an Austin Allegro and it was the first care I drove after passing my test.
I agreed with his conclusion on it; never again.
And sorry for delayed moderation. It might have been quicker on holiday!
Great post.
The only garden we tend and grow these days is the money garden and then we celebrate it and worship people’s private palaces and yachts and high end car marques whilst kids go hungry, the roads deteriorate and people pass away in hospital corridors.
We’re so parsimonious with the future, with the long term. It’s grab it whilst you can and if it belongs to some one else already – so what? Take it anyway.
We really do need a change of plan don’t we? This is leading the majority of us to big fat nowhere.
I propose to broaden the question to Europe.
https://www.theguardian.com/business/2025/nov/11/nexperia-row-china-trade-brussels-beijing-chips
In summary: EU does not make the ICs it needs for its various industries, China does and uses this reality.
Fact: 10kms from where I write sits the largest & best semiconductor research establishment on the planet (IMEC)
Fact: ASML (Netherlands) is the leading global manufacturer of lithography equipment to make semiconductors (the Chinese are around 10 years behind)
Fact: the only global manufacturer of ultra pure quartz crucibles – needed to produce ultra pure silicon is 10kms from where I write (no not IMEC).
Point: EU does not lack “the tools” to change the situation. But:
Fact: the EU (& the UK) has NEVER had an industry strategy worthy of the name
Fact: the Euro is managed by the ECB on a neolibtard basis for the benefit of the EU finance sector – not for the benefit of the EU
The above points to a total & complete poilitical failure – EU & UK. Neither the politicos nor the bureacracy supporting them knows enough nor does it have the ability to even imagine let alone implement what needs to be done. Over 40 years, the finance vampire/sector has grown to the point where it dominates everything and erodes the UK’s & EU’s ability to act.
Might it be that “sevice economy” was and is a euphamism for “financialised economy”?
Might it be that a “service economy” indicates that an economy is significantly dependent upon “production economies” and therefore intrinsically weak?
Might it be that a service economy, with its self imposed limitation, is avoidably weaker than a mixed economy?
Might it be that a financialised economy inevitably diminishes its citizens and their children and so exploits them directly and indirectly in ways which intensify over time?
I disagree
The service economy is fundamental
It is the finance economy that is a problem
“Their sale to overseas investors has, in fact, become Labour policy. They call it foreign direct investment, but it’s selling the future, however it is dressed up, creating insecurity as a result.”
It was Tory policy in 2012.
(https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/32097/11-1377-constraints-on-developing-uk-managementpractices.pdf)
You might like Ari Weinzweig’s definition of “Good Profit”
“Good Profit, I will now say, appears when multiple ecosystems are all benefited at the same time:
– Our inner ecosystem
– Our client’s inner ecosystem [my addition]
– The ecosystem of the organization in which the profit is produced
– The ecosystem of the community of which that organization is a part
– The greater ecology of the planet”
That’s the goal
You’re right in your other piece about the lack of any credibility in any Budget Statement by Rachel. So how about this one instead? We can dream!
“This Budget redefines growth as the expansion of the nation’s productive, social, and environmental capacity, not just GDP. It launches a ten-year public investment plan to rebuild Britain’s industrial base, prioritising advanced manufacturing, green energy, and care infrastructure. A new Industrial Reinvestment Fund will partner with regional development banks to channel affordable finance into productive industry rather than property or speculation. Public investment in education, health, and social care is increased and treated as capital formation, building the nation’s long-term capability.
“Tax reform redirects reliefs away from asset-holding and speculative finance towards reinvestment in productive activity. Pension and ISA savings will gradually be required to fund UK green and social infrastructure. Enhanced resources for HMRC will ensure fair taxation and close the wealth and avoidance gaps.
“A new fiscal framework replaces GDP as the main success measure with broader indicators of resilience, capability, and sustainability. Growth will be judged by rising living standards, regional regeneration, and environmental restoration. The state’s role is restored as an active economic partner, using fiscal policy, targeted credit, and public investment to build a fairer, greener, and more productive Britain.
“I commend this Budget Statement to the House.”
Mine is coming soon
When I can fin ish a massive opile of admin
Tax returns have to be done….
Charles Tilly’s paper below tells us precisely why we need manufacturing because many human beings are still at the stage of being greedy and racist. An argument that many refuse to accept largely because they’ve failed to take an interest in history and global affairs and the argument has complexity:-
https://drive.google.com/file/d/1mUdisni1J9dGtVA2thBRVHJDb30ciLSx/view
We’ve been taken for a ride by our politicians with hardly any sincerely taking on board Michael Sandel’s argument we need contributive justice to which I would add not just nationally but globally and with respect to the planet’s carrying capacity.
https://www.theatlantic.com/ideas/archive/2020/09/contributive-justice-and-dignity-work/615919/
As the person who originally posed this question to you, can I say not only have you re-phased and amplified my question/concerns…but you have answered in the most comprehensive way. Thank you for spending the time and sharing your thoughts in this very constructive way. What next… how do we get a real discussion underway and get people (government) thinking/focussing on this. Could I encourage you to cover this topic on your YouTube channel please.
Thanks Chris.
And the answer to that suggestion is, yes, that’s a good idea.
PS I wsa awake at 3am this morning – and this was what wrote.
This particular paragraph from your text above resonants with me …. so clearly written, to the point and from my perspective absolutely key.
“I have no doubt that manufacturing is not a relic of the past if what is made is needed, rather than a product designed to fulfil manufactured demand. Having made that assumption, manufacturing remains key to a resilient economy. When a country makes things that are important, it sustains networks of skill, design, and innovation. What is more, manufacturing generates multiplier effects that extend through supply chains and logistics into local economies. They provide apprenticeships, research, and stable work.”
Thanks
That was carefully crafted
I know there are some things you wouldn’t agree with in that fantasy budget statement, like “capital formation” for example. And you’d want to go further on some things. So it’s a half-way house, that, given the right set of circumstances and a real push for change, might be deliverable and not scare the horses. And maybe those circumstances are starting to happen, with the turmoil in and around Downing Street. Or maybe I’m just a bit bonkers.
Did you receive my Fantasy Budget, or did I press the wrong buttons? Cos it hasn’t appeared. Shall I send it again?
I have had a frantic day…
Just posted