Scottish Manufacturing Industry Employment Change 1960 To Present Economics Essay

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At the beginning of Twentieth Century, manufacturing played a major role in the Scottish economy and Scotland could be described with confidence as being one of the manufacturing centres of the world. Before the First World War the Clyde was the centre of the British shipbuilding industry, produces one fifth of the world total output (Devine et al 1996). However, over the last fifty years, manufacturing in Scotland has gone into decline, reflecting the overall decline in manufacturing across the United Kingdom. During the post war period many of the heavy industries such as ship building and steel making collapsed, due to the fact that they were no longer being subsidised by government funds and increasing competition from abroad.

However during the 1980s Scottish manufacturing witnessed a change of direction to more high tech and light manufacturing and Scotland has become one of Europe's leading computer making countries. This change in direction has brought new employment opportunities to Scotland, in different sectors to that the Scottish labour market was used to.

Much like the rest of Britain, Scotland's economy had grown rapidly during and after the industrial revolution, due to heavy industries such as shipbuilding, coal mining and steel production. However, during the 1960s' these heavy industries went began to decline, again reflecting the situation not only Britain, but much of the industrialised world. This decline in heavy industries was due to a number of factors. Firstly there was increasing competition from abroad, particularly in the east from countries such as South Korea which was just embarking on the beginnings of industrial development as Scotland was moving out of it. Scotland was losing out to these countries because they could produce the same goods for a much cheaper cost, primarily because labour costs were much cheaper than those in Scotland. Also following the Second World War, Britain found itself in declining importance on the world market, resulting in losses in trade. On a more internal level, coal mines were closing down due inefficient production and worries of health and safety. This caused a domino effect amongst the other heavy industries such as shipbuilding and steel that relied on the resources such as coal to create their own products. The decline in these industries also caused major problems with employment in Scotland. These heavy industries were labour intensive, which explains the heavy job losses associated with the manufacturing industry in Scotland at this time.

Between 1961 and 1971, unemployment levels in Scotland rose from 4.5% to 7.4%. Despite this obvious decline in heavy industries, the government continued to prop up these industries over the next couple of decades. Regional Policy and government involvement during this period was seen as 'active' or strong. Griffiths et al (2007) describes active regional policy periods where "periods in which the amount spent on regional incentives increased significantly" even more so in Assisted Areas (AA) such as Scotland. Devine et al (1996) argues that the government's initiatives were "misconceived" and that they were simply delaying the eventual collapse of the heavy industries. Throughout the 1960s and 1970s the government provided grants financed by tax payers money (Paterson et al 2004), as well as strategies to help 'prop up' the industries. Strategies included making it compulsory for the state owned electricity company to use Scottish coal, the steel industry was supported by grants, while the shipbuilding industry was supplied with contracts from the Royal Navy (Devine et al 1996). The politicians at the time were arguably socially motivated, as the labour force had no other skills other than working in the heavy industrial sector. Two of the more successful initiatives were Regional Selective Assistance (RSA) and Regional Employment Premium (REP). However, even thought they were more successful than other incentives (based on administrative costs), both still had their weaknesses. Firstly RSA slowed down the manufacturing decline in Scotland, and also brought new work. However, it is argued that RSA was capital biased, and encouraged capital intensive rather than labour intensive firms to Scotland, which would not help the employment situation. RSA was also given to all firms, even if they didn't create employment and would also have located in an area anyway, without the incentives. The Regional Employment Premium was a direct labour-subsidy, for employers to maintain jobs. This proved successful as it helped keep people in work in manufacturing in Scotland. However, REP provided incentives to all industries in the manufacturing sector, even if they were unprofitable and in decline (Griffiths et al, 2007). This is a good example which shows that government schemes were merely delaying the fate of heavy manufacturing in Scotland.

Despite government intervention, unemployment in Scotland was 70% above the United Kingdom (UK) average (Griffiths et al, 2007).during the same period of time, unemployment in the South East were half of the UK average, due to light manufacturing, and an ever increasing market. Griffiths et al (2007) argues that along with decline in traditional industries, Scotland's unemployment during this period could be blamed on "a disproportionate number of big cities in which unemployment is particularly high. This was due to the fact that factories within Scottish cities were too old, and dated compared to those now emerging in rural areas.

During the mid 1970s, government initiatives to help AA's such as Scotland were cut to try and reduce government spending. However during the late 1960s, a large field of oil was discovered in the North Sea, which Scotland hoped would benefit their economy and save employment in the manufacturing sector, as the extraction and transportation of the oil would require materials from the heavy industries. The discovery became even more important after the oil crisis in 1973 when oil was limited to countries such as the UK and United States of America by members of the Organization of Petroleum Exporting Countries (OPEC). This caused the prices of oil to increase dramatically, which brought a greater need for the extraction of North Sea Oil. The oil began to flow in 1975, however Scotland did not benefit from it. Scotland could not compete with multinational companies; neither did it have the technology or skilled labour force to work in the oil industry. Like wise, the heavy industries that could have benefited from the production of oil in the North Sea such as the steel plants and shipbuilding were simply overlooked. Scottish steel plants were unable to produce the specific pipe lines required. Also the shipyards of Clyde were restricted by poor transportation links (Paterson et al, 2004). Scotland was loosing its battle to boost its economy and prevent the decline of the heavy industries. The decline became severe after 1979 after the Conservative Government, led by Margret Thatcher came into power. The monetary ideology of Thatcher's government led to the privatisation of industries which with the withdrawal of government support, led to the final collapse o heavy industry in Scotland and with it thousands of jobs. During the period 1979-1980, Britain went into recession, which greatly effected employment in manufacturing in Scotland. During this period, employment n Scotland fell from 2.108 million to 1.917 million (Danson et al, 1992). Most of these job losses came from the manufacturing sector.

However, the 1980s also witnessed a change in employment in manufacturing in Scotland, into light manufacturing, in particular the growth of the electronics industry. The collapse of the heavy industries led to a transformation of Scottish manufacturing and also employment in manufacturing. However, manufacturing in the electronics sector was not new to Scotland. American companies International Business Machines Corporation (IBM) and National Cash Register (NCR) located in Scotland to try and expand their trade within the European market. By 1970, employment in electronics had risen by 30,000 (Devine et al 1996). Also, during the 1970s Motorola and Hewlett-Packard Bell were also located in Scotland, particularly in regions around Glasgow, the sites of previous industries. By 1983, American owned companies accounted for 79% of all of the UK's integrated circuits, and 21% of Western Europe's (Devine et al 1996). By 1988 there were over three hundred companies involved in the manufacturing of electronics. However, Devine et al (1996) argues that by the late 1980s, foreign manufacturing firms were stifling indigenous firms from being successful. Scottish companies were only providing for 12% of annual purchases within the electronics sector. Indigenous firms were restricted into making simple products. This type of manufacturing was not up skilling the workforce, so therefore wasn't a sustainable solution for employment in manufacturing. There are also arguments for the case that Scottish firms were not only finding it hard to compete, but also to get started in the first place. This was partly due to a lack of access to finance to help get indigenous firms up and running, but also due to cultural tradition and the perception of workers in Scotland. Devine et al (1996) argues that "entrepreneurialism was less accepted" in Scotland than in England and Wales. This stifled the growth of many Scottish firms and many failed to get off the ground in the first place.

The growth in the Scottish electronics industry was not just due to companies seeking involvement in the European market, as they could have located in other countries other than Scotland. Companies wanted to locate in Scotland to take advantage of the friendly tax situations created by government policies such as Enterprise Zones, and also RSA. Also, by the end of the 1980s, Scotland had a highly educated work force. Scotland had one of the highest numbers of university graduates in Europe, with half of the graduates having degrees in Science, Maths, or Engineering. Also during the 1980s, Wolfson Microelectronics located at the University of Edinburgh. Using the universities resources, Wolfson became a world leader in microelectronics during the 1980s.

The growth of manufacturing in the electronics sector has seen a significant change in the employment structure in Scotland. The job losses in the traditional big three industries (coal, steel and shipbuilding), were being replaced by new high-tech manufacturing jobs. By 1983, the microelectronics industry in Scotland employed more workers than the three traditional industries put together (Paterson et al 2004).

At the start of the 1990s the United Kingdom again went into recession. Historically rates of unemployment in Scotland had always been above the UK average. However, between 1992 and 1993, the UK unemployment rate rose a lot faster than Scotland's, and for the first time in seventy years rose above Scotland (The Scottish Office). This shows that employment in Scotland was now more stable than it had been in previous years, partly due to the growing service sector, but also the importance of manufacturing, particularly that of electronics.

One of the main locations of the growth of the electronics industries was at the so called Silicon Glen, which had first been created in the 1940s. The manufacturing belt ran from Greenock in the east, to Edinburgh in the west and from Stirling in the north, to East Kilbride in the south (see figure 1).

Figure 1. Location of Silicon Glen

(The death and rebirth of Silicon Glen, Arnold, 2003)

Silicon Glen is a good example of a conglomeration of multinational companies locating in a certain area, and boosting the areas economy and employment levels. The regions surrounding Silicon Glen had previously been dominated by the heavy industries, so there was an abundance of labour for the new firms locating in the area. This is also a good example of a significant change in employment from heavy to light manufacturing.

However, the heavy investment of foreign firms in the 1980s and 1990s was not sustainable. Business costs at the time were very low and there was "plentiful spare industrial capacity" (Arnold 2003), meant that multinationals were quick to locate in Silicon Glen. The companies that were locating in the 'glen' however were mainly manufacturing hardware such as personal computers, mobile phones and hi-fi systems. By the early 1990s, Scotland was producing 10% of the world's Personal Computers (PCs). However, the production of hardware is limited, and quickly becomes dated. Had the companies been manufacturing software rather than hardware, they would be able to be much more flexible with their manufactured products and adapt to market demands. Hugh Aitken, head of Scottish company Sun Microsystems described Silicon Glen as being "a screwdriver shop". This suggests that unlike Silicon Valley in California, Silicon Glen was the centre of basic manufacturing, which did not up skill the workforce as they were still doing blue collar jobs.

However, now in the 21st Century we were seeing a shift into more diversified, software based manufacturing in Silicon Glen. Unfortunately this change came about after the 'internet bubble burst' at the turn of the millennium, causing the electronics industry all over the world to suffer and leading to some foreign companies beginning to close down firms in Scotland. Others such as Motorola and Via Systems lay off vast amounts of worker (Devine et al 1996). Between 2001 and 2002, Scottish electronic exports fell from £10.9 billion, to £6.7 billion (see figure 2).

Figure 2.

(The death and rebirth of Silicon Glen, Arnold, 2003)

This shift into software manufacturing was encouraged by the Scottish Enterprise (Formerly the Scottish Development Agency) who put £450 million into Intermediary Technology Institutes (ITIs) to help local high-tech enterprises (Arnold 2003). This investment has also helped Scottish firms set up branches in Malaysia. This it could be argued has both positive and negative effects on employment. It can be said that the jobs being created are high-quality office jobs, compared to mass low- value job which was not up skilling the Scottish workforce. However this does lead to high-quality office jobs being taken out of Scotland. Hugh Aitken (Arnold 2003) argues that in order to achieve the transformation from manufacturing of low order hardware goods to high order software goods, then low-value jobs can not be sustained. He argues that the Silicon Glen of the 21st Century is about "wealth creation, not job creation". However the change of strategy in the electronics industry did bring employment opportunities to Scotland through call centres to help support firms. Rockstar North, responsible for big hit video games such as the Grand Theft Auto series also chose to locate in Scotland during this time. Amazon also located in Scotland during this time, the first outside of the USA. This shows that despite placing an emphasis on indigenous start up firms at the start of the 21st Century, manufacturing in Scotland was still very much reliant on inward investment from foreign owned firms to help boost its economy and employment levels.

The electronics industry is not the only industry that has been reasonably successful over the last half century. The cultural image of Scotland has created a niche industry that has flourished, especially in the last few decades. Products such as Scottish Knitwear and Whisky have seen a growth in exports. Whisky in particular has saved and created many jobs thanks to a huge export market. Latest figures show that in the first nine months of 2009 more than 807 million bottles of Scottish whisky were exported abroad (Scottish Whisky Association 8th December 2009).

Figure 3 shows how important whisky is to manufacturing exports in Scotland, contributing to 13% of exports. The chart also shows that office machinery (such as PCs) dominate manufacturing exports in Scotland.

Figure 3. Scottish Manufactured Exports by Sector

(The Scottish Office)

In the 21st Century manufacturing in Scotland continues to be important both to the economy and in terms of employment. In 2005, total manufactured Scottish exports were estimated to be at £12.2 billion. However in 2009 Scottish manufactured export sales decreased by 6.5%, reflecting the recession (

Manufacturing in Scotland has witnessed many changes in the last half century. The transition form traditional heavy industries such as shipbuilding, steel and coal mining into lighter manufacturing such as the growth of the high-tech sector has caused changes in employment. Scotland now has a highly skilled and educated young workforce, which helps Scotland to compete on a global level. The last few decades have also seen a growing service sector emerge, which has again changed employment in Scotland. In 1995, the service sector attributed to 64.1% of total employment in Scotland, with manufacturing being the second biggest employer at 20.1% (The Scottish Office). Through the service sector, Scotland has also seen a rise in female employment.

Employment in manufacturing in the last half century therefore has seen profound changes. As Hugh Aitken (2003) quotes "manufacturing is very much alive-it's just different".