Throughout its history, the United Kingdom has been a leader in the development of parliamentary democracy, literature, science, business and monetary policies. At one point, the British Empire included about one-fourth of the Earth’s land, but today the U.K. is much smaller. Although much of the area is devoted to agriculture, manufacturing is an important part of the U.K. economy, equaling about 10 percent of the country’s GDP.
Manufacturing in the U.K.
Typical manufacturing products made in the U.K. include machine tools, power equipment, railroad equipment, shipbuilding, aircraft, automobiles and parts, electronic communication equipment, paper and paper products, food, clothing, textiles and other consumer goods. Coal, chemicals, petroleum and metals are also significant.
Industrial production is growing at about 0.7 percent annually as of 2017. While manufacturing accounts for about 10 percent of the GDP, that percentage has been declining in recent years.
Other Important Industries
Banking, insurance and business services are the most important drivers of the British economy, making up more than 80 percent of the GDP.
Agriculture in the U.K. produces about 60 percent of the country?s required food, but it uses only about 1.5 percent of the labor force, making it highly efficient. Key commodities include cereals, oilseed, vegetables, potatoes, cattle, sheep, poultry and fish.
Supply Chain Infrastructure for Manufacturing
Transportation and communication pathways are strong in the U.K. In fact, the robust infrastructure makes the U.K. one of the easiest countries in the world for moving manufactured goods and raw materials, helping to ensure on-time deliveries of customer orders and preventing unexpected delays in the flow of components and raw materials.
Shipping by Air
The U.K had 460 airports and about 5.4 billion metric tons of goods moved by air in 2015. The air infrastructure ensures that manufactured goods and raw materials can move quickly to and from all parts of the globe.
Rail and Water Shipping
Transportation of goods within the U.K. is also highly developed, whether you need to ship by rail, truck or water. There are several major seaports that simplify trade in goods and materials with European countries. The U.K. has more than 60 intermodal terminals in operation, making it easy for manufacturers to ship using a variety of transportation methods for speed and cost considerations.
Workforce
The U.K. had a low unemployment rate of about 4.4 percent in 2017. About 1.5 percent of the workforce is involved in agriculture, 15.2 percent in industry and manufacturing and 83.5 percent in services.
Many people in the workforce are well educated and highly skilled, but it can be difficult to attract or retain people with sought-after manufacturing skills. Since Brexit, fewer workers from other countries are applying for work in the U.K., exacerbating the shortage of skilled manufacturing workers. Even with the possible need to pay higher wages to attract needed workers, the U.K. ranks number 13 for productivity worldwide, making it an attractive location for manufacturing.
Economy
The U.K. ranks number 81 in the world in terms of geographic area, but it is the 10th largest economy in the world and the third largest in Europe, providing a strong demand for many manufactured goods. Its 2017 estimated GDP is around $2.88 trillion with an estimated GDP growth of about 1.7 percent. The government is stable and business laws are clear-cut.
Despite having been an active member for many years, the U.K. opted to withdraw from the EU in 2016. Terms of the withdrawal are still under negotiation, but the final withdrawal date is set for March 29, 2019. Even so, the U.K. economy remains strong in comparison to many other parts of the world.
In 2017, the U.K. exported about $436.5 billion worth of goods. Primary trading partners included the U.S., Germany, France, the Netherlands, Ireland, Switzerland and China. The country ranks 11th in the world for net exports. Manufactured goods are one of its primary exports, so the U.K. offers attractive opportunities for manufacturers to sell to both domestic and foreign markets.
The U.K. imported around $602.5 billion in 2017. The primary commodities included manufactured goods, machinery, fuels and food products. Primary import partners were Germany, the U.S., China, Netherlands, France, Belgium and Switzerland. It ranks sixth in the world for imports.
Political Landscape
In addition to the current Brexit situation, the U.K. continues to face issues with the CIRA and NIRA over unification and rule of Ireland. England has also been the victim of several terrorist attacks, including the most recent attacks on London Bridge and the U.K.’s parliament building. Despite these highly publicized incidents, the U.K. is a comparatively tranquil country for setting up manufacturing operations.
Tax Rules
Taxes equal 38.4 percent of the GDP, putting the U.K. 43rd in the world. The corporate tax rate is 20 percent, but the rate can fall to zero for R&D and the tax on patents is only 10 percent. Intellectual property protections are strong. This makes the U.K. a desirable location for new product development and prototype labs as well as full-scale manufacturing.
It’s relatively easy to start a business in the U.K., but it can take some time to set up. Special business taxes in the U.K. can be complex, with some estimates saying it can take 110 hours or more to calculate and file taxes.
Special Circumstances
All companies operating in the U.K. are subject to the Registrar of Companies rules for public records disclosure. The fees for these processes are small, but the number and complexity of the steps can be time consuming and laborious.
Obtaining building permits and constructing new facilities are both fast and simple processes but connecting to power can take up to 100 days for a new business. When planning a new or expanded manufacturing facility in the U.K., factor this potential delay into the project plan to ensure operations commence as planned.
Getting Down to Business
Doing business in the United Kingdom has its own sets of advantages and challenges. U.K. manufacturing output is at its highest in 10 years, but it’s also important to note the industry’s role in the U.K. economy. QAD Internationalization enables companies to identify and overcome the challenges and meet the requirements associated with taxes, regulations and globalization in 63 countries, including the U.K.
How would you describe the state of Manufacturing in the U.K.? Learn more about manufacturing and doing business in other great countries around the world.
