...is that really true? The UK is currently home to Europe's largest civil engineering project (Crossrail), my hometown produces Trent jet engines and designs wings for all Airbus aircraft. And there's the cars that are both manufactured (BMW, Honda, Toyota, Nissan, etc) and designed (Jaguar, Aston Martin, Land Rover, McLaren...) here.
The engineering we do has changed, and maybe there is less of it than there was forty years ago, but it's a bit hyperbolic to say we simply "don't do" actual engineering.
On an unrelated note, some of the social issues we complain about these days seem to be a direct consequence of the off-shoring of manual labour.
"A 2009 report from PricewaterhouseCoopers, citing data from the UK Office for National Statistics, stated that manufacturing output (gross value added at 2007 prices) has increased in 35 of the 50 years between 1958 and 2007, and output in 2007 was at record levels, approximately double that in 1958."
Our problem is that we got too good at manufacturing!