what is de-industrialisation?
Commentators often talk of the long decline of industry in the British economy. In simple terms this is what we mean by deindustrialisation - a fall in the contribution made by the manufacturing sector to national output, employment and income. We can consider manufacturing as a whole, or focus on individual industries such as steel and clothing and textiles
De-industrialisation is a long-term process of structural change in an economy - leading to a change in the composition of national output, and important alterations to the structure of our labour market.
There is a number of different ways of measuring the extent to which our manufacturing sector is experiencing deindustrialisation:
(1) The Relative Decline of Manufacturing
Manufacturing industry might actually be growing from year to year, but if other sectors of the economy are expanding at a faster rate, then the share of total output or employment may still be falling - this is called relative decline. So three important measures of relative decline might be as follows:
A falling share of manufacturing in total national output (GDP)
A falling share of industrial employment in total employment
A declining share of UK manufactured exports in world trade
(2) The Absolute Decline of Manufacturing
An absolute decline is an actual fall in output, employment, profits or investment spending. For example during the summer of 2001 it became clear that total UK manufacturing output was falling - in technical terms, the manufacturing sector is now in a recession. This is both absolute and relative decline because UK real GDP continues to grow - other sectors of the economy are expanding.
Three measures of absolute decline:
A decrease in total employment
A shrinkage in manufacturing output by sector
Falling levels of real capital investment spending
Evidence for Deindustrialisation:
There is little doubt that the British industrial sector has experienced deindustrialisation in recent years both in relative and also in absolute terms. Three times since 1990, manufacturing industry has fallen into technical recession (defined as a time period of two successive quarters when output falls).
The share of total GDP taken by manufacturing has declined from 23% in 1989 to just under 19% in 2000. Less than 16% of the labour force is now employed in this industry - indeed employment has declined by over 1.2 million since 1989.
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