Manufacturing, a cornerstone of economic growth and development, has undergone profound changes in recent decades, reshaping employment patterns, trade dynamics and regional disparities. This report offers new insights into and analysis of the structure of manufacturing in rural regions across OECD countries, providing guidance and recommendations on how these regions and their manufacturing sectors need to continue to adapt to these and future changes.

Over the past 2 decades, manufacturing employment across OECD economies has declined, amounting to a loss of 8.6 million jobs between 2000 and 2018. Several factors explain this trend, including outsourcing, globalisation and productivity-enhancing automation. These have led to increasing tertiarisation in OECD economies, particularly in higher income economies, with services now accounting for around 70% of gross value added (GVA).

This chapter describes the context of why manufacturing activities are still important in rural regions. While metropolitan regions across OECD countries have benefitted from agglomeration effects in the service sector, manufacturing remains still a key driver of competitiveness in many OECD rural regions. The chapter also highlights the diversity of manufacturing activities in rural regions. These range from large scale multinational enterprises participating in complex global value chains, small businesses participating in primary and other activities, artisans passing down generational skills and cutting-edge innovators using advanced manufacturing techniques.

This chapter outlines the manufacturing landscape of OECD rural regions looking at trends in the manufacturing sector and the forces shaping these trends through regional data analysis spanning two decades. While many regions have experienced large falls in manufacturing employment over the last two decades, the sector remains a significant employer and supports upstream service sector jobs and jobs in other sectors. Manufacturing is also an important driver of gross value added across the OECD, yet rural manufacturing trends come in different forms across OECD countries and amongst regions, reflecting different local conditions, amenities, and areas of comparative advantage.

This chapter examines key factors driving manufacturing to particular locations and classifies them into six broad groups that include i) natural resources ii) accessibility and infrastructure iii) input suppliers, markets, and competitors iv) skills and knowledge v) innovation, and vi) social capital. Analysis in this chapter reveals that there is no single determining factor that drives manufacturing performance in rural regions, highlighting the relevance of tailored, place-based approaches to support manufacturing activities. The chapter sets the scene for the following chapter which discusses how many of these are being influenced over time.

This chapter examines challenges and opportunities that megatrends of globalisation, digitalisation, demographic and climate changes bring to rural manufacturing activities. Utilising more granular regional and sectoral data in 14 OECD countries, this chapter allows for deeper dives into the evolution of megatrends over time in the specific context of rural manufacturing. The chapter identifies some policy takeaways to help rural regions reap the benefits of each trend.

This chapter provides perspectives on the development of rural manufacturing from a future-focused lens. It uses knowledge from a strategic foresight and futures literacy workshops held with policy experts in January and June 2022 that mapped rural developments against five megatrends i) global warming and biodiversity loss ii) population decline iii) digitisation iv) globalisation, and v) declining trust in government. The chapter explores the means in which altering the framing of perceptions can expand the possibilities for policy development. Specifically, it points to possibilities for the development of manufacturing in rural regions from improvements and worsening of each megatrend and provides policy direction for policy experimentation in light of these opportunities.

This chapter summarises the key findings from 12 regional cases studies conducted over the course of this project across four OECD countries that include France, Germany, Italy and Slovenia. The case studies cover a diverse range of rural areas (non-metropolitan close to a medium-sized city, non-metropolitan close to the small city, and remote rural regions) as well as various types of manufacturing activities. These case studies deliver a practical deep dive into how manufacturing can evolve as a continued source of regional development, particularly with the right strategies, resources and co-ordination across policy areas. The chapter takes stock of some of the main recommendations identified in the case studies.