The current crisis stemming from the financial markets not the real economy, in the context of intense pressure from globalisation and environmental challenges, demands a fundamental change in Europe’s social and economic policy framework. It is not too late to act and there are opportunities for industrial workers in these challenges.

Under the threat of recession and growing unemployment, we urgently need coordinated and sustainable social, economic and industrial policies to ensure public confidence in the economy and stimulate economic demand, protecting jobs in the real economy.

Manufacturing underpins economic growth and wealth creation in the whole EU economy

Manufacturing (excluding construction) is directly responsible for 20% of GDP in the EU-27, and an equal proportion in the euro-zone. Industrial goods account for the lion’s share of intra-EU trade (approx. 80%). Production growth in manufacturing industries has underpinned economic growth in Europe.

The weight of manufacturing in the economy is heavier in terms of value added than employment in 19 of the 27 Member States, which indicates relatively high labour productivity (value added per person employed) compared with the economic average. (Source: Eurostat Statistics in Focus 37/2008)

Facing intense competition on the global markets, European manufacturing has long substantially contributed to the equilibrium of Europe’s external trade balance. Industrial goods represent three quarters of Europe’s exports, and the importance of industrial goods such as machinery and vehicles and pharmaceuticals is particularly noteworthy.

Manufacturing industries are significant employment creators

Industry employs close to 40 million European workers directly. Moreover, manufacturing provides employment-multipliers and drives demand for industry-related services: every industrial job creates 2 extra jobs in the service sectors.

The worsening economic climate is reflected in the Dublin-based ERM’s dataset where in the two most recent quarters, the number of announced job losses arising from restructuring outnumbered the number of jobs created by nearly two to one, with the car sector hit harder than other sectors.

With social Europe all but stalled, restructuring has been taking place in a virtual social vacuum at EU level. Adapting to economic and climate change necessitates a comprehensive approach to new skills and competences.

Manufacturing sectors are the primary source of innovation and technological progress

The only way for Europe to foster economic growth, to maintain its industrial base, while ensuring social progress and promoting environmental sustainability, is through technological and social innovation. Innovation is the primary driver of a successful and sustainable industrial policy. A strong lead in R&D and innovation is Europe’s key competitive advantage and of central importance in finding solutions to social and environmental challenges.

There have been significant increases in industrial R&D in recent years, which have had a direct impact on R&D intensity rates in European companies (R&D expenditure as % of GDP). Industry represents 81% of private sector R&D in Europe. In 2008, three EU companies are in the top 10 R&D ranking: Nokia, becoming the biggest EU R&D investor (partly through acquisitions), investing €5.28 billion, followed by Volkswagen with €4.92 billion and Daimler with €4.89 billion.

Despite this, overall spending on R&D remains below the ambitious Barcelona goals of 3% GDP spending, at 1.84% of GDP in 2006, and trailing international competitors in the US and Japan (source: Eurostat).

The impact of the current economic crisis is already being felt in company commitments to R&D spending, especially in the automobile companies specialising in smaller models and the components companies where margins have been tighter for a number of years and orders are substantially down due to the collapse in demand in Europe.

Industry faces significant challenges and changes

Industry remains vitally important for a successful European economy to create jobs, to boost productivity, to fuel innovation and to raise social standards. There is no doubt that an active industrial policy, able to tackle the radical transformation industry is undergoing and to mobilise the economy and society around a sustainable industry, will contribute to maintaining and developing a world class industrial activities within Europe and will be able to deliver on its social and environmental objectives.

Faced with the fall-out of the worldwide financial meltdown, a forceful industrial policy is needed to prevent European industry to collapse. Industrial policy has to be more than just helping companies to adapt to market laws and global competition.

Manufacturing industries are at the coal-face of pressure on fuel and raw materials. High commodity and fuel prices are a bitter reality. Pressure on raw materials as a result of worldwide industrialisation is likely to remain and to significantly change the industrial scenery.

Energy costs far outweigh labour costs in many manufacturing sectors. Energy policy and industrial policy are intricately linked and should complement each other in order to enforce the transition to a new industrial paradigm based on low carbon and eco-efficient production.

EU trade and industrial policy has to respond better to the emergence of global supply chains and the entrance of new, large and open economies like China, India, Brazil and Russia to the world markets.