UK manufacturing at a crossroads: building on strengths to meet the China challenge

By Zongshui Fan and Dr Mateus Labrunie

The UK remains a powerhouse in cutting-edge sectors like aerospace and life sciences. However, as China continues to rise, the UK’s share of global manufacturing steadily declines.

Drawing insights from the UK Innovation Report 2025, this article explores where the UK is maintaining its strength, where it faces challenges, and how manufacturing has transformed not only domestically but also across the G7 nations and China. By analysing long-term trends in value added, productivity, and exports, we evaluate the performance of UK manufacturing and assess its competitiveness on the global stage.

Historical shifts in UK manufacturing

The UK has a proud legacy of manufacturing, with iconic brands like HP Sauce, Dyson, and Land Rover deeply woven into British culture. However, when asked if these products are truly ‘made in the UK’ today, the answer may not be so clear, and in many cases, it is actually no.

HP Sauce production moved entirely from Birmingham to Europe in 2006/07. Dyson shifted its manufacturing to Asia in the early 2000s and relocated its headquarters to Singapore in 2019, bringing it closer to its manufacturing sites and supply chains. Even Land Rover, which still manufactures in the UK, has been scaling back its domestic workforce and has been owned by India-based Tata Motors since 2008.

On the other hand, many UK-born manufacturers continue to carry forward the legacy of British industrial strength. Rolls-Royce, for example, has delivered strong performance in recent years, buoyed by rising demand for engines used in large passenger aircraft and for power-generation systems serving artificial intelligence data centres.

These examples offer just a snapshot of how the UK’s manufacturing industry has changed since 2000. Over the past twenty years, the sector has faced persistent challenges to its international competitiveness across many key manufacturing sectors, as highlighted in the UK’s Modern Industrial Strategy 2025.

Industrial gravity centre shifts towards China

Between 2000 and 2022, manufacturing as a share of global GDP declined from 18.3% to 15.8%, indicating a long-term structural transition in the world economy. Meanwhile, beneath this overall trend, there is a significant redistribution of industrial strength across regions.

A significant shift in the world’s industrial gravity centre has occurred since 2000, moving from G7 countries to China. The G7 countries, including the UK, have experienced their combined share of global manufacturing value added decline from 56% in 2000 to 33% in 2022. In contrast, China has emerged as the world’s leading industrial player, with its share rising dramatically from 6.4% in 2000 to 31% in 2022. China’s gains outpaced G7’s losses by 1.6 percentage points.

Within the G7, the decline has been widespread. The UK’s share of global manufacturing value added contracted from 3.1% in 2000 to 1.9% in 2022. Similar downward trends were observed elsewhere: Canada fell from 2.4% to 1.1%, Italy from 4.1% to 1.9%, France from 3.2% to 1.7%, the US from 24.6% to 15.1%, Japan from 11% to 6.6%, and Germany from 7.6% to 4.9%.

A spotlight on the top seven UK manufacturing sectors

The top seven manufacturing sectors by value added in the UK were the focus of the UK Innovation Report 2025, including food, beverage and tobacco, pharmaceuticals, metal products, computer and electronics, machinery and equipment, automotive and other transport equipment (which includes aerospace, maritime, and railway equipment). Collectively, these sectors represented 62% of the UK’s manufacturing value added in 2020.

Between 2010 and 2022, the UK recorded value-added growth across all its major manufacturing sectors. Among these, the automotive industry stood out as the fastest growing, expanding by 72% over the period. The performance of other sectors reveals more nuanced patterns. For example, the UK and the United States followed broadly similar trajectories in metal products and machinery and equipment, though the UK outpaced the US in the other transport equipment sector, which includes aerospace, maritime, and rail.

China’s performance, however, dwarfed both countries. By 2017, value added in every major Chinese manufacturing sector had already grown more rapidly than in the UK or the US. Growth ranged from 56% in machinery and equipment to nearly 100% in food, beverage and tobacco, relative to 2010 levels. This highlights not only the scale but also the rapid pace of China’s industrial expansion, which continues to distinguish it from its Western counterparts.

Yet these shifts in industrial weight are not solely about outputs. They also raise questions about efficiency. To understand how countries are adapting, it is useful to look beyond value added alone and consider productivity growth.

Productivity divides: UK strengths and international contrasts

Since the global financial crisis of 2008, the UK’s overall productivity growth has remained sluggish. Yet, performance has varied widely across sectors, with manufacturing standing out as one of the country’s fastest-growing areas. Within manufacturing, other transport equipment led the way with a compound annual growth rate (CAGR) of 4.1% between 2010 and 2022, followed closely by machinery and equipment (4.05%), metal products (3.3%), and automotive (3.2%). Of these, only the automotive industry achieved productivity growth supported by clear increases in both value added and employment, rather than productivity gains being driven primarily by workforce reductions.

The international landscape highlights these contrasts. China surpassed both the UK and the US in productivity growth in food, beverage, and tobacco, as well as metal products, machinery and equipment, emphasising the swift catch-up of its manufacturing sector. Conversely, trends in computer and electronics diverged considerably among the three economies: the US recorded the strongest productivity improvements, but these were mainly driven by declining employment rather than an increase in output.

Productivity measures how efficiently industries create value, but it does not capture their competitiveness in global markets. For that, we must turn to trade performance.

Export strengths remain, but under increasing pressure

Between 2000 and 2020, the UK achieved solid export growth in several of its key manufacturing industries. Pharmaceuticals expanded by more than 80%, food, beverage and tobacco by 57.8%, and automotive by 51.9%. Other transport equipment, including aerospace, maritime, and rail, also grew by 17.2%, while machinery and equipment registered modest but positive gains. These results underscore that UK firms have remained competitive in some key areas, particularly in high-value sectors such as life sciences and advanced transport.

Yet, the broader global picture tells a more challenging story. Across the G7, manufacturing export shares declined over the two decades to 2020, with the UK’s steepest losses concentrated in pharmaceuticals (–5.3 percentage points) and other transport equipment (–4.2 percentage points) – areas in which the UK has traditionally held competitive advantages. In addition, the UK saw declines in exports of metal products and computers and electronics, signalling areas of relative weakness.

China’s rise provides the sharpest contrast. From 2000 to 2020, it recorded exceptional export growth across every major manufacturing sector, with compound annual growth rates ranging from 8.3% in food, beverage and tobacco to 17% in machinery and equipment. In automotive, Chinese exports grew nearly twentyfold during the period, although from a very low starting point. As a result, China’s global export share in vehicles remained modest until recently—but more recent data highlights how rapidly this is changing, particularly in electric vehicles.

For the UK, the story is mixed but not without promise. While it has lost ground in relative terms, its export growth in sectors such as pharmaceuticals and automotive demonstrates clear sectoral strengths that remain highly relevant in the global economy. With the right policies and investment, these industries could serve as platforms for renewal, enabling the UK to build on established capabilities and compete in emerging markets such as green technologies and advanced mobility.

From legacy to innovation: a step-change is required in industrial promotion

The trends outlined in this analysis highlight both the resilience and the vulnerabilities of UK manufacturing. While certain sectors, such as automotive and other transport equipment, continue to demonstrate productivity growth and global relevance, the broader picture is one of relative decline compared to international peers. The UK’s decreasing share of global manufacturing value added and exports highlights the need to rethink how the country competes in an increasingly China-driven industrial landscape.

China’s rise shows no signs of slowing. Its advances in traditional industries like machinery and electronics have been matched by world-leading progress in emerging sectors such as electric vehicles and solar panels. For the UK, this means that the path forward cannot simply rely on legacy strengths; it requires a step-change in industrial promotion.

The UK’s Modern Industrial Strategy is a good starting point, and the proposed Sector Plans are a welcome change towards more targeted policy support. However, in a new global order marked by strong state support to industries, a lot remains to be done. The UK’s manufacturing heritage is proud but not enough. To compete globally, it must invest in advanced technologies, support innovation and skills, and develop a clear industrial vision aligned with future markets like clean energy and digital manufacturing. By focusing on sectors such as green energy, advanced mobility, and digital manufacturing, the UK could shift from managing decline to leading the next era of global industry.

This article draws from Section 3 of the UK Innovation Report 2025.

For data and more analysis on the UK’s competitive advantage in industrial innovation, see the full UK Innovation Report 2025 produced by Cambridge Industrial Innovation Policy.