Improvement in the performance of manufacturing in the UK economy depends on a greater emphasis on resource efficiency, according to the Green Alliance.
The cross-party thinktank has produced a report, Lean and clean: building manufacturing excellence in the UK, with an analysis of the issues needed to encourage and reward more resource efficient production.
The report has been backed by the British Chambers of Commerce, the TUC and others who say more resource efficient manufacturing is needed to close the UK’s regional productivity gap.
A joint statement calls on the government to use its forthcoming industrial strategy to raise the baseline performance of all UK manufacturers, saying it has the potential to add £10bn to the profits of the sector, increase productivity, support growth in the north and Midlands where manufacturing is more dominant, and keep good jobs in the UK.
Rising input costs, investors’ concern over resource risks, and businesses using environmental innovation for competitive edge are all factors elevating resource efficiency from an operational to a strategic issue for UK firms, it says.
The report says the fastest-growing companies are those that actively manage their environmental impact. In the past 10 years such manufacturers have cut their energy use by 50%, but the majority have only managed a reduction of 10-15%.
The average UK manufacturer spends five times as much on resources as they do on labour, so there is more scope to raise productivity through resource efficiency than ‘labour efficiency’ alone.
Lowering the carbon intensity of production can be achieved by improving material and water use, the report says.
Material prices are volatile and rising over the long term. In the past 15 years, manufacturers have experienced a 75% increase in input prices, in contrast to manufacturing wage costs, which have only risen by 8%.
The Institute for Manufacturing says improving the resource efficiency of manufacturers to the level of the best in their sector would yield an additional £10bn per annum in profits for UK firms and a 4.5% reduction in carbon emissions.