Navigating Challenges: The Resilient Role of Manufacturing in the UK's Evolving Economy
The United Kingdom's employment landscape is predominantly service-oriented, with the services sector employing a significant majority of the workforce. In 2023, approximately 81.25% of UK workers were engaged in the services sector, 17.77% in manufacturing, and 0.99% in agriculture.
Services Sector
The United Kingdom's services sector is a cornerstone of its economy, encompassing a diverse array of industries such as retail, hospitality, finance, education, and healthcare. This sector's prominence underscores the UK's evolution into a knowledge-based economy, prioritizing professional services and technological innovation.
Economic Contribution and Employment
In 2023, the services sector accounted for 80% of the UK's total gross value added (GVA), highlighting its substantial role in economic output. This marks a significant increase from 70% in 1990, illustrating the sector's expanding influence over the past decades. In terms of employment, services industries provided jobs for 84.8% of the UK workforce, with health and social care (13.5%) and retail and wholesale (12.8%) being the largest employers within the sector.
Financial and Professional Services
A pivotal component of the services sector is financial and related professional services. In 2023, this industry contributed approximately £243.7 billion to the UK's real GVA, representing around 12% of economic output. Employing over 2.4 million people in 2022—nearly one in every 13 employed individuals—this sector boasts productivity nearly 2.5 times higher than the whole-economy average. Notably, two-thirds of these jobs are based outside London, in cities such as Birmingham, Edinburgh, and Manchester, demonstrating the sector's nationwide impact.
Regional Variations
Regional analysis reveals variations in the services sector's contribution. London stands out, with services accounting for 93% of the city's economic output in 2022, compared to the UK average of 81%. This reflects London's status as a global hub for finance, IT, communications, and professional services. Conversely, regions such as the North of England, Yorkshire and the Humber, the Midlands, and Wales have relatively smaller services sectors, though they still comprise over 70% of output in each area.
Growth Amidst Global Challenges
Despite global economic uncertainties, the UK's services sector has demonstrated resilience and growth. In March 2025, the S&P Purchasing Managers' Index (PMI) for services reached a seven-month high of 53.2, indicating expansion and providing a positive outlook for the economy.
Manufacturing Sector
The United Kingdom's manufacturing sector, despite facing challenges over the decades, remains a vital component of the nation's economy. In the fourth quarter of 2024, approximately 2.7 million individuals were employed in manufacturing, reflecting its significant role in the labor market. Statista
Economic Contribution
In 2023, the manufacturing sector contributed £224 billion to the UK's economy, elevating the country from ninth to eighth place in global manufacturing rankings. This sector accounted for 9.1% of the UK's value added and was responsible for 89% of goods exports and 48% of business expenditure on research and development (BERD), underscoring its pivotal role in innovation and trade. Make UKCambridge Industrial Innovation Policy
Regional Impact
Regionally, the North West stands out as a manufacturing hub, generating £28.2 billion in output and employing 314,000 people. Manufacturing in this area represents nearly 15% of its economic output and 8% of regional employment, highlighting the sector's localized significance. Make UK
Challenges and Outlook
Despite its contributions, the manufacturing sector has faced recent challenges. In December 2024, the S&P Global UK Manufacturing Purchasing Managers' Index (PMI) declined to 47.0, indicating contraction due to factors like higher taxes, weak foreign demand, and rising cost pressures. Additionally, in the fourth quarter of 2023, manufacturing output decreased by 0.9% compared to the previous quarter, reflecting broader economic pressures. ReutersOffice for National Statistics
Agriculture Sector
Agriculture employs a small fraction of the workforce, accounting for 0.99% in 2023. However, it plays a crucial role in food production and rural employment, with advancements in technology enhancing productivity and sustainability within the sector.
Recent Trends and Developments
The UK's labor market has experienced notable shifts in recent years. For instance, the Department for Culture, Media and Sport (DCMS) sectors, excluding tourism, reported a total of 4.0 million filled jobs in 2023, representing 11.8% of all filled jobs. This marks an increase of 403,000 jobs compared to 2019, indicating growth in creative industries, civil society, and related fields. GOV.UK
Conversely, the overall hiring rate in the UK has declined more sharply than in other major economies. Job postings were 13% below pre-pandemic levels and 23% lower than the previous year, particularly affecting the tech and professional sectors. Despite this, the unemployment rate remained low at 4.3%, with wage growth for new hires at 6.7% as of October. Financial Times
Additionally, policy changes such as the increase in national insurance contributions from 13.8% to 15% have impacted employment growth. This tax hike has led to a decline in hiring intentions, especially among small and medium-sized businesses, resulting in hiring freezes and layoffs. Latest news & breaking headlines
Overall, while the services sector continues to dominate the UK's employment landscape, ongoing economic and policy developments are influencing employment trends across various sectors.
