Page 1: Introduction
The economy is made up of a number of component parts or sectors. One commonly used classification of sectors is that of:
- primary - gifts of nature such as extracting or developing natural resources including farming, forestry, mining or fishing
- secondary – manufacturing and the construction industries or the making of goods on a large scale
- tertiary - service industries which are made up of either commercial services concerned with trading activity or direct services to people such as teachers or doctors.
Structural change refers to a shift in the importance of these sectors to the economy as a whole. As people in societies have an increasing amount of disposable income, so demand patterns change, resulting in a greater demand for luxury goods. This is illustrated by the current boom in the UK for computer services and financial services, together with recreation and entertainment.
Modern industrial societies such as the UK and the United States have been termed ‘third wave’ societies:
- ‘first wave’ - agricultural based society
- ‘second wave’ - the domination of manufacture
- ‘third wave’ - a switch to service occupations.
Over the last 25 years, the UK economy has seen the service sector grow rapidly and whilst manufacturing has failed to match the growth, this relative decrease is not because of falling industrial production. In fact, manufacturing production within the UK has continued to increase. In this time, however, services have grown at a faster rate.
As manufacturing has developed and become more complex - for example, by providing higher levels of support services - then jobs that might previously have been termed as manufacturing now fall within the services sector. This concept is referred to as ‘outsourcing’. Manufacturing is an important part of the UK economy. It employs four million people, indirectly supports a further 4.5 million and generates 20 per cent of the Gross Domestic Product.
The Gross Domestic Product is the output of goods and services produced by factors of production owned within the UK. Manufacturing is split into a number of sectors. Manufacturing generates new technologies that perform a vital role in aiding the performance of other parts of the economy.
However, manufacturing industries field the full brunt of global competition, with manufacturing production ten times more likely to be traded across international boundaries than services. The industry has to embrace change that, with help, enables it to raise efficiency to compete against best practice within global markets.
This case study focuses upon how the CBI, through the establishment of the National Manufacturing Council, works with manufacturing companies to help them to raise performance levels.