The UK needs a manufacturing resurgence - and a weak pound

OPINION: Productivity growth depends on industrial investment, which demands an active approach to the national currency, argues JML founder John Mills.

Productivity growth in the UK economy is almost non-existent. Many people find this fact puzzling. However, there’s a simple reason why, and there’s a relatively simple solution too – if only we can bring ourselves to face up to it.

If we want to rebalance our economy, and get our productivity up, we need to make manufacturing profitable again. We need to create the conditions whereby it makes sense to site new manufacturing facilities in the UK instead of China or Germany or Holland.

But to do this, we need a much lower exchange rate. This would make the prices we charge for goods to be sold to world markets much more competitive. We might not all agree with this strategy but it is the only way we are ever going to crack the UK productivity puzzle.

The UK’s low productivity is the result of two factors. Economic growth stems very largely from investment. Currently, we invest a very small proportion of our national income compared to most other countries, and what we do invest in produces very small returns.