The collapse of our industrial economy is a myth. Yvonne Cook investigates

Once the workshop of the world, now a nation of service industry workers and bankers; such is the popular narrative of Britain’s industrial decline. Except that it’s false. Britain is still a leading manufacturing nation and our industrial future is promising.

This is the surprising argument put forward in Made in Britain, a BBC Two programme to be presented by broadcaster and economist Evan Davis later this month. The three-part series, from the Money Programme stable, is co-produced with the Open University (OU) and aims to persuade us to take a more rounded and optimistic view of British industry. Dr Matt Hinton is senior lecturer in information and knowledge management at the Open University Business School. He is one of two academic advisors to the series and a specialist in innovation processes, working on the OU’s business functions in context course.

“Britain is still big in manufacturing, but because we’re not the world leader we used to be more than 100 years ago, that is seen as problematic,” he says. “What matters is that we are still in the running, we don’t have to be first.”

The evidence stacks up. Britain is the seventh-largest manufacturer in the world. Half our exports are manufactured goods. Contrary to popular belief, manufacturing is larger than the much-vaunted financial services sector, and employs 2.5 million people.

It’s easy to overlook, because modern manufacturing is not what it once was. The grimy factories and reeking chimneys have gone. Today’s thriving industry is more likely to be operating from an anonymous shed on the outskirts of town. It’s become more high-tech and efficient; in the two decades running up to the current recession, manufacturing output rose 15 per cent while the workforce dropped by around 35 per cent. Nowadays companies can be successful manufacturers without actually making the goods they sell, as Dr Hinton explains. “In a product supply chain, there is first research and development, then manufacturing the product and finally value-added activities, branding and marketing. One argument put forward in Made In Britain is that the real value is in research and development and marketing. So why not let countries such as China do the low-value bit?”

There is evidence this works, he says. Take ARM, a successful FTSE 100 listed company based in Cambridge’s Silicon Fen. ARM supplies silicon chips for a staggering 90 per cent of the world’s mobile devices. It does the research and development, then licenses the results to firms in places such as China, where they can make chips more cheaply.

However, Dr Hinton warns that outsourcing is not a panacea. “We cannot completely separate the parts of the chain from one another. If we want to remain good at research and development, we must understand manufacturing. You have to look carefully at every industrial context. Above all, we should avoid a ‘one size fits all’ approach. To put all your eggs in one basket, whatever shape the basket is, is dangerous – as the financial services crash proved. The key is a diversity of approaches.”

Britain’s manufacturing landscape is nothing if not diverse, as Evan Davis proves as he travels the country talking to one successful British manufacturer after another. He learns from Leeds firm Berwin & Berwin how it survived the decline of a once-thriving textile industry; he takes a spin in a McLaren sports car to discover what makes the British automotive industry so dynamic.

The message is that Britain’s manufacturing success isn’t limited to a few high-class niche products, such as whisky and tweed. We are also good at, among other things, computer software, pharmaceuticals, chemicals, engineering and biotechnology. But though we can be optimistic, we must not be complacent. Last year, Britain imported £30 billion more goods than it exported. To plug that gap, we need to manufacture more. But how? We can learn from other countries, particularly Europe’s top manufacturer, Germany.

By comparison, Britain is “lacking a sense of national direction” in its policy towards manufacturing, Dr Hinton claims. “One place I would point the finger is our educational system. In Germany they have far more specialist apprenticeships, which allow kids to leave school and qualify in, say, motor engineering in a hands-on environment – and this kind of education is seen as high value in German society.”

Then there’s our financial system. In Germany, a big chunk of their banking system is made up of a network of regional banks whose purpose is to support the Mittelstand – small and middle- sized firms. “In the UK, financial decision-making is dominated by London and the City, which disadvantages, well, basically anything which is outside London.”

Britain also seems to overlook the social dimension. Manufacturing is not just about making money, it also involves people’s livelihoods. Dr Hinton points out that while successful British manufacturer Dyson has outsourced its production to Malaysia, its equally successful German counterpart Miele still finds it possible to make its products in the Ruhr Valley.

“Certain countries – Germans, French, Swiss, Belgians, Dutch – make decisions on a national basis. If they have a company gainfully employing 200 people they would not want to let those jobs go abroad. In Britain, we make decisions on a company basis: if a firm thinks it’s better to go abroad, that’s fine. But it’s worth remembering that a country that supports industries keeping people in gainful employment, doesn’t need to support as many people not in gainful employment because there is nothing for them to do.”

In what is becoming a hallmark of OU programmes, the debate begun in Made In Britain will continue on the OU’s OpenLearn website, which is inviting employers, employees and anyone with an interest to explore the issues raised. See

“Made In Britain” is due to broadcast on BBC2 on 21 June, check listings for details.