Manufacturing Sector and Its Importance for Economic Growth
Cities play significant role to develop economic condition of a country through achieving localisation, economies of scale and agglomeration of capital. Moreover, cities are considered as most developed parts of a nation and provide service and efficient infrastructure in the form of communications, transportation, power and water supply (Frick and Rodríguez?Pose 2018). Hence, large cities containing huge number of population along with manufacturing and service sector contribute maximum share to total national income or gross domestic product (GDP) of the country. In addition to this, cities deliver various benefits to their citizens in the form of public goods and services. Globalisation has reduced the transport costs of people, goods, knowledge, information and money. As a result, a vast difference between cities of 21st century and these of 20th century can be observed. Furthermore, it needs to be mentioned that a vibrant manufacturing sector is essential for a country to strengthen and enhance economic condition with competitiveness. Cities invest in the infrastructure and provide space and skilled workforce for these manufacturing sectors (Beugelsdijk, Klasing and Milionis 2018). In addition to this, service sector also has huge importance to form economic base of a country.
This report will analyse the economic performance of Birmingham, which is considered as the second largest metropolitan of the United Kingdom. The city becomes major commercial and industrial areas of the country and acts as a recreational, administrative and cultural centre. Economic growth of this city during 2015-2016 was 4.8%, which was above the national growth rate (3.7%) (Warren and Jones 2018). Hence, it can be beneficial to discuss about the role of manufacturing sector and service sector for making industries and shaping the economic condition of Birmingham. Moreover, some creative thinking and final reflection will be provided to implement further policy approaches.
Manufacturing sector stimulates economic growth of a country through generating huge employment opportunities and contributing large share to the country’s national income. Thus, according to the Kaldor’s Law, economic growth and increased standard of living have positive correlation with industrial activity of a country (Marconi, de Borja Reis and de Araújo 2016). He also has suggested that growth in manufacturing sector can lead the GDP growth of a country towards positive direction. Instead of focusing on market equilibrium through allocating existing resources, Kaldor has recommended to focus on the creative market function. In the past, manufacturing sector of the United Kingdom experienced drastic fall due to poor industrial relations, insufficient investment in training and technical education, insufficient investment in research and development and poor management. Hence, neoliberal and monetarist economists have criticised the theory of Kaldor regarding the general role of manufacturing sector in the long-term with economic growth of a country (Meyer and McCAMEL 2017). However, according to some economists and market analysts, manufacturing sector has huge significance and loss of this sector could generate huge unemployment within the country. Some professors of famous universities suggest that without manufacturing sector, sustain of an economy in international market could be difficult (Haraguchi, Cheng and Smeets 2017). In the context, some points related to urban manufacturing can be discussed that can help a city to reshape its economic condition for the long-term.
Manufacturing in Birmingham
Firstly, through manufacturing goods, the city can trade with other countries in international market and this in turn can help this city to earn huge amount of profit. This money can be invested again in the production process (Feldman 2014). As a result, cities earn huge capital accumulation and this further helps these organisations to expand their business. Secondly, a large share of jobs can be found in manufacturing sectors, where most of these jobs are situated in the cities, as these have high-tech facilities. Every single job supports other types of jobs through applying the multiplier effect. Increasing capacity of these manufacturing sectors generate enormous employment opportunities for both skilled and unskilled workers (Rosenfeld 2017). This in turn creates huge income opportunities for the citizens and contribution of these cities to the overall national income of the country increases. Thirdly, manufacturing sectors play crucial role to develop service sector of the city. Service industries depend on manufactured products for their technological progress and operations. Fourthly, manufacturing sectors help the city to develop infrastructural facilities through providing transportation and communication. From this discussion, it can be said that manufacturing sectors play significant role to develop economic condition of a city in the long-term.
After 1970, the manufacturing sector in Birmingham has decreased over the years and presently it employs a small portion of the total workforce. At present, the economy of this city has diversified into retail, service industries and tourism (Gunn 2018). The chief manufacturing industries that still operate within the city are motor vehicles along with vehicle accessories and components. In addition to this, some other manufacturing industries like plastics, electrical equipment, chemicals, machine tools, food and glass have contributed significant portion to the country’s total national income.
The service sector acts as an engine of economic growth. This heterogeneous sector covers a vast area of transportation, retail, information, hospitality and communication. Moreover, the sector also provides corporate services, property and housing market along with healthcare, public administration and social services including childcare and education. Now a day, insurance and finance sectors have become an important segment of this sector (Charter and Tischner 2017). In addition to this, creative industries also have significant importance. These industries refer a range of economic activities that are concerned with the exploitation and generation of information and knowledge. The creative industries are referred as the cultural industries as well. Some important sectors that fall under these industries are advertising and marketing, crafts, architecture, fashion design and graphics along with IT, computer services, software services, film, T.V and photography and so on. In the U.K, these creative industries are contributing huge portion to the country’s national income compare to utilities or hospitality sectors. Three largest sub-sectors, such as, design, television, radio and publishing under the creative industries are dominating the entire economic condition of U.K. These sectors generate almost 50% of total population along with 75% of revenues (Boix et al. 2016).
Service Sector and Its Contribution to Birmingham’s Economy
The Gross Value Added (GVA) of local economy of Birmingham is influenced chiefly by service sector. The four major sectors, based on GVA are activities of business service, public administration along with health and education, transportation, distribution, food and accommodation and real estate (Lee, Quinn and Rogers 2016). The two largest sectors that have generated huge employment opportunities are social work, retail and wholesale. Three industries that have created huge number of employments are finance and insurance, public defence along with public administration and education. In Birmingham, some well-known banks like Deutsche Bank, Barclays, Royal Bank of Scotland and HSBC have relocated their businesses. Consequently, the city has become the regional centre of administrative and financial activities. Hence, the financial sector of this country has enough potential to develop further.
Birmingham has several characteristics that have helped it to develop creative industries. Young population, aged below 25 years create almost 40% of the total population (Council, B. 2018). Thus, Birmingham has been referred as the youngest city among all other cities of Europe. Multicultural features along with educational establishments have helped the city to get creative employees with huge talent. As a result, Birmingham has more than 5800 creative companies and almost 50000 creative workers.
Birmingham is a metropolitan city of the West Midlands, England, containing huge number of population. The city is located in the centre of the England, West Midlands Region and Birmingham Plateau, ranged between 500 feet to 1000 feet and above 150 meters to 300 meters sea level. The city forms a metropolis containing mainly residential area of Solihull, situated to the South East along with Wolverhampton and Black Country, an industrial city situated to the North West. In 2016, total population of this city was 1124569. In this year, the employment rate of this city was 63.4% while unemployment rate was 9%. However, the national rate of unemployment in this year was 4.9%, which is low compare to that of Birmingham. In 2016, the GVA was remained at £ 26.2 billion (Council, B. 2018). Hence, the rank of this city based on performance was 3rd in the same year. It contributes 21% of the country’s total national income. The city council is referred as one of the largest local authority across Europe. The headquarters of this city are situated at the Council House, Victoria Square. Presently, the ruling party of this city is the Labour Party, which has been selected after the 2012 election. The local government of Birmingham has taken some strategies and policies related to housing, city development, council, education and cultural aspects.
Creative Industries in Birmingham
After discussing about the economic condition of Birmingham, some recommendations based on strategic priorities related to business mix, sectors and economic role of the city regarding international and national contexts can be discussed. Birmingham, in the West Midlands, is referred as the main hub of economic activity. The major planned developments have helped this city to achieve its economic growth further. Thus, the GVA in this city is expected to increase significantly in coming years. However, the growing service sector alone cannot improve the entire economic position of this city. Thus, it would be difficult for Birmingham to sustain in both national and international economical condition. Service sector cannot develop without the progress of manufacturing sector. As, the number of manufacturing industries are reducing, the city experiences the need to import machines and other equipments related to service sector from other countries or from other parts of the state. Thus, import cost can reduce the GVA of this city significantly and this further can affect the economic prosperity of this city. In addition to this, structural changes in this city have forced many people to lose their jobs. Hence, citizens in Birmingham have experienced structural unemployment. Thus, to improve economic condition of this city in the log-run, Birmingham needs to adopt the strategy of business mix for providing all kind of services to their customers.
In the U.K, increasing recognition related to large number of issues has influenced the local government to earn success and sustainability. Some of these issues are competitiveness, skills and innovation along with infrastructural facilities, health, housing and quality of life (Sudmant et al. 2018). Other European countries such as London, Glasgow, Liverpool and Manchester are developing significantly through improving their base related to manufacturing and service sector. For this, some policies can be recommended so that the country can sustain in long run.
- Firstly, the city needs to reduce the production gap with other countries of the U.K in both the manufacturing and service sectors. For this, proper policy and business strategy are required for developing economic condition of these manufacturing industries again.
- Secondly, to secure long-term competitiveness of Birmingham, the government can diversify its industries through adopting business mix strategies in existing sectors by adding higher value and higher technological requirements (Ferretti, Landi and Venturelli 2018).
- Thirdly, through recruiting a wide range of workers containing both skilled and unskilled workers with different level of educational degrees, the city can upgrade its quality and variety of the local workforce.
- Lastly, Birmingham needs to attract investors after brexit, as this decision can reduce the inflow of both foreign and domestic investment into the city (Ho and Atkinson 2018). Otherwise, the process of capital accumulation within the country can be reduced in future.
In recent years, cities across the world are developing rapidly for which the number of total population in urban areas are also increasing continuously. At present, more than half of the world’s total population live in urban areas and the number will increase in future. Thus, urban planners experience many difficulties to accommodate this increasing population within the cities without exhausting the limited natural resources. In this context, the concept of sustainable development arises with the help of which the urban planners and policy makers intend to solve this emerging problem through confirming secured resources for future generations. This concept is also applicable for Birmingham. The city has the skills, determination and ability to become the first sustainable city of the U.K for generating low carbon within the environment. The City Council has adopted an ambition to reduce carbon dioxide by 60% between 1990 and 2026 (Antipova 2018). For achieving this goal, the city has generated Green Commission by bringing private, public and third sector together for developing a roadman for controlling carbon in the air.
Characteristics of Birmingham’s Economy
To reduce the percentage of carbon dioxide in air, industries and service sectors need to adopt upgraded business strategies with modern technologies. For this huge amount of capital accumulation is needed. Moreover, skilled employers and employees can perform efficiently through producing output efficiently by exhausting minimum natural resources. This further can help this city to save its natural resources for future generations (Zhang, Xiong, Li and Zhang 2018). In addition to this, the process of business mix can help Birmingham to obtain sustainable development, as a single firm or company provides verities of services to their customers. Efficient managers and other employees can utilize natural resources in a scientific way to reduce production costs and increase profits.
Hence, the provided recommendations can help Birmingham to develop its urban economy successfully and to obtain sustainable development.
Birmingham is the second largest city of the U.K, which has earned huge importance of this developing service sectors and increasing number of population. However, the manufacturing sector of this city has collapsed due to poor management system. This sector has significant impact on a city, as it can generate huge employment opportunities and national income. In addition to this, service sector also plays significant role to shape the economic base of a city for long term. This sector in Birmingham has improved and that can be seen in financial, public administrative and defence sectors. However, some recommendation related to production strategy, workers and investments are provided so that the city can sustain in both national and international contexts with other developed cities. These plans and policies can help Birmingham to obtain sustainable development. The policymakers can adopt this development strategy for future generation of Birmingham and sustain in long-term with other cities.
Antipova, A., 2018. Urban Environment: The Differences between the City in Europe and the United States. In Urban Environment, Travel Behavior, Health, and Resident Satisfaction (pp. 35-117). Palgrave Macmillan, Cham.
Beugelsdijk, S., Klasing, M.J. and Milionis, P., 2018. Regional economic development in Europe: the role of total factor productivity. Regional Studies, 52(4), pp.461-476.
Boix, R., Capone, F., De Propris, L., Lazzeretti, L. and Sanchez, D., 2016. Comparing creative industries in Europe. European Urban and Regional Studies, 23(4), pp.935-940.
Charter, M. and Tischner, U. eds., 2017. Sustainable solutions: developing products and services for the future. Routledge.
Council, B. 2018. Birmingham City Council Homepage. [online] Birmingham.gov.uk. Available at: https://www.birmingham.gov.uk/ [Accessed 10 Aug. 2018].
Feldman, M.P., 2014. The character of innovative places: entrepreneurial strategy, economic development, and prosperity. Small Business Economics, 43(1), pp.9-20.
Ferretti, R., Landi, A. and Venturelli, V., 2018. Book and Market Values of European Banks: Country, Size, and Business Mix Effects. In Contemporary Issues in Banking (pp. 329-360). Palgrave Macmillan, Cham.
Frick, S.A. and Rodríguez?Pose, A., 2018. Big or small cities? On city size and economic growth. Growth and Change, 49(1), pp.4-32.
Gunn, S., 2018. Ring Road: Birmingham and the collapse of the motor city ideal in 1970s Britain. The Historical Journal, 61(1), pp.227-248.
Haraguchi, N., Cheng, C.F.C. and Smeets, E., 2017. The importance of manufacturing in economic development: Has this changed?. World Development, 93, pp.293-315.
Ho, H.K. and Atkinson, R., 2018. Looking for big ‘fry’: The motives and methods of middle-class international property investors. Urban Studies, 55(9), pp.2040-2056.
Lee, S.E., Quinn, A.D. and Rogers, C.D., 2016. Advancing city sustainability via its systems of flows: the urban metabolism of Birmingham and its hinterland. Sustainability, 8(3), p.220.
Marconi, N., de Borja Reis, C.F. and de Araújo, E.C., 2016. Manufacturing and economic development: The actuality of Kaldor's first and second laws. Structural Change and Economic Dynamics, 37, pp.75-89.
Meyer, D.F. and McCAMEL, R.T., 2017. A Time Series Analysis of the Relationship between Manufacturing, Economic Growth and Employment in South Africa. Journal of Advanced Research in Law and Economics, 8(4 (26)), pp.1206-1218.
Rosenfeld, S.A., 2017. Competitive manufacturing: New strategies for regional development. Routledge.
Sudmant, A., Gouldson, A., Millward-Hopkins, J., Scott, K. and Barrett, J., 2018. Producer cities and consumer cities: Using production-and consumption-based carbon accounts to guide climate action in China, the UK, and the US. Journal of Cleaner Production, 176, pp.654-662.
Warren, S. and Jones, P., 2018. Cultural Policy, Governance and Urban Diversity: Resident Perspectives from Birmingham, UK. Tijdschrift voor economische en sociale geografie, 109(1), pp.22-35.
Zhang, H., Xiong, L., Li, L. and Zhang, S., 2018. Political Incentives, Transformation Efficiency and Resource-Exhausted Cities. Journal of Cleaner Production.