New report sets out post Covid roadmap to economic recovery

Manufacturing - welder image

A new report from the John Mills Institute for Prosperity sets out a post Covid roadmap to economic recovery.

Can manufacturing provide growth and jobs?

John Mills (founder of JML, Labour activist and economist) has published his plan for UK economic recovery. It focuses on rebuilding manufacturing in order to enhance productivity and protect the economy.

“The key to an alternative policy aimed at getting the economy to perform much better is to get the sustainable underlying growth rate of the economy up by a significant amount. The target proposed is an increase of about 2% per annum above current expectations once the main recovery from Covid-19 has taken place. This would bring our growth rate up to an average of around 3.5% per annum instead of the 1.4% average we have seen recently.51 This would then enable us to pay for the impact of Covid-19 and the other cost pressures which we know are going to hit us over the next few years by creating new wealth rather than by squeezing down incomes. We need to do this by a combination of rebalancing the economy and increasing its productive capacity.”

Is there a problem with U.K. manufacturing?

The report outlines how UK growth rates are low and how this has left us vulnerable during the Covid-19 crisis. It states that manufacturing currently makes up less than 10% of the economy. It makes the case that a growth to 15% of the economy would make a big difference in terms of economic returns, and would complement the service sector to provide a more resilient and healthy economic outlook. On a more fundamental level, it argues the UK has had difficulty producing PPE when it was required, as a result of limited UK manufacturing infrastructure.

How can manufacturing levels be improved?

The report outlines that there are two preconditions: devaluing the pound further toward the £1-$1 level to make exports competitive, and ensuring that finance is available to manufacturers so they can grow production levels, with a focus on mechanisation, technology, and power.

Is there an alternative viewpoint?

It is worth noting that some economists may argue against the idea of further devaluation of the pound, citing the potential for higher import costs and prices, leading to higher inflation.  The report acknowledges this argument but disagrees this is inevitable.

Summary

In summary, according to Caroline Flint, ex Labour MP for Don Valley;

“Facing the greatest period of uncertainty in our lifetime, in a Britain that doesn’t train enough, invest enough or make enough, there is no certainty of a fair or sure recovery. I do not envy any Prime Minister or Chancellor faced with demands for hundreds of billions in bailouts and investments.  But the challenges of this enormity facing this Government – and any Government in a post-Covid-19 crisis – cannot ignore a profound choice. We either shape our future and remain a manufacturing nation, or we see even more of our industry go to the wall. This report offers an answer to the question of which way forward.”

Sources and Notes

The John Mills Institute for Prosperity is a non-profit, cross party lobby group campaigning on the UK economy.

https://instituteforprosperity.org.uk/about

The report and introduction can be found here;

https://instituteforprosperity.org.uk/research/post/2020-05-18-report-manufacturing-a-recovery-from-coronavirus