The financial crisis has unleashed a great debate about rebalancing Britain’s economy. The conventional wisdom is that our prosperity during the Nice decade (non-inflationary continuous expansion, that is) was over-dependent on finance and that we need to refocus our attention on high-quality manufacturing.
Under New Labour, and the Tories before them, manufacturing was allowed to wither, declining from 18 per cent of GDP in 1996 to just 12 per cent now. The better news, however, is that what’s left behind is much better than what was lost. In certain sectors, including high-end engineering and aerospace, Britain has managed to retain a strong competitive edge. And unlike in previous decades, this has been achieved for the most part without large subventions from the public purse.
That does not mean all is well in engineering and manufacturing. The recent row over the order for Thameslink trains, which went to Siemens rather than the British-based Canadian firm Bombardier, exposed weaknesses in our public contract bidding process, which ignores social consequences such as the impact on existing jobs.
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