BIS Review 70/2006  1  Globalisation and UK manufacturing Looking wider than the UK, one of the most striking changes of the last few years has been the integration of China, India and countries from the former Soviet Union into world markets and the sharper competition that is bringing first into goods markets and, increasingly, into services also. The EEF report, ‘Where now for manufacturing?’, published at the end of 2004, highlighted the ‘huge increase in the importance of lower-cost countries as competitors’. Just under half of companies surveyed by the EEF saw China as the biggest competitive threat to their activities and nearly 60% identified China as a major competitive threat over the next five years. That was sharply up on the equivalent figure of 18% in 2001, illustrating that the change was occurring faster than companies then foresaw. One of the consequences of the globalisation of production is that a reduced proportion of output in the developed economies is in manufacturing. This is true of the UK, where manufacturing accounts for less than 15% of GDP, but also of France, Spain, the Netherlands and US (Chart 2). 4 Some have felt the blunt end of this competition from Asia. But the emergence of China and others has also created opportunities. It has encouraged UK manufacturers to specialise in those products for which they have a comparative advantage over their competitors, prompting a change in structure and focus of the UK manufacturing sector.
Underlying this principle is also the recognition that we cannot predict how the world will evolve. We must be open to and prepared for the unexpected. We have seen how sudden events, such as the Global Financial Crisis and more recently the pandemic can lead to a fall in the value of the GPFG. Looking ahead, our management model may face new challenges. Analysing different scenarios of possible outcomes is certainly useful, but making major strategic changes based on a particular vision of the future is still a risky undertaking. Broad diversification should continue to be a pillar of the strategy. CONCLUSION Nicolai Rygg delivered his final annual address on 12 February 1940. When the tradition was reinstated after the war, it was under a new governor. The time also represents an important turning point in Norwegian economic policy. The ideal of an independent central bank with decision-making authority over the instruments at its disposal had been abandoned. The Bank’s primary task was to carry out the Government’s decisions, and the policy rate was geared towards objectives other than low and stable inflation. It was to take forty years for the pendulum to swing back. In 1986, responsibility for setting the policy rate was returned to Norges Bank. The Bank was tasked with maintaining a fixed exchange rate. Again, the objective was price stability. 5 Hylland, A. (2005) "Statens reservefond 1904-1925. Et forsøk på å binde politisk handlefrihet?" [The State Reserve Fund 1904-1925. An attempt to restrain political freedom of action?].