Monthly note on industrial policy indicators and analysis
SPECIAL FEATURE: MANUFACTURING AND BUSINESS SERVICES
Manufacturing production recovers in September, uncertainty for the near future continues
Overall economic conditions continue to deteriorate and the recovery still seems a long way off. Expectations are no longer sufficient to drive investments, and investment rate forecasts are falling precisely when other world regions are renewing and upgrading their industrial assets. Industrial production grew, both in September and October, signalling that the fall experienced in August was only temporary.
This renewal gives them an advantage in adapting to the new industrial landscape being laid down in the dawn of the 4th industrial revolution. Unless European industry catches up in the short run, it runs a significant risk of losing its leading role in global value chains and value added distribution.
Manufacturing and business services integration
A study commissioned by DG ENTR on “The relation between industry and services in terms of productivity and value creation” looked into the links between manufacturing and services. Results of the study indicate an on-going trend towards further agglomeration and specialisation of both industry and business services at Member State level. This evolution increases the imperative of promoting cross border trade and the internal market in goods and services. This would realise the potential from improved competition and increased trade in business services.
The service content of EU manufacturing goods increased by 3 percentage points between 1995 and 2011 and has reached close to 40% of the value added in the manufacturing value chain. This indicates a further “servitisation” of the industry. Services are also very dependent on industry, through investments in capital goods, but this is not captured by the statistics.
In most Member States imported services represent less than 10% of total business services input to manufacturing. The reasons are: a) the existence of barriers created by differences in the implementation of European legislation (e.g. Service Directive) and National legislation and standards, and b) low cross-border tradability of many services, often produced and delivered locally. For the internal market for services, rules of establishment and entry of are obviously essential.