George Osborne’s recent warning of an imbalanced economic recovery has reawakened concerns about the fundamental problems besetting the nation’s manufacturing sector. They reflect a long-term trend of British industrial decline that successive governments have failed to address, and which growing reliance on the service sector for employment and incomes has failed to rectify.

With this in mind, it will be of interest to see how Osborne’s comments feature in the upcoming Budget on 19 March. Despite the rapid growth of the service sector, manufacturing is important to the so-called “industrial countries” for several reasons. First, it is a leading generator of the middle-class incomes and jobs that sustain the entire economy, and remains an important employment pathway for young adults. Furthermore, manufacturers depend on an entire web of supporting economic activity, creating additional jobs, incomes, taxes, and profits in many different sectors.

As well as generating exports and earnings from abroad, manufacturing is also an important source of any nation’s R&D and innovation. The sector makes long-term investments, ensuring that economies do not become too myopic - a potential danger when a nation relies too heavily on financial markets.

The largest manufacturing sector in Britain is food and drink. Accordingly, it makes sense for policymakers to look at opportunities for future growth.

” Every pound of value created by Coke supports an extra £8”

The specific benefits of manufacturing are exemplified by the surprising case of Coca-Cola in GB - surprising in that few people are aware how British that company actually is and how much it contributes to the industrial base. Research I led recently on the socioeconomic impact of Coca-Cola in Britain demonstrates why competitive companies such as this are essential to sustained growth.

Our assessment revealed that every pound of value created by Coca-Cola supports an additional £8 elsewhere in Britain, bringing nearly £2.4bn annually to the British economy. With some 4,000 people directly employed, Coca-Cola supports a further 34,500 high-quality skilled British jobs through its broader value chain, from local suppliers and producers to transport, hospitality and retail workers.

Food and drink manufacturing presents a real interconnectivity between businesses with the common thread being the association and sale of world-class products, all made in Britain.

There are very clear benefits to having a world-class manufacturing supply chain operating in GB, and for this chain to remain strong, businesses must be encouraged to continually invest. Coca-Cola is injecting £52m into its operations in GB in 2014, reaching a total of £227m of investment since 2011.

This is just one example, but it demonstrates how the continued manufacturing of products in Britain not only benefits these companies directly but brings significant value to a broad range of people across the country - now and into the future.

Professor Ethan B Kapstein is a visiting fellow, Center for Global Development (Washington DC) and associate partner, Steward Redqueen Consulting

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