Britain Considers a Second Industrial Revolution

As London seeks to end the financial crisis, some Brits want to go back to how things used to be—way back. Last year, then–business secretary John Hutton pinpointed industrial manufacturing as "central" to recovery, an idea echoed in March by Tory leader David Cameron, whose party has long been inimical to manufacturers. Their support has delighted industry leaders, who say that producing more goods can rescue the very country that begat the Industrial Revolution.

It's an unusual strategy, given that most of the countries that make their big money on industrial exports (China, Germany) are trying to move away from that model, which leaves them vulnerable to falling consumer demand. But Britain's renewed interest reflects a consensus that the U.K.'s over-reliance on financial services is now hurting it. Since the 1970s, Britain has steadily shifted away from factory output; by 2007, business and financial services accounted for more than 30 percent of GDP, compared with just 13 percent for manufacturing.

Proponents of reindustrialization hope that the U.K. can take advantage of its high-value sectors like aerospace engineering, as well as the sharp fall in sterling, to drive up exports. Yet that strategy hasn't worked for Germany, where output is down 3.3 percent more than in the U.K. owing to its emphasis on capital goods. And British manufacturing is expected to lose 140,000 jobs this year as orders slow. The second Industrial Revolution may never materialize.