The Office for National Statistics said

Finally, this edition of the Economic Review

presents an analysis of productivity growth in the
services sector. It suggests that the recent
weakness of services productivity is a consequenc


The value of trade in goods grew steadily from the beginning of 2007 to mid 2008. The onset of
the global economic downturn in mid 2008 affected the economic performance of the UK's
major trading partners, and the value of both UK exports and imports fell sharply until Q2 2009.
Growth in the value of trade in goods resumed from mid 2009 with improving global economic
conditions. However, the value of both UK exports and imports has remained flat since mid 2011
with the continuing difficulties in many economies.In 2013, the deficit on trade in goods
narrowed by 0.9 billion to 107.8 billion (annually). The level of exports increased to a record
304.7 billion in 2013, up 1.4% from 300.5 billion in 2012. However, the rise in exports was
accompanied by an increase in imports to a record 412.5 billionin 2013, up 0.8% from 409.2
billion in 2012. Despite these record levels of exports and imports, annual growth in the value of
trade in goods has slowed considerably since 2010 and 2011.




In the short term, the UK ME sector remains exposed to the global downturn.
According to the industry figures, the following key short-term trends are currently
affecting the industry:
A marked reduction in manufacturing output and export orders.
Manufacturing Purchasing Index (measuring business activity) is at a record low.
Export orders are no longer sufficient to compensate the manufacturers for
domestic weakness.
Domestic and export prices and margins are falling. Increased cost of financing.
Cash-flow problems are adversely impacting investment plans.
Widespread job cuts, with the risk of even deeper cuts within the sector.
The above short-term trends will inevitably determine the long-term outcome and
future landscape of the ME sector in the UK. Manufacturing firms in the motor
vehicle and electronics segments are expected to experiencethe biggest slowdown.
At present, much work remains to be done both by the government and
organisations within the ME sector to tackle and address the short-term challenges,
and to ensure that their organisations, and the ME sector as a whole, not only
survives but emerges fitter for the next cycle of economic growth. The most
important strategic trend that has been affecting the UK manufacturing sector is the
growth of global value chains, as UK companies have began to increasingly source
goods and services from across the globe. This has also meant that the UK
MEfirms (being in the relatively higher cost economy) are increasingly competing
through differentiation of their products and supporting services instead of price.
Consequently, manufacturing firms are placing increased emphasis on their
implementation of manufacturing technology, investment in R&D, aftermarket
services, design and branding, as well as information and communications
technologies (ICT), and further investment in people and skills development.
In addition, proactive action on achieving the EU and international targets for
carbon reduction is creating new challenges and opportunities for the ME sector.
Hence, a number of trends are emerging along the following six axis:
Change in Government policy;
Integration of global supply/value chains;
Increased information technology exploitation;
Development of human resources and wider competencies;
Need for renewed focus on R&D and innovation enablers;
Transition to a low-carbon economy.


This means firstly that UK manufacturers must continue to innovate. They must
develop and bring to market new, more sophisticated and better quality products
and adapt their business models in ways that add further value to the
manufactured products which they supply. By responding quickly to the new
opportunities created by predicted changes in global demand and the emergence
of new technologies, UK manufacturers can exploit first mover advantage,
obtaining a larger share of new product and geographical markets. At the same
time, UK manufacturers must also continue to become more internationalised. By
engaging in international markets,UK manufacturers can keep at the forefront of
ongoing developments in innovation and technology through greater exposure to
new ideas and knowledge and access to customers/ suppliers and skills around
the world. The remainder of this paper considers the extent to which UK
manufacturing is well placed to continue competing effectively in the global
economy and take advantage of the new opportunities which may created by
anticipated changes in long-term global demand.





Innovation is defined as the successful exploitati
on of new ideas. It can involve the development
of new designs, concepts, technologies, products, processes, business models,
organisation structures and management practices. Innovation also
encompasses much more than just research and development activity.
Innovation has a key role to play in promoting productivity growth through the
development of more valuable products or services, the development of new
technologies, processes and business models which increase firm-level
efficiency, and through the generation and diffusion of new ideas and knowledge.
B


Informational failure around new manufacturing ideas and processes Some firms,
particularly small and medium sized enterprises (SMEs), may experience
difficulties accessing knowledge of the latest industrial ideas, technologies and
practices or finding professional support and advice on how these can beapplied
to their business. For example, in manufacturing there is evidence to suggest
that many manufacturing firms are not aware of the economic and financial
benefits of greater automation





Some of the research undertaken in the UK would not be commercially
exploited to the same extent without the Intermediate Sector. It fills a
crucial role between academia and industry by enabling the transfer of raw
knowledge from academic research into a problem solution that can be
well understood by all levels of management within industry.



There are several phases of innovation, from initial research, through
development, knowledge and technology transfer, to new technology monitoring,
exploiting opportunities for new applications, culminating, for the enterprise, in
new product development and introduction