No plant, no problem? Factoryless manufacturing, economic measurement and national manufacturing policies

Abstract

‘Factoryless manufacturing’ describes the strategic decision by businesses to contract out part or all of their production, sometimes overseas. Although it has become widespread in some sectors of manufacturing, the phenomenon is not captured by existing economic statistics. This implies that the decline of manufacturing, often a focus of policy, may be overstated, while trade statistics fail to reflect globalized production. We present web-scraped evidence on the extent of factoryless manufacturing in the UK, finding that firms in sectors such as chemicals and pharmaceuticals are much more likely to use contract manufacturing, whereas in the US it is more prevalent within electronics. We also present case studies highlighting that firms can both use and provide contract manufacturing services. The limitations of the statistics imply that governments may believe their manufacturing sectors to be smaller than is the case and at the same time be unaware of the globalized character of much of that manufacturing production, adversely affecting their economic policies.

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