I seem to recall that, measured by value in real terms, the UK does more engineering than ever. Just because it's a smaller part of the economy and doesn't support as many unskilled people doesn't mean it's not happening.
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.
The UK does (at least before the recent recession) more manufacturing that ever - it's just that the whole process has become super efficient that it doesn't employ very many people:
"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."
I don't know if that is the case in the UK, but it is the case in US vs. Chinese manufacturing. The US output never went down and more things are produced in the US than ever - it just takes fewer people to do it, and it isn't the kinds of things that are currently visible to most consumers.