Manufacturing Forum

Key performance indicators

What we do

One of the strong findings of our review of external stakeholders was the need for a set of headline Key Performance Indicators that allow a qualitative and quantitative assessment of the climate of the UK's manufacturing sector - and help us to monitor its performance and the effectiveness of the actions of Government, business and others in supporting the sector.

Working with stakeholders including the TUC, CBI and EEF, and drawing on the expertise of KPMG, we have developed a set of Key Performance Indicators, which:

• Are specific to manufacturing
• Are measurable over time
• Allow continuity and annual updating
• Can provide an international comparison of the UK's performance

The aim is to provide an 'at a glance' view of the current state of manufacturing, with the emphasis on simplicity rather than comprehensiveness. The measures we have chosen are:

Output  shows the level of value added of the UK manufacturing sector. It is calculated by subtracting the value of inputs from the value of outputs, and is indexed using 1990 as the base year.

Investment shows the level of new investment in the UK manufacturing sector, and is indexed using 1990 as the base year.

Innovation uses Business Enterprise Research and Development spend in manufacturing businesses as a proxy for innovation in UK manufacturing, and is indexed using 1990 as the base year.

Productivity uses labour productivity, on the output per hour measure, as a proxy for total productivity in UK manufacturing. It is calculated by dividing total manufacturing output by total hours worked, and is indexed using 1993 as the base year.

Profitability is measured using the rate of return. This is calculated by dividing total industry profits by total industry capital, and is expressed as a percentage.

Skills shows the proportion of qualifications at different levels held by the UK workforce.

Manufacturing output 1990=100

Manufacturing output in 2004 increased by 1.8% compared to 2003, representing the second consecutive year of growth. However, recent data from ONS and other business surveys has been subdued.

Manufacturing investment 1990=100

In 2004, manufacturing investment rose by 2.5% - its first annual rise since 1998. However, investment remains at historically low levels

Innovation

Manufacturing investment in R&D in the UK continued to increase in real terms, but with lower levels of expenditure as a share of GDP compared to our main competitors, particularly US and Germany.

Manufacturing productivity per hour worked 1993=100

UK manufacturing productivity – on a per job and per hour basis – were both up in 2004, by 5.8% and 5.1% respectively. International comparisons show that UK productivity remains significantly lower than in France, Germany and the US.

Manufacturing profitability % net rate of return

Comparing 2003 with 2004, manufacturing profitability was broadly unchanged – averaging nearly 7%. However, recent data from ONS and other business surveys suggests that firms continue to face difficulties as input costs outstrip output prices.

Highest qualifications, UK proportion of economically active adults

In 2004, the proportion of economically active adults with a degree or higher increased to 31%. But there remains a large proportion of the workforce with low basic literacy and numeracy skills.