The UK economy is almost flat-line., It rose just 0.1 percent in November after two months of contraction.
While most sectors of the economy increased.According to the Office for National Statistics (ONS), as construction and services, including retail and hospitality, output fell by 0.4%, led by a decline in manufacturing.
According to the data, production of pharmaceutical products, paper, machinery and food products fell, adding to the deficit.
Why is manufacturing shrinking?
Rising energy prices and other high costs have made the UK uncompetitive for factories and the industry has been slowly shrinking for some time. According to the International Monetary Fund (IMF), between 1960 and 2015, UK manufacturing employment fell by more than 0.4% per year.
But there are also recent signs. Today’s news comes just days after Sir Jim Ratcliffe, Britain’s leading industrialist and one of the country’s richest men, warned that chemical manufacturing in the UK was facing “extinction”.
Sir Jim spoke last week after Enos closed the last remaining synthetic ethanol plant in the UK. The chemical is used in medicine and cosmetics.
He said: “We are witnessing the extinction of one of our major industries because chemical manufacturing has squeezed the life out of it.”
Ineos said 10 major chemical plants in the UK had closed in the past five years and there were no new sites to replace them.
A key issue is energy prices, said Sharon Todd, chief executive of SCI, a powerful industrial sector in Britain during the Victorian era. A charity founded to bring about innovation and scientific progress.
“We have to deal with the cost of energy whether it’s steel, glass or chemicals,” he said. Big businesses in the UK pay the most compared to members of the western EU, according to government figures. In 2023, large industrial companies paid 93 percent more than the average in countries including France, Germany and Italy.
But he said the sector also felt neglected because more attention had been paid to the services sector, which includes everything from banking and insurance to retail, education and media.
“There is a need for a change in perspective and understanding that this sector is part of the national infrastructure,” he added. “I think it’s at a critical juncture,” he said of the chemical industry. “We really have very little left in Britain.”
What is closed?
A fertilizer plant in Cheshire owned by CF Industries closed in 2022, eliminating 283 jobs.
And last year, Mitsubishi closed its UK methacrylate plant in Teeside, which made chemicals for plastics, with the loss of more than 200 jobs.
Britain has also lost many steel companies and its motor industry in recent years. Vauxhall owner General Motors said last year that its Luton van factory was also facing closure.
How can you save manufacturing?
Chemicals are used in everything from clothing to consumer products, medicine, food and defense and manufacturing jobs often pay well, Ms Todd says.
To save the industry, the government will likely have to choose which sectors to focus on, reduce electricity prices and think about the flexibility of the chemical sector.
Since the Covid lockdown, companies have been reminded that losing a supplier can be fatal, as production lines will be halted until a new one is found.
Expensive car production lines are idle if the seats or steering wheels are not up.
The industry should probably consider how to avoid this, perhaps by working with suppliers to become more flexible.
“It requires a long-term plan and an understanding of how the pieces fit together,” Ms. Todd said. He said he hoped the government’s industrial strategy would provide some support to the chemicals industry and manufacturing more broadly.
Gareth Stace of lobby group UK Steel, also an industry at risk, said electricity prices could help his industry regain competitiveness.
“The global steel market is very difficult at the moment, but China is ramping up production and the UK is only supplying less than a third of its own steel,” he said.
“We pay more for our electricity than France and Germany and the rest of the world,” he said, “which creates an uncompetitive business market and our competitors can compete better than us in our own market.”
How bad is the UK economy now?
Mr Stace says the UK steel industry is in as bad a place as it was during the 2016 crisis, when many smaller players went into administration amid falling steel prices.
“I think 2025 will be a very challenging year,” he added.
Mr Stace said British steelmakers had to pay grid connection charges that French and Grameen rivals did not have to pay, which the government could change.
He is also concerned about the proposal for pricing zones for electricity, where areas with abundant cheap green energy, such as Scotland and its offshore wind farms and hydropower, have cheaper electricity. This could further increase prices for steelmakers.
He said the combination of high energy costs, high costs for some regions and high carbon costs bodes poorly for the sector when it comes to attracting investment.
Britain is not alone – the German economy, which relies heavily on manufacturing, has entered its second year of recession.
The end of cheap natural gas from Russia and weak demand for its cars from China have been weighing on its growth for some time.
But UK industries cannot rely on bad news elsewhere to save themselves, Ms Todd said. Quality jobs are now on the line, he said.
“Often those jobs are in diverse parts of the country and they’re very stable with good employers.”