The growth of technology and innovation has changed the shape of industry across England and Wales. 

Census data from the Office for National Statistics (ONS) demonstrates that the Fourth Industrial Revolution is having a big impact on the economy, with traditional industries, like manufacturing, declining between 2011 and 2021, while newer sectors, such as programming and consultancy are on the up. This is true for both England and Wales. 

The trends also show noteworthy increases in the proportion of workers in the scientific research and development and education sectors. The rise in the former (up 15% to 132,000 people) and the latter (up 3% to 2.7 million people) seems to have particularly taken place near universities. Oxfordshire saw an increase of 37% (to 6,100 people) and Cambridgeshire was up 16% (to 10,000 people). This trend could partly be explained by a strong university research base, which has seen sustained growth since the 1970s.    

The move towards new industries

Likewise, the programming and computer consultancy sector saw its workforce increase significantly. Data shows it grew by 53%; 274,000 additional people reported working in the sector in 2021 compared to 2011  levels. This trend was mainly driven by England (up 53% from 503,000 to 771,000), and, in particular London (up 79% from 105,000 to 189,000) – reflecting the fast development of the capital’s IT and digital hub. Indeed, the programming and computer consultancy sector has now surpassed finance as “an important area of employment in London”, as described by the ONS in 2022. This significant move in the UK labour market has been driven by increases in the demand for digital jobs as part of the ongoing Fourth Industrial Revolution – compounded by rapid technological change due to rising interconnectivity, machine learning, automation, etc. – and accelerated by the Covid-19 pandemic.  

Such shifts in the UK labour market have come at the expense of traditional sectors, such as manufacturing, which have seen their number of workers diminish across the UK. Figure 1 shows, with a few exceptions, that England and Wales’ workforce declined across manufacturing sectors, down 12% from 2.15 million to 1.9 million. Fabricated metal products and machinery and equipment manufacturing experienced a dramatic drop (down 8%). This parallels with a decline in productivity growth in most manufacturing sectors, including machinery and equipment and pharmaceutical preparations as previous evidence points out. See the changes in 2021 with 2011 figures for comparison in the figure below. 

Figure 1

While most of these shifts are shared with other developed countries, the UK has its own idiosyncrasies. Firstly, the UK’s reliance on North Sea Oil in the 1980s and the financial boom in the 2000s may have led to a “Dutch Disease”, increasing the dependency on these sectors at the expense of others, such as manufacturing. Secondly, policy choices over the last decade have also influenced the UK’s evolving economic structure. These have included  the impact of fiscal tightening since the Global Financial Crash aimed at reducing deficits and debt alongside the effect of Brexit in terms of increased trade barriers for industries that previously benefited from frictionless trade with EU member states. 

Overall, the workforce expansion in services, and especially in knowledge-intensive sectors, such as programming and computer consultancy, scientific research and development and education, is welcome as we advance through the Fourth Industrial Revolution. However, prompt and decisive action must be taken in order to tackle some of the UK’s most serious economic problems – the lack of productivity growth, large regional concentrations of wealth creation and productivity, low business investment and slow economic growth.   

Tackling economic growth

Tackling such economic challenges to improve the UK’s overall economic performance will require policymaking that not only ensures our manufacturing and other key industries remain sustainable. It must also make them competitive by nurturing their ability to develop and adopt new technologies, addressing the skills shortage, and incentivising enterprise and innovation. The message set out by Chancellor Jeremy Hunt in the Government’s four-pillar economic growth plan is therfore a welcome one, as UK universities will play a determinant role as a source of knowledge creation and transfer, and innovation. However, clear and implicit commitments to this are needed. This includes increasing R&D spending to develop the innovative products and services that create the perfect environment for good jobs and businesses, bringing together universities and local communities by creating more enterprise and opportunity hubs, and developing a clear and credible plan for training and attracting the people with the skills needed to power the UK’s future economy.  

Therefore, the Government should continue making efforts to strengthen, and unlock the ground-breaking potential of the UK’s higher education system. We hope the Budget in less than two months will show strong actions towards these commitments.