Skip to content

What does the UK pharmaceutical industry look like today?

ONS looks at value added, turnover and productivity in the pharmaceutical industry

The pharmaceutical industry is a key component of the UK manufacturing industry. A wealth of information on the composition and recent performance of the industry can be found in a range of ONS statistics, including changes in the value added and productivity of the industry over time.

What activity takes place in the pharmaceutical industry?

According to ONS’s Annual Business Survey (ABS), the pharmaceutical industry’s total turnover in 2012 was £60.1 billion. This includes businesses that manufacture1 (26% of industry turnover), wholesale (57%) and dispense pharmaceutical products (17%). This piece of analysis focuses on the manufacture of pharmaceutical products. 

How important is pharmaceutical manufacture to the UK economy?

The relative size of an industry within the UK economy is described by its contribution to gross value added (GVA)2; that is the value added to the inputs by a process. The manufacture of pharmaceutical products and preparations accounted for £13.34 billion of current price GVA in 2013, approximately 0.8% of the total economy. To provide a comparison, this is slightly more than three times the size of textile, clothing & footwear industry and just over half the size of the telecommunications industry. Manufacturing is a key element of the UK economy, and the manufacture of pharmaceutical products accounted for 9% of the manufacturing economy in 2013.

How has the manufacture of pharmaceutical products in the UK changed over time?

Gross value added in constant prices3 in the manufacturing sector increased consistently on an annual basis before 2008, but fell markedly during the economic downturn, and the recovery since then has been minimal. Most manufacturing sub-industries followed a similar trend; however, this was most notable in pharmaceutical manufacturing.

The manufacture of pharmaceutical products was the best performing sub-industry4 within the manufacturing sector before the 2008/09 economic downturn. The manufacture of pharmaceutical products increased on average by 4.4% annually between 1991 and 2009 (although in 2007 there was a 4.1% fall). This consistent growth was at the upper end of growth compared with the other 23 manufacturing sub-industries (Figure 1).

However, from 2010 onwards the manufacture of pharmaceutical products was at the lower end of this range, and was the poorest performing in 2010 and 2011. The manufacture of pharmaceutical products fell by 25.9% between 2009 and 2013, with a particularly strong fall of 13.5% in 2011.

Figure 1: Gross value added growth of the manufacture of pharmaceutical products and preparation compared to range of growth in other manufacturing sub-industries, constant prices

Figure 1: Gross value added growth of the manufacture of pharmaceutical products and preparation compared to range of growth in other manufacturing sub-industries, constant prices

Download chart

How productive is pharmaceutical manufacturing?

There was strong growth in the productivity5 of pharmaceutical product manufacturing and preparations prior to the downturn due to both growth in output, and reductions in the amount of hours worked in the industry. On an indexed basis (2010=100), output per hour grew from 37.8 to 116.0 between 1998 Q3 and 2009 Q3.  At this peak, productivity for pharmaceutical manufacture was seven times higher than productivity in the whole economy.

Following the downturn, productivity has been on a downwards trend.  Productivity in Q3 2013 was just 60.1 which was slightly above half its peak value. At first, the major contributor to this fall was negative GVA growth. However, in the three most recent quarters, rising hours worked have been the more prominent contributor.

Figure 2: Output per hour of pharmaceutical products and preparation manufacture, and components of output per hour growth (quarter on same quarter last year)

Figure 2: Output per hour of pharmaceutical products and preparation manufacture, and components of output per hour growth (quarter on same quarter last year)

Download chart

Where can I find out more about pharmaceutical industry statistics?

This story was created by Pete Lee, Michael Hardie and Rachel Lewis at ONS. The analysis was based on data from: Annual Business Survey, Labour Productivity, and Gross Domestic Product low level aggregates.  If you would like to find out more about pharmaceutical industry statistics, you can read any of the releases in the related links above. If you have any comments or suggestions, we would like to hear them. Please email us at: abs@ons.gsi.gov.uk

Notes

1. Standard Industrial Classification 2007 (SIC07) division 21: Manufacture of basic pharmaceutical product and pharmaceutical preparations.

2. GVA is a measure net output, often simply referred to as ‘output. It is equal to gross output minus ‘intermediate consumption’. Intermediate consumption includes the goods and services used up in the process of producing the output (though not including labour costs). For more information on how GVA is calculated, see A Comparison between Annual Business Survey and National Accounts Measures of Value Added. All measures of GVA used in this story, including references to ‘output’, refer to ‘real’ GVA – i.e. adjusted to remove the effect of inflation.

3. Adjusted for price changes over time.

4. Chained volume measure.

5. Productivity, or more specifically labour productivity, refers to the average amount of output produced by one unit of labour. The unit of labour used in this story is hours worked, meaning output per hour is the measure of productivity used. The measure of productivity for pharmaceutical manufacture and preparation used in this story is not seasonally adjusted, so particular care should be taken when comparing quarters representing different times of year

 

Categories: Economy, National Accounts, National Income, Expenditure and Output
Content from the Office for National Statistics.
© Crown Copyright applies unless otherwise stated.