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Theme 3

Industrial Performance – International Comparison

Policy questions and key messages

  1. Are the UK’s manufacturing industries becoming more or less competitive internationally?
  2. How are UK manufacturing industries performing in terms of productivity, value added, employment and exports?
  3. How is the UK’s performance in key manufacturing industries?

Since 2000, G7 countries, including the UK, have reduced their share of global manufacturing, while China has become a dominant player:

  • Since 2000, the manufacturing sector has experienced a decline across G7 countries, with their combined share of global manufacturing value added dropping from 56% in 2000 to 33.1% in 2022. Over the same period, their share of global manufacturing exports fell from 51.9% to 30%.
  • The UK’s manufacturing sector followed a similar trend, with its share of global manufacturing value added shrinking from 3.1% to 1.9% between 2000 and 2022, its share of global manufacturing employment declining from 1.3% to 0.6% between 2000 and 2022, and its share of global manufacturing exports narrowing from 3.7% to 1.5% between 2000 and 2020.
  • Meanwhile, China has emerged as a prominent manufacturing player, gaining global market presence in manufacturing industries. China’s share of global manufacturing value added rose from 6.4% in 2000 to 31% in 2022.

The UK’s top manufacturing industries by value added have shown varying trends in value added, employment, productivity and exports since 2010. Among them, automotive manufacturing stands out as one of the fastest-growing industries:

  • The top seven UK manufacturing industries by value added include food, beverage and tobacco, pharmaceuticals, metal products, computer and electronics, machinery and equipment, automotive and other transport equipment.
  • Among the seven manufacturing industries, automotive saw the highest growth between 2010 and 2022, with value added rising 72% and employment up 18.7%. It was also one of the fastest-growing export manufacturing sectors, with a 51.9% increase between 2000 and 2020.
  • Since the 2008 financial crisis, the UK’s overall productivity growth has been sluggish, but sectoral performance varies. Manufacturing stands out as one of the fastest-growing sectors, with notable productivity gains seen in other transport equipment (CAGR 4.1%), machinery and equipment (4.05%), metal products (3.3%) and automotive (3.2%) between 2010 and 2022.

The UK has lost competitiveness in key manufacturing industries, including those in which the country has traditionally been strong, such as pharmaceuticals and other transport equipment:

  • In the last decade the UK has seen a decrease in its global manufacturing export shares. This reduction has been largest in industries in which it has traditionally been strong, such as pharmaceuticals (-5.3 percentage points) and other transport equipment (-4.2 percentage points). In a selection of 10 advanced industries, the UK’s market share (in value-added terms) decreased from 4.4% in 2000 to 2.6% in 2020.
  • In the 2000–2020 period, the UK increased its specialisation (measured by a revealed comparative advantage index of value added) in two advanced industries: automotive, and information and communication services. In all other advanced industries, the UK has seen a decrease in specialisation, with the largest reductions being in basic metals, chemicals and electrical equipment.

World manufacturing value-added shares

  • Between 2000 and 2022, manufacturing as a share of global GDP declined from 18.3% to 15.8%.[1]
  • The UK’s share of global manufacturing value added changed from 3.1% in 2000 to 1.9% in 2022.
  • Overall, G7 countries (including the UK) reduced their total manufacturing value-added shares from 56% in 2000 to 33.1% in 2022.
  • The manufacturing value-added shares of Canada, Italy and France roughly halved during this period (56.3%, 53.7% and 47.4% reductions, respectively).
  • China captured manufacturing value-added shares from other countries, going from a 6.4% share in 2000 to 31% in 2022.

[1] Source: World Bank. World Development Indicators.

World manufacturing employment shares

  • Between 2000 and 2022, total global employment increased by 30.8%, while the growth of global manufacturing employment was 28.6% over the same period.[1]
  • G7 countries’ shares of global manufacturing employment dropped from 15.5% to 9.8% between 2000 and 2022.
  • The UK was the G7 country with the largest reduction (50.7%) in global manufacturing employment share, going from 1.3% to 0.6%, followed by France, with a reduction of 45.3%. In 2022 the UK’s manufacturing sector provided 2.4 million jobs, accounting for 7.4% of total UK employment.[2]
  • China’s share of global manufacturing employment remained stable, with a slight increase from 32.9% in 2000 to 33.1% in 2022.

[1] Source: ILOSTAT (2024). Employment by sex and economic activity — ILO modelled estimates, Nov. 2024 (thousands).
[2] Source: OECD (2024). Annual employment by detailed economic activity, domestic concept.

World manufacturing export shares

  • From 2000, the UK’s share in global manufacturing exports more than halved, going from 3.7% in 2000 to 1.5% in 2020, representing a 60% reduction.
  • The G7 countries reduced their global shares in manufacturing goods exports, from 51.9% in 2000 to 30.1% in 2020.
  • In some countries the reduction was less pronounced, such as Germany, whose export share went from 9.5% in 2000 to 8.5% in 2020, a reduction of 10.7%.
  • China saw substantial growth, gaining manufacturing export shares over other countries: from 4.8% in 2000 to 21.4% in 2020.

International industrial competitiveness rankings

UNIDO’s Competitive Industrial Performance (CIP) index

  • UNIDO’s CIP Index is a composite index that combines measures of a country’s capacity to produce and export manufactured products, its technological sophistication, and its impact on world manufacturing production and trade.
  • In the global ranking of this index, the UK fell from position 11 in 2000 to position 15 in 2020.
  • Most G7 countries lost positions during this time period. The only exception was Germany, which went from position 2 in 2000 to position 1 in the global ranking in 2020.
  • China, in turn, went from position 23 to position 2 in the global ranking during this period.

ITIF’s Hamilton Index

  • The Hamilton Index is a composite index that measures countries’ competitive position in 10 advanced industries.[1]
  • The UK went from position 23 in 2000 to position 26 in 2020 in this index, showing a loss of specialisation in advanced industries.
  • Of the other G7 countries, Germany, Italy and Japan went up in the ranking from 2000 to 2020, while the USA, Canada and France went down.
  • China lost only one position during this time, moving from position 4 to position 5 between 2000 and 2020.

[1] Note: Pharmaceuticals; electrical equipment; machinery and equipment; motor vehicles; other transportation (aerospace, rail and sea transportation); computer, electronics and optical products; IT and information services; chemicals; basic metals; and fabricated metals.

Structure of manufacturing value added across G7 and China

  • In 2020, seven sectors – food, beverage and tobacco, pharmaceuticals, metal products, computer and electronics, machinery and equipment, automotive and other transport equipment – accounted for 62.1% of the UK’s manufacturing value added.
  • The UK‘s manufacturing structure is similar to that of the USA. However, the computer and electronics sector contributed 13.9% to the USA’s manufacturing value added, which is 7.3% higher than in the UK.
  • Among G7 countries, the USA had the highest manufacturing value added in 2020, at US$2,301 billion, while the UK‘s manufacturing sector generated US$248 billion, ranking sixth within the G7.
  • China’s manufacturing value added reached US$4,117 billion in 2020, 1.8 times that of the USA, with the metal products sector being one of the largest, accounting for 15.3% of its total manufacturing value added.

Value-added trends of key manufacturing sectors

  • The UK experienced value-added growth across all selected manufacturing sectors between 2010 and 2022. Among these industries, the automotive sector saw the fastest growth, with a 72% increase from 2010.
  • The UK and the USA exhibited similar value-added growth trends in the manufacturing of metal products and machinery and equipment. The UK led the USA in the growth of the other transport equipment industry.
  • China‘s manufacturing growth stands out compared to the USA and the UK. As shown in the charts, all selected sectors in China reported higher value-added growth by 2017, with increases ranging from 56% in machinery and equipment to 99.8% in food, beverage and tobacco, compared to 2010.

Employment trends of key manufacturing sectors

  • Between 2010 and 2022, the UK’s employment growth was modest or even negative in many selected industries. In contrast, the automotive sector saw the largest growth, with a 20% increase.
  • The US experienced a notable decline in computer and electronics manufacturing jobs. China, on the other hand, saw significant employment growth in computer and electronics, outpacing both the USA and the UK.

Productivity trends of key manufacturing sectors

  • Since the 2008 global financial crisis, the UK’s overall productivity growth has been sluggish. However, productivity and growth rates vary across sectors, with some consistently outperforming others. Among them, manufacturing industries stand out as one of the fastest-growing sectors.[1]
  • Specifically, the UK achieved productivity growth in the manufacturing of other transport equipment, with a compound annual growth rate (CAGR) of 4.1%, followed by machinery and equipment (4.05%), metal products (3.3%) and automotive (3.2%) between 2010 and 2022.
  • Among these four industries, only the productivity growth in automotive manufacturing was driven by obvious growth in both value added and employment over the same period.
  • China’s productivity growth in the manufacturing of food, beverage and tobacco, metal products and machinery and equipment outpaced that of the USA and UK.
  • China, the UK and the USA exhibited different productivity growth trends in computer and electronics, with the USA recording strong labour productivity growth, primarily driven by a reduction in employment.

[1] Source: CIIP (2022). Understanding sectoral sources of aggregate productivity growth: a cross-country analysis.

Structure of manufacturing exports across G7 and China

  • The UK had the lowest manufacturing exports among the G7 countries in 2020, valued at US$137.3 billion.
  • In 2020 automotive manufacturing was the UK’s largest manufacturing export, accounting for 16.7% of the total, followed by other transport equipment (11.7%) and machinery and equipment (11.5%).
  • Among the G7, the UK’s manufacturing export structure was most similar to that of France. However, top manufacturing exports in France included other transport equipment (18.1%), automotive (9.9%) and food, beverage and tobacco (10.5%).
  • Compared to G7 countries, China exported less in the seven industries highlighted, while computers and electronics made up 28.3% of its total manufacturing exports.

Export trends of key manufacturing sectors

  • Between 2000 and 2020, the UK experienced export growth in the following key manufacturing industries: food, beverage and tobacco (a 57.8% increase), pharmaceuticals (80.3%), machinery and equipment (2.8%), automotive (51.9%) and other transport equipment (17.2%).
  • In contrast, the UK’s exports in the manufacturing of metal products and computer and electronics declined over the 2000–20 period.
  • China saw exceptional export growth across all selected industries compared to the USA and UK, with a CAGR ranging from 8.3% in food, beverage and tobacco to 17% in machinery and equipment from 2000 to 2020.
  • China’s automotive exports grew almost 20 times from 2000 to 2020, but starting from a very low basis of US$2.9 billion in automotive exports in 2000. As a comparison, in the same year, the value of the USA’s automotive exports was US$54.0 billion and that of the G7 countries was US$320.8 billion. This explains why despite this growth China’s global export share in this sector has not become very large (see Chart 3.11).

Global export shares in key manufacturing sectors

  • Overall, there was a cross-industry reduction in export shares for G7 countries between 2000 and 2020.
  • In the UK this decline was largest in industries in which it has traditionally been strong, such as pharmaceuticals (-5.3 percentage points) and other transport equipment, including aircraft, maritime and railway equipment (-4.2 percentage points).
  • China’s growing presence as a manufacturing exporter powerhouse is particularly visible in sectors such as metal products, computer and electronics and machinery and equipment.
  • In the automotive sector, China’s export share was not particularly large until 2020 (the latest available year in the TiVA database used in our analysis). However, the latest data from other sources shows that China’s exports in this sector have grown remarkably since 2020,[1] highlighting growing Chinese competitiveness in this sector.
  • This trend in the automotive sector is further heightened by China’s dominance in electric vehicles (EV). According to the International Energy Agency (IEA), Chinese carmakers moved from accounting for 35% of global EV sales in 2015 to 45% in 2022. This was led by companies such as BYD (18%), Geely (6%), and several other firms including SAIC, Chery, Changan, Dongfeng, Hozon, CHJ, Great Wall, NIO, Xiaopeng and Leap.[2] Other estimates put China’s global EV market share as high as 69% in 2024.[3]

[1] Source: UNCOMTRADE.
[2] IEA (2023) Global EV Outlook 2023. p. 97
[3] Dongshu – China Passenger Car Association (2024)

Global value-added market shares in advanced industries

  • This chart shows the global market share (in value-added terms) in advanced industries.
  • The share of G7 countries decreased from 70.6% in 2000 to 46.8% in 2020.
  • The UK’s market share in the aggregate of these industries decreased from 4.4% in 2000 to 2.6% in 2020. Japan saw the most drastic change – from 18.7% to 7.1% – while Germany had the lowest reduction – from 7.4% to 6.1%.
  • China saw striking growth, going from a 4.7% market share in 2000 to 23.5% in 2020, reaching almost the same market share as the USA (25.4%).

Level of specialisation in advanced industries

  • The Revealed Comparative Advantage (RCA) index measures a country’s level of specialisation in different industries. It measures the market share (in value-added terms) of the country in a specific industry, divided by the market share of the country in all industries. This indicates how specialised the country is in that specific industry. An RCA index above 1 means the country has high specialisation in that industry (i.e. its market share is higher than the country’s average market share).
  • From this analysis, we see that in 2020 the UK was specialised (RCA > 1) in two advanced industries: information and communication services and other transport equipment.
  • In the 2000–2020 period, the UK increased its specialisation in only two advanced industries: automotive and information and communication services.
  • The largest reductions in UK specialisation were in basic metals (-64%), chemicals (-45%) and electrical equipment (-35%).
  • Compared to the other G7 countries, the UK’s specialisation in 2020 was significantly lower in six advanced industries and similar in four.
  • China’s specialisation in 2020 was significantly higher than the UK and other G7 countries in most advanced industries. The exceptions are information and communication services, in which China’s specialisation was lower than the UK and other G7 countries, and pharmaceuticals and other transport equipment, in which it was similar.