15 July 2013


Prospects for the world's manufacturing landscape are uncertain and developed countries are in for a prolonged period of low growth, says a new report, The World's Industrial Transformation.

The financial crisis and recession mean a long period of tepid growth is likely in the West, whilst developing countries such as China – now the world’s largest manufacturer - and India, should continue to grow at a healthy rate, partly owing to the emergence of a huge middle class that will need consumer goods and vast infrastructure investments.

The World's Industrial Transformation assesses which industries will change the global manufacturing landscape and drive future growth. The report examines four key sectors: aircraft, automotive, pharmaceutical and retailing. From the aircraft and automotive studies comes a clear recommendation that governments should support free trade and resist protectionist pressures.

Global agreements such as the stalled Doha round now seem to be beyond the reach of the international community but fresh attempts to promote international trade and investment, including regional initiatives such as the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership, should be strongly supported.

Key findings include:

  • The aircraft industry should grow quickly, driven by growing demand for air travel. Production will continue to be dominated by the United States and Europe, at least until 2020, with smaller contributions from Brazil (Embraer) and Canada (Bombardier). But China is rapidly building its own aircraft industry. It will challenge the Boeing/Airbus duopoly by 2020 and will be an important player by 2030, based on its huge domestic demand for aircraft.  
  • The world market for cars will continue to shift in favour of developing countries. The developed world is saturated, and growth there will come from technical advances in fuel use and in safety. By contrast, car ownership in the developing world will soar, and production will increasingly be concentrated in these markets.  Most dramatically, in the automotive sector, China produced more vehicles in 2011 than the United States and Japan combined. 
  • Pharmaceuticals demand will be buoyant, though there will be some brake on supply in countries where healthcare is public and government budgets remain under pressure. The other factor that will have a big impact on this industry is technology. Recent basic scientific breakthroughs in genomics should produce an increasing flow of new drugs over the next 10 years. These developments may lead to cheaper drugs but the impact is not likely to be felt much before 2020.
  • Retailing is very well developed in the West and is not expected to drive growth there. It faces a continuing revolution as e-commerce separates product selection from purchase and expands its share at the expense of physical shops and established retailing companies. Internet purchasing also facilitates closer relations between producers and consumers, who may ignore retailers altogether. 


Notes to Editors

Read the report The World's Industrial Transformation
Authors: Donald Hepburn, Andrew Black, Matteo Ferrazzi, Andrea Goldstein, David Hurst, Steven McGuire and Michael Owen.

Launch Event: Monday 15 July, 12:00 - 14:00, Chatham House