Qimtek Contract Manufacturing Index – 2021 Overview: Qimtek is an independent network for the UK engineering and manufacturing industry that connects active buyers and suppliers. By monitoring the purchasing budget of companies who are looking to outsource manufacturing, they can track activity in the sector.
From this they calculate the Contract Manufacturing index (CMI) which shows that 2021 was a volatile year with notable troughs in May and September but significant peaks in August and November. Overall, the market was 10% higher than in 2020, despite the usual slump in the 4th quarter which was compounded by various supply chain issues as well as rising energy and material costs.
The CMI is split between three processes – fabrication, machining and other. According to Qimtek, during 2021, fabrication accounted for 54% of the sub-contracting market and machining represented 35%; this balance is slightly surprising as data from the ONS shows that total UK output of machining subcontractors in 2020 was worth £4.6 billion while the metal forming subcontractors output was worth £1.5 billion – however, the definition of “fabrication” in the CMI is not entirely clear, so this may explain the difference.
It may also be driven by the contacts that they have and this is suggested by the fact that the list of top industries in 2021 is led by industrial machinery (31%), electronics (15%) and heavy vehicles & construction equipment (13%). Another factor is the extent to which subcontract activity is tied in with long-term supply chains rather than individual contracts – for example, the automotive industry only accounted for 7% of the market in 2021 but subcontractor activity in this industry will more typically be as part of long-term relationships.
You can get more details from the Qimtek press release which is attached below or from their website at https://www.qimtek.co.uk/blog/qimtek-contract-manufacturing-index-2021-overview (for the 2021 overview) and https://www.qimtek.co.uk/blog/qimtek-contract-manufacturing-index-quarter-4-2021 (for the 4th quarter).
International Comparisons of Productivity: The UK Office for National Statistics (ONS) has published an analysis of productivity among the G7 industrialized nations – Canada, France, Germany, Italy, Japan, the UK and the USA. In 2019, on the preferred measure of output per hour, this shows that the UK is more productive than Japan, Canada and (just) Italy, but less productive than Germany, France and the USA.
This apparently simple statement is slightly complicated because while there is a single international definition for output (using GDP), there are alternative ways of measuring hours worked. The general statement above applies to most of the methodologies although there is one for Germany that puts their output per hour a little below that of the UK.
The number of jobs in the economy is easier to measure, so output per worker is not subject to the same variation in its estimates, However, it can be affected by factors such as the extent of part-time working in the economy and the amount of casual and “gig-economy” workers. Using this comparison, the UK had higher output per worker than Japan and Canada, but is behind Germany, Italy, France and the USA in 2019.
The paper goes on to explore trends in productivity which show the growth in output per hour in the UK is in the middle of the range for the G7 countries between 1997 and 2019; for the growth in output per worker, the UK has consistently out-performed the other countries except the USA over this period.
More detailed analysis is also provided for some countries which we don’t have space here to go into, except to note that the contribution of capital deepening – the amount of capital (including equipment) available to workers for each hour they work – has been relatively weak in the UK, especially since 2009, and created a drag on labour productivity while it has been positive in Canada and the USA.
The Coronavirus pandemic created more volatility in productivity and different policies have had an impact on the various measures. In the UK, hours fell faster than output which led to an increase in output per hour worked, as the industries most affected were generally those with lower levels of productivity. This resulted in average output per hour increasing.
This pattern is also reflected in other G7 countries to a greater or lesser extent. Canada and the USA, which did not operate a furlough scheme as in the UK, saw larger declines in employment and hours worked than other G7 countries, and thus larger increases in labour productivity.
You can get more details from the ONS bulletin which can be downloaded from their website at https://www.ons.gov.uk/releasecalendar (20 January) or request them from MTA.