UK manufacturing firms with poor IT have seen productivity fall, while those who have invested in better connectivity have become more profitable, with 11 percent productivity growth per year, research from the Office for National Statistics (ONS) shows.
Manufacturing productivity has grown by 2.8 percent on average every year since 1948, compared to 1.5 percent in the services industry, the study found.
Alongside other factors including skilled workforces, investment in research and development and a more integrated global economy, an improvement in IT has had a direct affect on a firm’s profitability, the ONS said.
The study found a direct correlation between firms with fewer employees with a broadband connection in the workplace and decreased productivity - a drop of one percent per year between 2001 and 2007. Firms with better connectivity grew over 11 percent year-on-year over the same period.
Industry 'changed markedly'
ONS’ Chief Economist, Joe Grice said: “The manufacturing industry has changed markedly over the past sixty years.
“It is becoming more productive, despite a steady fall in the number of people employed and broadly stable capital stock, and economic downturns in the 1970s, early 1990s, and notably 2008-9.
“There are several factors at work: a better quality and more skilled workforce; a shift from the production of low to high productivity goods; an improvement in the information technology base; more investment in research and development and a more integrated global economy.
"Exporting firms generally are associated with higher productivity and foreign-owned firms in the UK generally experience higher productivity than domestic firms”
Over the past 35 years the manufacturing sector has shed more than half of its jobs, the figures released yesterday revealed. The outsourcing trend means that low-value production has been offshored to cheaper economies, leaving a smaller, higher skilled workforce in the UK. The job losses could also be due to the defining split between manufacturing and the services industry.
The report stated: "It is possible that manufacturing firms previously provided support services such as transport and wholesale in-house – but are now sub-contracting these functions. Therefore activities that would traditionally be classified as manufacturing and are generally associated with lower productivity are now classified in the services industry."