(12 years, 12 months ago)
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Mr Deputy Speaker (Mr Nigel Evans)
I remind the House that there is a five-minute limit on Back-Bench contributions, but not for the first two speakers, or for the Minister and the shadow Minister.
Guy Opperman (Hexham) (Con)
I beg to move,
That this House has considered the matter of the future of manufacturing.
Manufacturing should be at the heart of any long-term plan for economic growth. It is a sleeping giant that, if revived, would become the backbone of a strong UK economy. It is entirely right that, five days before the autumn statement, we should have the opportunity to debate the subject in broad terms in the House. I thank the Backbench Business Committee and the House of Commons staff for their assistance in bringing this matter before the House and, in particular, I pay tribute to my co-sponsors, the hon. Member for Huddersfield (Mr Sheerman), my hon. Friend the Member for Warwick and Leamington (Chris White) and the hon. Member for Burnley (Gordon Birtwistle), who have adopted an all-party approach to this problem which affects us all.
It is well known that I used to be a jockey and a lawyer, so it is legitimate to ask how on earth I can have any credibility in speaking about manufacturing. All MPs do, because we all have small and medium-sized enterprises that make something in our constituencies. We all have credibility on this issue.
My family came to this country as immigrants. They were engineers, specialising in gears. In May 1924, in the depths of a very bad recession, they set up Opperman Gears in a basement in Albemarle way in Clerkenwell. It had four staff—my great-grandfather and his three sons—who worked in the basement on two lathes, three milling machines and a couple of tools. They had borrowed £110 from a distant relative to set up the business. It grew rapidly and by early 1939 it moved to Newbury, where my family set up a larger firm that was able to produce the parts for the Wellington bomber with its long-term partner, Vickers.
We do not run that company any more, but I should declare that I am a shareholder in the small manufacturing business run by my father and that my family members are involved in a number of different manufacturing businesses up and down the country. I should also make it clear that I resigned my directorship of the family business in 2009 and am not paid by it in any way.
I should also declare that I am a wholehearted supporter of my local manufacturing businesses in the north-east, notably Kilfrost, EGGER, SCA, Agma and others, and their financial support allowed the charitable functions I ran this summer in the constituency. I should declare an indirect link, in that a director of one of those firms made a contribution to my association.
I hope I am doing my bit to try to create jobs. I was the second Member of this House to employ an apprentice and I urge those Members who have not to do so. She is a young lady who works in my office in Hexham and who has been with me now for nearly a year, and is doing extremely well. Members of all parties can take on apprentices—it is allowed under the rules—and I urge them to do it.
The scale of the manufacturing deficit is huge. The nations that expanded post-war specialised in and pushed manufacturing. Those nations—Germany, Japan, Taiwan, Korea and China—knew what they were doing. Today, the services sector alone can prop up Britain no longer, and there is a strong argument for greater industrialisation and changing things. We have seen the demise of manufacturing—it accounted for 20% of gross domestic product in 1997 and now accounts for 11%—and there is a strong argument for specialising not just in high-tech industry but in other industries, which are often derogatively labelled “metal-bashing”. Their products are unassuming, even if they are created by some of the most precise machines on the planet.
My constituency is in Northumberland and my four biggest non-public sector employers are all manufacturers. The north-east might be the birthplace of ships and steel, but we have reinvented ourselves. I was pleased to see SCA recognised in the Government-backed “Made by Britain” awards, which were so ably organised by the hon. Member for Huddersfield. That company employs about 435 local people in Prudhoe, including 60 apprentices. It could not be doing any more to support its local community. It does not make glamorous, eye-catching products—or perhaps some people think it does—but it produces one in every five toilet rolls in this country, as well as vast quantities of paper towels. I am sure we all agree that those are essential products.
Guy Opperman
It is, indeed, flushed with success, as my hon. Friend so ably quips from the sidelines—as always, he is on the money. The wood pulp goes in at one end of the factory and paper products come out at the other. The machinery is highly technical; this is modern manufacturing in the modern age.
In this time of austerity, I am extremely proud that the north-east has a positive balance of trade and is the only region consistently to do so. We should trumpet the fact that the North East chamber of commerce is the only regional chamber of commerce in the country. It represents more than 4,000 businesses and covers more than 30% of the region’s work force. If I had to single out one local concern that it has highlighted to me from the multitude of things it would like to be done, it would be to urge the Minister to conduct the review that it is hoped will be undertaken of the planned carbon floor price and other climate change and energy-related matters.
How are we to address the manufacturing deficit? I have three main suggestions. First, we need a Minister for manufacturing. That is not to decry the efforts of the Minister with responsibility for business or the Business Secretary, both of whom are worthy men, or those of any parties in that Department. However, the fact remains that, according to the House of Commons Library, there has not been a Minister for manufacturing since 1945.
Gordon Birtwistle (Burnley) (LD)
In my constituency, I get a lot of requests from local manufacturing companies for advice on various issues, mainly in relation to exports and where to go for help with them. Does my hon. Friend agree that a Minister with responsibility specifically for manufacturing would be a major asset to the Government and the manufacturers of this country? Businesses would be able to go directly to the person who could give them the answer they required rather than having to go through myriad Departments. People get lost in that process—even Ministers sometimes, I imagine—and if we had someone who could be accessed directly and who reported directly to the Prime Minister, that would be a major asset to the Government.
Guy Opperman
I completely agree. To put it in the vernacular, we need a go-to guy who is the one person looking after manufacturing.
Guy Opperman
Of course, it could be a woman—I accept that entirely. I was using the term generically. Such a Minister could provide co-ordinated responses to the concerns of manufacturing businesses. Having such a Minister would send out a message that this really matters. I challenge anyone to say that that is not a good idea. It is something that successive Governments have consistently failed to do, and I do not blame previous Governments for that, but doing it would send out a positive message for the future.
The second issue I want to address is banking and the chronic deficit that every Member of the House must be facing in their constituency—a lack of bank financing for businesses. Every one of us, in every constituency surgery, will regularly have businesses coming to us and saying, “I cannot get the funding I need,” or “I cannot get the borrowing I used to have.” It is a chronic problem. Much good work is done by business angels and credit unions—those hon. Members who attended the debate on credit unions yesterday will know that very positive steps were discussed there—but when it comes to bank finance, the system of the main banks is clearly logjammed. What can we do about that?
Currently, to set up a bank one needs £110 million-worth of assets—of cash, effectively—or the Financial Services Authority will not allow it. If the FSA relaxed that rule or changed the figure to £10 million, for example, then prominent local businessmen or businesses in a local community could set up a local bank.
Traditionally, the problem has always been that banks go bust, as they did in the 1920s and ’30s, because they over-borrow and over-lend in effect. If there were a restriction such that they could not exceed the money held on deposit with the Bank of England, the only loss that could be sustained would be the funds in that bank. The effect would be true localism. Someone could set up the bank of Hexham—or, in the Minister’s case, the bank of Bognor—and that bank would be specifically focused on providing small and medium-sized enterprise lending to local businesses.
The Minister for Universities and Science (Mr David Willetts)
In my case, it might be the bank of Havant, rather than the bank of Bognor.
Guy Opperman
There could be competition throughout the region. That would not be difficult. Would it not be great if we had some competition among local banks?
Andrew Stephenson (Pendle) (Con)
In Pendle, a local businessman called David Fishwick is trying to do exactly what my hon. Friend suggests. He is trying to create his own bank to help small and medium-sized enterprises in Pendle and Burnley. The regulations are so detailed and engrossing that the FSA has refused to help him, despite his instructing high-flying lawyers. So far, it has even refused to meet him to discuss the creation of a bank that would directly help small and medium-sized manufacturers in Pendle and Burnley.
Lorely Burt (Solihull) (LD)
The hon. Gentleman has obviously excited a lot of interest with his suggestion. Will he consider the American model of community banks, which have stood the test of time and served their communities?
Guy Opperman
My hon. Friend anticipates my next move, which is to say that such matters are already road-tested in other jurisdictions in other countries. Sadly, the FSA is reluctant to change its regulatory system. I have heard other examples of its failing to meet individuals who want to provide local financing—something that would be immensely good for local communities and could provide a flexible approach. Instead of being stuck with a loan from Barclays, for example, people would have a much lower flexible interest rate and adopt a much more interesting way to recuperate their finances at a later stage when the company was in profit. Banking would be local. We all know what happens when we are approached by a constituent when a business is in trouble. The decisions in relation to such financing are made not in Hexham or Newcastle or even in the north-east, but in a place such as Nottingham or Leatherhead or, ultimately, in London. That must change.
Mike Weatherley (Hove) (Con)
Does my hon. Friend agree that the banks in his example would facilitate help for some of the failures in respect of the enterprise finance guarantee scheme? There are 4.8 million SMEs, but the Government are targeting only 6,000 of them with help through the EFG at the moment.
Guy Opperman
My proposal would provide an alternative way forward for the financing that those businesses clearly need. I suggest that the Minister take it back to the future Minister for manufacturing and the Treasury, with a view to trying to move forward. I am conscious of the time, so I will not take any further interventions.
My next suggestion is an industry bank. We could extend the remit of the existing green investment bank to form a general enterprise bank, for which there are successful models in Germany and the United States. The German KFW—a product of Germany’s social market tradition—and the US Small Business Administration industry bank are specialists in long-term lending to SMEs, and they are effectively financed by their Governments, with a bottom line of commercial viability and social benefit.
The blueprint also exists in this country. What is presently 3i, which is a FTSE 100 company, was originally the UK Industrial and Commercial Finance Corporation, which had tremendous success when it was set up. On practical realisation, given that we have quantitative easing, would it not be better, instead of investing all those sums in bank bonds, for some of that money to go into an industry bank, so that it would go directly to the people who need it most and who are creating the jobs and growth that we all want and need?
I must conclude my remarks. I urge the Government to have a more pro-business policy. Others will talk of what the Government are doing and the positive steps they are taking, but I put in a plea for flexibility. There are repeated examples in my constituency of viable and successful businesses being penalised heavily for being a day late with their tax returns, or three days late with their VAT returns. Effectively, the Government are penalising those who are working the hardest to create the jobs that we need. I thank the House for its indulgence.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
My sincere apologies for arriving two minutes after the hon. Member for Hexham (Guy Opperman) started his speech, but I think I caught the gist of it. We have worked harmoniously in calling for this debate, and I am delighted that we are having it today, and that it is cross-party. The group of us who are associated with the all-party manufacturing group are very pleased about that. My interest in manufacturing has obviously been a total failure. I have been in this House for more than 30 years, and I started the manufacturing group not long after I got into Parliament. Ever since the original all-party manufacturing group started, our manufacturing sector has shrunk and shrunk, under all parties and all Governments.
I represent Huddersfield, the cradle of the industrialisation of our country. Anyone who knows anything about my part of the world will know that even today it is a centre for the highest-quality wool textiles—super-100 and super-110 worsteds and so on. It is also very well known for its engineering, for David Brown gears and many other manufacturing companies, and of course for chemicals, which come from the traditional industry of dyestuffs for textiles.
Huddersfield became an industrial town because of power. The energy coming from the fast-flowing streams from the Pennines—the Holme, the Colne and the Calder—attracted industry because that is what made the mills work. That is how we got industry in our part of the world. It was a manufacturing town. There was not much in Huddersfield; there was the old village of Almondbury, which is a bit of a market town, and an ancient place, but the modern town is 18th and predominantly 19th century. Some 70% of the population would have been in the manufacturing sector. We are now down to about 8.9% manufacturing employment in the constituency, whereas 86.7% of employment is in various forms of services; 33% is in health, education, or working for the local authority. We are lucky to have a large and successful university, Huddersfield university, which is pre-eminent in engineering, textiles and design innovation, but that does not disguise the fact that we are pre-eminently in the service sector; 87% of employment is in services of various kinds. Unemployment is at its highest level since I became a Member of Parliament.
Gordon Birtwistle
Does the hon. Gentleman agree that the collapse of manufacturing in Huddersfield, which has gone from 30% or 40% of employment to 8%, is significant given that youth unemployment is so high? Huddersfield’s colleges are training young people to be engineers and manufacturers, yet the collapse of manufacturing industry means that the jobs are not there any more for them to do. Manufacturing has been overtaken by the services sector. Does he agree that it is high time we reversed the trend towards the services sector and returned to a buoyant manufacturing sector, which could employ those young people?
Mr Sheerman
I would go 90% of the way with the hon. Gentleman, but I would not accept the word “collapse”, because we still have a vibrant, though much smaller, manufacturing sector in engineering and chemicals. The textiles, engineering and chemicals industries are still there, and have very high productivity, but the capability now is such that we turn out an enormous amount of worsted in a crinkly shed—not one of the magnificent old stone mills—that is working 24/7. I think we underrate the productivity of some of those industries.
I do not want to make Members suicidal, but let us compare the decline of the UK’s manufacturing sector with that of other countries before moving on to something more cheerful. In Great Britain around 8.8% of employment is in manufacturing. Some figures for 2008 indicate 9.8% for manufacturing and 80.8% for services. Things are very similar, if not worse, in the United States, where employment in 2009 was 8.9% in manufacturing and 83.4% in services. The decline of manufacturing in the UK has very much gone in parallel with the experience of the US. By comparison, Germany still has 18.5% in manufacturing and 73% in services, and China has 27.8% in manufacturing and 53% in services.
I want to draw the House’s attention to the UK’s balance of trade, particularly the trade deficit with Germany, which last year was £16.8 billion, and with China, which was £21.6 billion. Whatever is happening today, and despite the depressing interview with Chancellor Merkel last night, which persuaded me that we are on the precipice of a world recession, we must remember that Germany has been very fortunate and that the eurozone has been very kind to German manufacturers over this period. The renminbi, the Chinese currency, which the Chinese conveniently manipulate to give their manufacturing exports every possible advantage, has done the same for China.
I want to dwell on the future and what kind of society we want. It seems to me that we want a wealth-creating society that produces the goods and wealth that can then be shared. Some of us disagree about the levels of individual and corporate taxation, but we all agree that we have to produce the wealth in order to share it, whatever way we choose to do so. I am concerned that if we do not do something in the manufacturing sector we will not have very much to share.
What do we depend on? A core element at every level of activity is the fact that in every facet of human experience success depends on the quality of the people who do the job, their skills and commitment and their desire to do a good job. In the 10 years that I chaired the Education and Skills Committee, that came home time and again. The history of our country is one of clever and skilled people with ingenuity, determination and a hunger to do something. We have had an amazing crop of entrepreneurs. At the heart of our manufacturing problem is the fact that too many people in our country who go to university do not go into manufacturing. I remember walking across the hallowed lawns of Magdalen college with the master some years ago. I asked him whether any of his graduates went into manufacturing or public service. He replied, “Oh no, they all go into the City.” If we continue to make the City and banking the profession of choice, we will be in even more trouble than we are in at the moment.
Mr Pat McFadden (Wolverhampton South East) (Lab)
My hon. Friend is drawing attention to the place of engineering in academic ambition. Does he welcome, as a corrective to the problem, the recently announced Queen Elizabeth prize for engineering, a £1 million prize overseen by the Royal Academy of Engineering, which is designed precisely to elevate the status of engineering, creativity and innovation for the next generation of young people?
Mr Sheerman
I agree absolutely, and was going to mention that. I was also going to mention the Aldridge Foundation and Rod Aldridge, who founded Capita. He puts a great deal of money into education and is absolutely obsessed with finding entrepreneurs and giving them a chance to become successful.
We must ensure that there is reward for the risk of being an entrepreneur. We have to be open about the fact that that is what we want to reward. No one on either side of the House should fail to realise that. I do not mind seeing entrepreneurs getting super salaries. I have a great deal of sympathy with some aspects of the 99% campaign, but I do not mind people earning a great deal of money and being rewarded if they are entrepreneurs who produce jobs and wealth. I am worried when people in pretty safe and comfortable jobs, who are never going to risk anything, get millions of pounds a year. That is what I do not like.
On skills and training, the STEM subjects are neglected in our country, and we need more young people to stay with science, technology, engineering and mathematics longer.
Tony Cunningham (Workington) (Lab)
Many engineering entrepreneurs, past and present, started out as apprentices, so does my hon. Friend agree that if we put more energy, resources, money and time into apprenticeships we might see more entrepreneurs?
Mr Sheerman
I absolutely agree, and I will come on to that issue.
The slight disagreement between me and the Secretary of State for Education has occurred because I believe that young people who are not very academic but quite good at practical subjects will lose out on an opportunity if we remove design and technology as an option, focus on the more rarefied academic subjects and push the more hands-on subjects to one side.
After the Tomlinson report we lost diplomas, and that was the fault of the Blair Government, but the role of our universities is one thing that we can say is brilliant. If it was not for our universities, I would despair. They are increasingly working with entrepreneurs and the manufacturing hinterland, and that must be rewarded. We need more links between universities and further education colleges, of which there are about 450 in this country, and they really need to work much more closely, so that they turn out the young people that local industry needs. We should not pretend that all apprenticeships are three-year courses in engineering, because they are not; the average length of an apprenticeship is one year to 15 months, but they are not good enough; they are not proper apprenticeships.
On design, anybody who wants to know or who cares about the creative industries should look at Sir George Cox’s review of them and their relationship with enterprise, innovation and manufacturing. If we were to ask him, “What is the one thing that could transform this country’s manufacturing success and wealth creation?” he would tell us, “It’s the supply chain and how this country and its Departments procure. At the very heart of making a great change, it’s procurement that will do it.”
I could have covered other things today, but I finish on this point. In this country, we are still pussyfooting around competition. I have grown up to be a free trader, with the belief that we are a trading nation and should not have any barriers to trade, but I am changing my mind. I do not believe that this country, at this moment in time, with the imbalance in exports and imports between ourselves and Germany and China, can possibly accept the situation for much longer. Something pretty dramatic has to be done, especially when research increasingly shows that China, that wonderful, not very democratic industrial nation that is growing very fast every year, conducts a form of economic warfare against any area where it feels there is competition.
Let us look at the way in which the Chinese seek raw materials, resources, minerals and rare earths. An expert from a university told me yesterday, “If you want to know who’s going to move into Afghanistan in 2015, it will be the Chinese, because Afghanistan has more of the rare earths that China wants than anywhere else.” The Chinese will be there in 2015, as they already are in Africa and throughout the world, and they are also manipulating currencies and targeting specific industries in a way that we have only just begun to comprehend.
So there is economic warfare, and it is about time that the Treasury, with other Ministries, was conscious of this: manufacturing matters in this country. We need skills and entrepreneurs, but we have to have fair competition with competing nations.
Mr Deputy Speaker (Mr Nigel Evans)
Order. As we are approaching the festive season, I will play an early Father Christmas and set the time limit at 10 minutes.
Graham Evans (Weaver Vale) (Con)
I congratulate my hon. Friend the Member for Hexham (Guy Opperman) on securing the debate. Apart from a brief spell stacking shelves in my local Co-op in Poynton, I have worked in the manufacturing industry for my entire career. Interestingly, my first manufacturing job as a young man was working for BAE Systems on the mark 3 airborne early warning Nimrods. After a lot of taxpayers’ money, that was rightly cancelled because it was over budget and out of date and did not work.
When Britain was described as the workshop of the world nearly a century and a half ago in 1870, the UK accounted for almost half—46%—of the world’s manufacturing output. Today, that title has been bestowed on China, which produced a fifth of the world’s manufactured trade in 2007. The term seems to have lost some of its meaning over time, as has the notion of Britain as an industrial nation.
Everyone appears to believe that the UK is doing fine when it comes to manufacturing, citing the fact that we are the fifth largest manufacturer in the world in terms of value of output. That attitude has bred complacency and allowed successive Governments to believe that they are doing enough to maintain that position. However, that belies the truth. If we measure manufacturing in terms of per capita value added, we realise that Britain is only around 12th in the international league tables, and suddenly the picture changes dramatically.
It is clear that if we are to rebalance our economy, much more must be done to push us up the rankings. That means providing support for all forms of manufacturing, rather than just the high-tech sectors that seem to be so fashionable at the moment. It has been calculated that those sectors make up only 14% of British manufacturing and it has been argued that the support for manufacturing should be based on value, not the complexity of the product. For example, the UK still produces basic metal turbine blades, but they are cut by some of the most precise machines on the planet. The product is simple but very high value, thanks to the advanced production process.
There is no question but that such a shift must take place. The financial crisis made most people aware that the UK cannot rely on the financial services trade surplus to prop up the industrial trade deficit. However, it is less well known that, according to the Office for National Statistics, even the financial sector’s maximum export volume of £55 billion in 2008 was eclipsed by manufacturing’s £195 billion of exports.
The problem is twofold. First, our manufacturing ability is only rivalled by our insatiable appetite for other people’s goods. That has led to the latest trade in goods deficit of almost £100 billion—a new record. Secondly, Britain has grown complacent. Our manufacturing output has remained constant for the past 13 years under Labour, which is a reduction of £3.5 billion per annum in real terms.
Where did it all go wrong for UK industry? Contrary to popular assumptions, although some deindustrialisation did occur under Margaret Thatcher, the bulk of the factory closures came later. Indeed, when Labour took office in 1997, manufacturing comprised exactly a fifth of the UK economy. By 2007, it had declined to an eighth. In comparison, under the whole of the Thatcher Administration, the decline was 3.3%. The loss of our manufacturing capabilities is a very recent concern, which should fill us with a certain level of optimism.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
So far, the debate has been conducted on a reasonable cross-party basis. However, given the fact that the hon. Gentleman has made a political assertion, can I point out that in the black country, at least four huge manufacturing employers—Round Oak steelworks, Patent Shaft steelworks, Bean Cars and Cannon—were closed during the Thatcher era? That had a devastating impact on the level of employment in the black country.
Graham Evans
I am grateful for the hon. Gentleman’s intervention. At the beginning of my speech, I made the point that all Governments of all political persuasions have contributed to the overall decline. I take on board the closures in his constituency. All Governments need to learn the lessons of the past, but that does not mean that we should underestimate the problem.
Let us consider energy-intensive manufacturing sectors, which include the chemical, steel, glass and paper production industries among others. The chemical industry is of particular importance in my constituency, where Tata and INEOS Chlor are still major employers in Northwich and Runcorn. According to Waters Wye Consulting, policies such as the EU’s emissions trading scheme and the unilateral carbon price floor mean that the average energy-intensive company’s energy bill will rise from £3 million now to £17 million in 2020—an untenable level for the majority of these firms, which simply cannot afford to continue production in the UK. Proponents of these policies argue that energy-intensive sectors account for only 1% of GDP and so do not matter. If we quantify that figure, it equates to a potential loss to the UK economy of £15 billion and 290,000 jobs. More widely, the Royal Society of Chemistry claims that £220 billion of GDP and 5.1 million jobs are partly reliant on UK chemical research alone. Clearly, the visible threat to UK manufacturing is only the tip of the iceberg, but the problem is that most people do not realise that.
British industrial decline, relatively speaking, is in sharp contrast to the experiences of our neighbours—in particular, Germany. German long-term support for manufacturing means that it now possesses the economic clout to dominate Europe. Given the UK’s and Germany’s widely different starting positions 60 years ago, it is clear that it has done something that we have not, and that something is valuing industry. From post-war restructuring to reunification, Germany has always recognised that manufacturing was the backbone of its economy and therefore never enacted policies that would endanger it. Indeed, political infrastructures were set up to nurture industry, especially mittelstand—or, as we refer to them, small and medium-sized companies or SMEs. Foremost among those tools stands KfW, the state-backed bank that ensures that mittelstand can access funding even when the commercial banks are unwilling to lend. The value of such an institution was seen in the financial crisis. According to its accounts, in 2010 KfW financed a record €28.5 billion for SMEs, amounting to approximately 94% of all its commitments for the year. Without KfW, the potential for many extra jobs and exports would have never been realised for Germany.
It is hard to understand how far the value of German industry goes. Youngsters are encouraged from an early age to appreciate the importance of making things.
Gavin Williamson (South Staffordshire) (Con)
Does my hon. Friend agree that one of the key elements of Germany’s success is its investment in research and development? We need to be encouraging that. Jaguar Land Rover is building a new factory in my constituency and investing in R and D, and the Government could go a long way towards helping that by reviewing R and D tax credits, which the Treasury is considering at the moment.
Graham Evans
I agree with my hon. Friend. We have a reputation for very good, world-beating research and development, but it goes beyond that—when we have discovered these things, we still have to ensure that we make them in this country.
The Germans try to ensure that their young people appreciate manufacturing. Eliciting such a response from British children, compared with their counterparts in Germany, is increasingly difficult as they grow up. Initial curiosity about industrial work might be dismissed as selling themselves short by parents and teachers, and by the time the most able leave school, university is the only option, with apprenticeships considered by some to be second rate. The closest many of the next generation get to manufacturing is printing off a computer document. Little wonder that youth unemployment hit 1 million last week; many do not have the skills needed by manufacturers, thus further encouraging those manufacturers to relocate their businesses elsewhere, to the increasing detriment of British growth. As I have repeatedly said in this Chamber, we need to educate our children in a manner that will enable them to become the engineers, scientists and entrepreneurs that this country needs to pay its way in the world.
With the average age of those in industrial employment at 40 and rising—50 in some sectors, such as chemicals—drastic action is required. British manufacturing is at a crossroads. It can grow, bringing jobs to those who need them and contributing to reducing the deficit, or it can decline further, with valuable businesses permanently lost. There is reason to believe that the former positive outcome is more likely if we commit to making it happen. The Government have made a strong start. That this debate is happening is hugely positive and shows that we recognise the seriousness of the problem. The solutions that we need involve major changes both culturally, in widening our appreciation for manufacturing, and practically, in creating a more positive environment for industry. Let us make it in Britain. Let us make Britain great again.
Mr Pat McFadden (Wolverhampton South East) (Lab)
I have taken part in a number of debates on this matter over the years, including as a Minister in the previous Government and as an Opposition spokesman after the election. Such debates often follow a similar pattern. Labour Members talk about the great wave of industrial closures that happened in the 1980s. We had a flavour of that a minute or two ago. Government Members are tempted to say that manufacturing declined as a proportion of GDP under the Labour Government. It all gets a bit familiar. Whatever the rights and wrongs of those arguments, they are united by two things. First, they tend to look in the rear-view mirror. Secondly, they take little account of the huge wave of globalisation and the enormous technological advances of the past 20 years.
Nobody can underestimate the importance to every developed economy, including ours, of the opening up of China as the factory of the world. To try to pin that on any single Government is to miss the point. No country is immune from its effects. Whatever product one makes, the chances are that it takes fewer people to make it today than it would have taken 20 years ago. It takes fewer people and fewer person hours to make a car today than it did 20 years ago. It is therefore not surprising that the number of people employed in these activities has declined.
It is good that this debate is focused on the future of manufacturing. We should avoid the rear-view mirror stuff that sometimes characterises these debates if we can. Any honest debate about the future of manufacturing has to begin by acknowledging the power and reach of globalisation and the power of technology, rather than pressing the rewind button or taking us on a nostalgic tour of the past.
Tony Cunningham
There is a company in my constituency called New Balance, which is the only running shoe manufacturer in the United Kingdom. It sells its running shoes to China. It does that because of the quality of the product. Is that not the way to compete?
Mr McFadden
That is a good example. I know that my hon. Friend is a keen runner. In my more conscientious days, I have also done some running. New Balance is an excellent product. He shows that globalisation is a two-way street, not a one-way street.
The emphasis on the past that sometimes characterises these debates can lead to an over-pessimistic discussion about decline and loss. Let us be honest: we make less than we used to, as is clearly shown by the figures. However, I also believe that we make more than we think and more than we sometimes give ourselves credit for. The point made by my hon. Friend the Member for Workington (Tony Cunningham) shows that, and there are other examples. We still make about 1.5 million cars a year, most of them for export. We have heard news today that Toyota has again chosen the UK as the base for a new model, which I understand will create up to 1,500 jobs. We also have a hugely successful pharmaceutical industry with a strong balance of trade surplus.
Although we had a debate earlier about British aerospace that centred on the loss of jobs, that sector as a whole is strong and is an important earner for us. Only this week, Goodrich, a company in the constituency of my hon. Friend the Member for Wolverhampton North East (Emma Reynolds), won a contract to maintain landing gear systems for the United States air force. That company has already taken on 200 people this year, and it aims to keep hiring in the period to come.
Valerie Vaz (Walsall South) (Lab)
I thank my right hon. Friend for giving way and the hon. Member for Warwick and Leamington (Chris White) for securing the debate.
May I bring the House’s attention to another success story, which is in my constituency? Chamberlin and Hill has actually won contracts back from China for making castings for turbo-charged engines.
Mr McFadden
My hon. Friend makes a very good point. Chamberlin and Hill is a company that I know well and a fine example of what the Germans would call a mittelstand—a medium-sized company—that is doing very well. What is its slogan? It is “Difficult things, done well”, I think, and it does indeed do them extremely well.
As we heard a moment or two ago, we have all been delighted by the news that Jaguar Land Rover is to locate its new engine plant on the boundary of Wolverhampton in the constituency of the hon. Member for South Staffordshire (Gavin Williamson). That investment of more than £300 million will mean more than 1,700 new manufacturing jobs directly, but many more than that in the supply chain and indirectly in the wider economy. In a sense, Jaguar Land Rover is a microcosm of the story of globalisation. Its Indian owner, the Tata group, is investing heavily in new models that are being sold in a number of new markets, which are growing because there is a growing middle class keen to buy high-quality, prestige vehicles. That is also why it is hiring more workers in the constituency of the hon. Member for Solihull (Lorely Burt).
I use those few examples to illustrate that although there has been decline and closure over the years—in my constituency we saw more than our fair share, with the closures of Stewarts and Lloyds, Sankey’s and many others some years ago—the story of manufacturing in the UK is not always one of decline and loss. We need to believe more in what we still make, and resolve to value more the activity of making things. In a short debate such as this, there is not much time to discuss the detailed policy prescriptions that might make that happen, but I should like to mention a few things that we could do to support manufacturing more.
First, as I have said, we can challenge the culture of decline and loss. As a country, we should resolve to be the best place in the world for engineering. That might not mean that we are the biggest manufacturing economy in the world, but we should resolve to be the best place for it. That resolve should be shared by Government, our universities and our top companies, and it should fire the imagination of the next generation about the huge benefits that creativity, innovation and making things can bring.
As we heard a few minutes ago, one positive step in that direction is the Queen Elizabeth prize for engineering, which has just been announced and which the Royal Academy of Engineering will oversee. The Royal Academy is right to emphasise that the benefits of engineering go way beyond pure manufacturing and contribute far more than we think to our wider economy. I personally believe that the boundaries between a rigid manufacturing sector and services are becoming outdated. Rolls-Royce, for example, talks about “manu-services” and about earning as much from maintaining and servicing products as from just making and delivering them. We need to do something about the national resolve on manufacturing.
Secondly, we have to get tax policy right. I want to heed the advice of my neighbour, my hon. Friend the Member for West Bromwich West (Mr Bailey), not to be too partisan, but I say gently that I cannot see how cutting investment allowances helps the Government’s stated aim of rebalancing the economy, at a time when the life cycle of products is getting shorter. It is a £3 billion-a-year hit on manufacturing, to fund a corporation tax cut for banks and other businesses that do not always invest. It seems to me to run completely counter to Government rhetoric about supporting manufacturing. The Government should be making it easier for manufacturing companies to take investment decisions, not more expensive as that change to the tax system does.
Thirdly, we need an active industrial policy. We have become too defensive of the accusation that the Government should not pick winners. There is nothing wrong with a nation looking at the changes that are to come—be they for a low-carbon economy or a more digitally connected world—and resolving that the UK must have the capacity to make the most of them. The Government are a big market player. That should be a priority not only for the Department for Business, Innovation and Skills, but for the Ministry of Defence, the Department of Health, the Department for Education and many other Departments. All should think about their budgets and activities in terms of industry policy, but far too often, they do not do so. The Department for Business, Innovation and Skills should not be the only bit of the Government that thinks about business and industry—thinking about business must be done far more broadly across the board.
Finally, we ought to rethink our definition of making things. It is a touch old-fashioned in the digital age to think of making things only as making things that we can see or touch. Our country is a world leader in creative industries. The truth is that change has meant that people who might have become engineers or involved in manufacturing in the past are now making other things. Our TV formats are exported around the world; our football teams are watched around the world; the computer games that are developed and made in the UK are played around the world; and our musicians are listened to around the world. Everyone involved in those activities is also involved in making things, so our definitions have fallen behind the reality of the modern economy and what we as a nation are good at. Times have changed and creativity has been bent to new ends.
If we think about making things in that broader sense, we will throw into sharp relief the sense of loss and decline that can characterise such debates. My plea is therefore to think about making things in the broader sense. What we need in future is both belief and action to back that belief. If we have those, we can make many more things in that broader sense in times to come.
Gordon Birtwistle (Burnley) (LD)
I congratulate my colleagues who called for this debate and thank the Backbench Business Committee for accepting and giving us a lengthy amount of time for it at short notice.
The future of manufacturing products is inextricably linked to the future of manufacturing growth and wealth. If we have a strong manufacturing sector, we will have a strong economy that will create growth and prosperity for the country.
I have a personal interest in manufacturing. I left school at 15—I did not pass my 11-plus or get any GCSEs—and went to be a craft apprentice at a local company in Accrington that manufactured textile machinery. That was an enthralling event. I had to go to night school three nights a week until I was 25, where I secured two HNCs. Unfortunately, that does not happen any more, but young people go into manufacturing and get other types of education.
Mr Willetts
I should like to assure the hon. Gentleman that I meet young people who are doing HNCs and HNDs at their local colleges to be trained to work in British business, including in manufacturing. We should take pride in the fact that people still get those qualifications, which are valued and recognised. Indeed, part of the Department for Business, Innovation and Skills commitment is to continue to recognise those qualifications.
Gordon Birtwistle
I am grateful to the Minister for that assurance and I hope that that continues.
When I started in manufacturing some 53 years ago, manufacturing was 40% of the country’s gross domestic product and a balance of payments surplus was delivered every month. What on earth would the Chancellor think of having a constant balance of payments surplus now rather than the negative position we have? As manufacturing was so big, lots of apprenticeships were available through local companies that delivered the products that the country needed. The unemployment rate for young people was very low. When I left school, I applied for many apprenticeships throughout Lancashire. Most young people with whom I went to school achieved an apprenticeship in some industry or other. The vast majority of people in those days did not go to university; many people would have liked to have gone, but they could not, so they spent their time being apprentices and learning skills in the old-fashioned way by making things and having a trade.
I do not want to make this political, but I have to point out that under the last Labour Government, manufacturing fell from 22% to 11%. Even Mrs Thatcher did not achieve such a drop—she only managed to get it from 25% to 21%. Manufacturing has a number of variables to overcome. They include how the industry is perceived by young people, the lack of skills, and the lack of investment and of research and development. One of the biggest challenges to manufacturers in my constituency is finding enough skilled workers to carry out the incredibly technical jobs that are available. More must be done to change the image of industry to make it attractive to young people. I know that those who undertake skilled apprenticeships will end up with great jobs working on interesting projects, earning decent salaries and probably with a job for life.
A lot of damage has been done over the past 10 years to the image of manufacturing and vocational courses. A priority for the Government and for our successful and well-known manufacturers is changing the perception of manufacturing, especially among the young. We have become a country relying on a fragile financial sector and on the service industries. If young people were asked what they thought manufacturing was, they would probably respond that it is dirty and grimy. That is not the case. We need to show young people that there is more to manufacturing—that it is about maths and science, about design and innovation, about robots and computers. Manufacturing and technology in the food industry, for example, are phenomenal. There are so many different areas in the manufacturing sector and they are all innovative and exciting sectors to work in.
Controlling the supply side of our skills deficit is but part of the problem. As important is ensuring that both new entrants and existing employees in manufacturing are sufficiently upskilled to meet the demands of British employers. The preparation work needs to begin in schools. We know, for example, that pupils who take three separate science subjects at GCSE are more likely to study science, technology, engineering and maths later in their educational careers. If we can tackle the problem at source, and improve the rigour of the subjects and the number of pupils studying them, it will have a cumulative impact on the calibre of graduates entering the job market.
Lorely Burt
Does my hon. Friend agree that a great way to get youngsters more excited and involved is to have closer collaboration between employers and schools, so that children can see what it is they aspire to do, and therefore choose to take the subjects to which he refers?
Gordon Birtwistle
I totally agree with my hon. Friend and I will come on to an initiative in my constituency related to that suggestion.
In my constituency we have Burnley college, a joint FE-HE campus working with local firms to train highly skilled youngsters to be ready for the world of work. We are also getting a university technical college that will bring young people into the industrial life. Burnley college has made huge leaps in changing the perception of manufacturing locally among young people, and if the model the college uses were introduced across the UK, it would go a huge way towards really changing the perception of manufacturing at a national level. More schools and colleges need to start joining up with local businesses to provide youngsters with the knowledge and experience that will help them in the world of work. Too many children do not have any experience of working, or of the personal and other skills required. I will continue to encourage the Government to introduce impartial careers advice from the age of 11. Indeed, we should start careers advice long before young people go to secondary school.
Graham Evans
Is the hon. Gentleman aware of the Manufacturing Institute’s Make It campaign, which is specifically designed to enable young people in what used to be year 3—now year 9, I think—to experience as they take their options the delights of working in the manufacturing industry?
Gordon Birtwistle
Yes, I am aware of that, and it is a great thing. I encourage the Government to encourage such things, and we should also give careers advice to young people at 11.
Manufacturing must cease being perceived as a career avenue for low achievers, and the Government must work harder to ensure that perception and reality are closely matched. The culture in our schools must change, and the Government can help with that. There is so much emphasis on how many children can get to Oxbridge but there is never a fanfare about how many get on to high-skilled training programmes in the manufacturing industry, such as those with Rolls-Royce, BAE Systems or Aircelle in my constituency. Business must recognise that a new role is emerging, and UK manufacturing must ensure that it sells its career and employment possibilities to young people.
Trade finance also plays a huge role in the export cycle, but small and medium-sized enterprises often find raising the finance overly complex because of the myriad requirements on both financial institutions and Government agencies. The manufacturing industry in Burnley would like the Export Credits Guarantee Department to work more with financial institutions on initiatives to support exporters, particularly small businesses, many of which would love to export but find it difficult. For example, What More, an SME in my constituency that makes plastic buckets, washing-up bowls and lunch boxes that are sold widely in Tesco, is taking on the Chinese. The Chinese used to control that market but the company now exports to 38 countries, including China, and would like to export further afield. What More tells me that with an export credit guarantee it could export to another 25 countries. It employs 160 people and has invested £16 million over the past few years.
It is critical that the Government, as a big purchaser of manufactured goods, buy British-made goods. I was extremely disappointed by the decision on the Thameslink contract. I do not know how it happened. I was not a Member of Parliament during the consultation and quotation on the Thameslink trains but I was concerned that the contract was placed with Germany. I do not understand the European rules but I was extremely concerned. Importing trains when we make our own does not stack up. I am pretty sure that the Germans and the French do not import their trains. They seem to find a way around these rules to ensure that the same does not happen there. Furthermore, a £1 billion order for Chinook helicopters was sent direct to Boeing despite there being a helicopter company in this country with a licence to build Chinooks. That would have saved us £500 million on our balance of payments.
I have a couple of suggestions for the Minister. First, we should return the capital allowances scheme to enable companies to invest and get the capital allowances on the new equipment that they buy. There would be a massive investment in new plant and investment if the capital allowances were returned. Secondly, as my right hon. Friend the Member for Haltemprice and Howden (Mr Davis) said, tax rebates on research and development should be increased in line with the rest of the world and with what is needed in this country.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
My constituency borders that of my right hon. Friend the Member for Wolverhampton South East (Mr McFadden), so if my remarks echo his it is because of our shared experience of black country manufacturing and the challenges that it faces. My constituency, consisting of Oldbury, Tipton and Wednesbury, was at the heart of British metal-bashing for centuries. When Britain was the workshop of the world, the black country was the centre of that. It has a proud manufacturing tradition, and I am equally proud to say that, even given the hard times that the industry has gone through, there are still more foundries in my constituency than in any other in the country. The number of people employed in traditional manufacturing, while nothing like what it was, is still higher than in most areas of the country. My constituency is thus second to none in having an interest in the particular theme of this debate.
I know that many people, particularly within the black country business community, welcome the Government’s rhetoric on boosting manufacturing, rebalancing the economy and securing export-led growth. I certainly share both the Government’s and the local business community’s enthusiasm for all of those. I think, however, that we need to measure this with a touch of realism.
My right hon. Friend the Member for Wolverhampton South East made it clear that although we might want to extol the virtues of manufacturing, we must not do that to the detriment of the contribution made by other sectors of the economy, particularly our creative industries, which are world leaders and provide a significant proportion of our national output and a large number of employees. This applies to our service industries as well. Although manufacturing might have declined relatively, that is partly because we have an expertise in the service industries that is recognised throughout the world and provides potentially exportable market opportunities.
Manufacturing has a crucially strategic role. Although it provides something in the region of only 11% of national output, it provides nearly 50% of our exports. If we are to export our way out of recession, the service industries might play a significant part, but we cannot overlook the potential of manufacturing industry. It contributes something like 74% of research and development. The more R and D there is, the more competitive we become: the two are crucially linked.
We must recognise that without having more R and D and without providing a higher value-added manufacturing base, we might not be able to generate the levels of employment that we have had historically in manufacturing. We might well pursue policies to help businesses expand manufacturing as a proportion of our national output, but that might not necessarily result in a huge increase in the number of people employed because as we become more competitive and productive, we might be using fewer and fewer people to achieve it. That can sometimes blur the distinction between manufacturing employment and service employment—hence the reference made by my right hon. Friend the Member for Wolverhampton South East to “manu-services”. Increasingly, as our high value-added manufacturers export abroad, they follow it up with service contracts, which provide a lot of employment for people who are technically in a half-way house between servicing and manufacturing.
Mr Sheerman
I know that my hon. Friend, as Chairman of the Select Committee, has a great deal of knowledge on this subject. I wonder, however, whether we are avoiding the fact that Germany is also good at services and at design and many other things, yet it still has a manufacturing base that is twice as big as ours. That is why I keep coming back to “It’s Germany, isn’t it?” that we need to copy.
Mr Bailey
My hon. Friend is quite right—for a whole range of reasons that, unfortunately, time constraints prevent me from developing. Germany has a far stronger manufacturing base than we do, and a much stronger manufacturing culture throughout the country. I would like to discourse at length on that, but time constraints prevent me from doing so.
Notwithstanding the German experience, it is generally recognised that our expertise in some of the service industries may well give us greater export opportunities to countries such as China. Because of Germany’s expertise in manufacturing, it has done very well in what we might term the first wave of exports to China, but we may do better now because of our superiority in some service industries.
David Morris (Morecambe and Lunesdale) (Con)
I serve on the Science and Technology Committee and we recently examined how the Germans fund their new technology infrastructure. They have the Fraunhofer institutes, which have been running for more than 100 years. We are now trying to emulate that through the Turing centres. German manufacturing is good, but ours could be equally good, if not better.
Mr Bailey
That issue was recognised by the previous Government, and measures were being put in place to replicate that approach in the context of the British industrial scene. The current Government are, to their credit, taking that up.
Bank lending is a hugely significant issue for small and medium-sized enterprises in my constituency and nationally. The Merlin targets are not being met. That, combined with low consumer confidence and low business expansion expectations on the basis of the domestic market, means that companies are not applying for loans because they do not feel positive about future market opportunities and because they are wary of the banks making their credit lines even more difficult than they already are. That is having a stultifying effect on the ability of small businesses to expand.
Quantitative easing in order to address that issue may, indeed, keep interest rates low, but I have yet to meet a bank that knows how that will help SMEs directly, and I have yet to meet a business that knows how it would make any difference to its relationship with its local bank. Although lower interest rates may be welcome in general, that will not necessarily feed through to more investment in small businesses. I am concerned that the effect low interest rates are having on pension fund incomes could lead to some manufacturing businesses having to pay more into their pension funds, thereby diverting money from other areas in order to sustain their pension levels. This could be a counter-productive step, therefore.
There is now a lack of provision in the crucial area of small grants and loans for small businesses that want to expand to take the market opportunities that will be available to them. The regional development agencies will not be reintroduced—that is a debate for another day—but they did provide small loans to businesses that wanted to expand. Those loans are gone now, and they are not being replaced by the banks. The regional growth fund is not yet delivering for small businesses. If we are to expand the capacity of manufacturing SMEs in the time that they have available to make an impact on employment, that vacuum needs to be filled. Either local enterprise partnerships must be given more powers or the RGF needs quicker and more localised means of distributing money.
Mr Bailey
No; I am sorry, but I am running out of time.
I reiterate the points made about research and development tax credits and capital allowances—they might go some way to dealing with that problem. As they have been mentioned, I will not repeat the discussion of the issue.
The second issue to address is skills. As has been said, Tata has invested £300 million in Jaguar Land Rover in a site to the north of Wolverhampton, with enormous employment potential locally. The concern within the industry is that the extended supply chains of small and medium-sized enterprises that could service JLR may have a shortage of skilled apprentices, and I have already mentioned the potential need for capital investment to improve the capacity to meet the demand from JLR. I have no doubt that JLR will attract all the people it needs, because it is a high-paying iconic company that is very attractive to everybody. It will be the SMEs in the area that will need to recruit, and we need to expand our vocational skills base to ensure that that happens.
The Government have rightly concentrated on apprenticeships. However, there is emerging a picture of apprenticeship provision that will not necessarily address that need. First, a high proportion of the new apprentices are over 24, and there is considerable concern that these are just Train to Gain people rebadged. There is nothing wrong with Train to Gain, because it has an important role to play, but it will not necessarily meet the skills need that it is directed at. Secondly, there is increasing evidence of private providers coming in with short-term courses, which do not meet the historically longer-term need for training in a particular industry to meet capacity. I believe that the black country local enterprise partnership is examining the issue to try to scope out the skills provision that will be needed and ensure that it is provided. That LEP will be able to its job far more effectively if the Government were prepared to back their localism agenda by providing it with the resources to assess the skills need and to deliver on it locally.
Madam Deputy Speaker (Dawn Primarolo)
Order. I am keen to make sure that every Member who has indicated a wish to speak in this debate—
Madam Deputy Speaker (Dawn Primarolo)
You may sit down, Mr White, as I will not forget you and you do need to know this before you start speaking. I am going to change the time limit, because if we have 10-minute speeches, we will not get everybody in. I am therefore reducing the time limit to eight minutes per Back Bencher from you onwards, Mr White. However, you have the great joy of being called next, so the Floor is yours.
Chris White (Warwick and Leamington) (Con)
Thank you very much for that warning, Madam Deputy Speaker.
May I, too, start by thanking the Backbench Business Committee for securing time for this important debate? As co-chair of the Associate Parliamentary Manufacturing Group, alongside my friend the hon. Member for Huddersfield (Mr Sheerman), I have a particular interest in this area of policy. I was pleased to hear from earlier speakers who were able to bring their own experience to this debate, for example, my hon. Friend the Member for Hexham (Guy Opperman) and the hon. Member for Burnley (Gordon Birtwistle). I am also pleased that Westminster is being visited today by the leader of my local district council, who also has a background in manufacturing industry. Perhaps it would not hurt too much if more Members of Parliament had a background or personal experience in manufacturing, engineering or industry itself.
If we do not secure both a rebalancing of our economy towards manufacturing and growth in the sector, the UK will be very much the weaker, not least in my constituency, which is home to names such as Ford. Things have changed very much over time. My area has one major manufacturing works; the reason why we no longer have soot on our food is because Flavel, which won an award at the Great Exhibition, managed to change that by an innovative process and, to this day, the factory is still producing cookers in my constituency.
As the right hon. Member for Wolverhampton South East (Mr McFadden) said, we need to look forward. What does a prosperous manufacturing sector need? It needs a large skills base, a strong communications network, a focus on exports and the opening up of new markets. There has been progress on the first point. In Warwick and Leamington, we have 210 additional apprenticeships compared with last year. Great thanks must go to places such as Warwickshire college for managing to secure that.
Young people need to be encouraged to make a positive choice to take up careers in manufacturing. As the hon. Member for Huddersfield said, if that is to happen, design and technology must play a much greater part in our schools. We need to build on it through our entire education system. We cannot just wait until young people are 16 before they begin thinking about careers in the sector—it should thread right through our education system.
We cannot afford to fall behind other countries in this vital area. We should be under no illusion: competitors like China and India will be doing more, not less, to educate their young people in those subjects. The national curriculum is under review and I hope that the Department for Education will consider the importance of design and technology for the future of our economy and work with organisations such as the Design and Technology Association to ensure that D and T remains at the heart of the curriculum.
I believe that if we are to see long-term progress for manufacturing, we need the Government to be at one with the sector as a whole. Given the importance of manufacturing to our economic future, it makes sense that, as has been mentioned, the Government should create a dedicated Minister for manufacturing, and I would support the creation of such a Minister.
Mr Sheerman
Does the hon. Gentleman agree that if that Minister for manufacturing was linked to a clear long-term strategy for manufacturing, that would be even better?
Chris White
I very much agree. A Minister and a strategy could go hand in hand.
We need a strategic vision for manufacturing, with measurable targets of success so that we can see how our efforts at rebalancing our economy make headway and whether more needs to be done to help the sector. A Minister for manufacturing, tasked with creating a cross-departmental manufacturing strategy with targets and measurement tools to plot success or failure, would be a good start.
The Government, for example, could make it their goal to boost manufacturing to 15% of our GDP by 2015. This “15 by 15” target would send a powerful signal and boost confidence in the manufacturing sector as a whole. The mere creation of a Minister and a strategy will not bring about growth and jobs, but it will signal the Government’s intent, give manufacturers a voice in the decisions on economic policy, better co-ordinate Government manufacturing policy and ensure that manufacturing is properly considered across all Departments.
The UK is now the ninth biggest manufacturer in the world, unfortunately down two places on the previous year. We need to recognise that although we need to promote high-tech manufacturing we cannot ignore the rest of the industry. To quote a recent report,
“‘low-tech’ does not mean ‘low-value’”.
A Minister with responsibility for all manufacturing could ensure that it was not ignored and that we had a strategy in place that benefited all manufacturers.
If we are to remain at the forefront of manufacturing globally, businesses need to be able to access the funds that they need to compete and grow. I therefore also support the creation of a bank for industry, similar, perhaps, to the green investment bank. We should not be content to allow Britain to slip down the league any further and we should make it our goal to climb back to the top of the table.
Nick Smith (Blaenau Gwent) (Lab)
All too often, the issue of defence management is sidelined, so it is good that we discussed BAE Systems earlier. I see this debate as an opportunity to emphasise the importance of defence manufacturing and procurement, which a colleague mentioned earlier.
I have been lucky enough to be a member of the Public Accounts Committee for the past 18 months, during which time we have focused partly on questioning top Ministry of Defence officials, making defence one of our Committee’s themes and, crucially, visiting our country’s manufacturing base by going to Govan in Glasgow and Rosyth in Edinburgh where our new Queen Elizabeth-class aircraft carriers are being built. In doing that work, we have considered a number of instances in which the MOD has not secured value for money in procurement. I raise those instances today because I think they undermine our manufacturing capability and make the work of our armed forces much more dangerous.
As a country, our priority should be to provide our troops with the equipment they need for the best possible value for money. Having a sustainable skills base is vital for that. In Britain, we have a thriving defence manufacturing industry, as I saw for myself at this year’s Defence and Security Equipment International exhibition. We have skilled engineers and fantastic research and development skills. Under the Labour Government, firms such as BAE had the opportunity to invest as the defence budget increased by 10% in real terms. The defence industry provides valuable exports for our country, as well as important skilled jobs. Having the latest technology can also be valuable as it gives our troops an edge on the battlefield.
What are the key figures? Defence spending has been cut, meaning we have £2.63 billion less to spend on our military over a five-year period. This leaves 7,000 fewer members of our armed forces needing armour, four fewer frigates to equip and 40% fewer Challenger tanks to arm. As a result, we cannot afford to sustain our domestic capability to produce the kit we need. Last year’s strategic defence and security review was criticised by the Select Committees on Defence and on Public Administration. It was seen as a tug of war between the Ministry of Defence and the Treasury.
Cost-effectiveness is important. Initially it was hoped that the decision to change the type of aircraft flown from the new aircraft carriers would save money. However, it has resulted in a multi-billion pound refit for the carriers because catapult and trap technology have to be added. That type of indecision can rapidly increase costs for manufacturers and, ultimately, for taxpayers. It also means that we will not have carrier capability until 2020 and that the carriers will not be fully operational until 2030.
The best way to ensure value for money in procurement is by ensuring there is genuine competition in the tendering process. One way in which the MOD has discouraged competition is by gold-plating its procurement plans. Yes, our soldiers should have the best equipment, but that can lead to delays and leave our soldiers without the kit they need for a very long time. Competition is key in achieving value for money in defence manufacturing. Competitive tendering has been the Government’s aim, but National Audit Office figures show that fewer than 20% of the current major projects nearing their service date were awarded through genuine competition. Some 40% of contracts, representing £8.7 billion a year—these are big numbers—have been awarded by single-source procurement, under which the MOD invites only one firm to tender. There is a danger that by excluding firms from the tendering process we are reducing our skills base and our capacity to produce certain equipment in the long term as firms build up monopoly status.
In conclusion, the best way for us to maintain domestic manufacturing capability is to have a number of firms with the ability to produce the equipment we need. That would protect more jobs throughout the industry, enable us to achieve better value for money and provide an incentive for firms to produce good-quality equipment on time. The point about being on time is particularly important. In future, both Government and industry must work to ensure that we have sustainability in our domestic defence manufacturing industry. Then we will better protect and arm our brave servicemen and women.
Andrew Stephenson (Pendle) (Con)
I am delighted to contribute to the debate and I pay tribute to the hon. Members who helped to secure it. Some very interesting points have been made. I have already spoken to my hon. Friend the Member for Hexham (Guy Opperman) about individuals’ being able to set up their own bank, and I know that we have constituents who share the desire to diversify lending to small and medium-sized enterprises in this country. The debate has already been very productive.
In my maiden speech, I said:
“I am proud to represent a seat with a higher proportion of the work force employed in manufacturing that than in any other constituency in England, and I am delighted that manufacturing is back on the national agenda.”—[Official Report, 17 June 2010; Vol. 511, c. 1108.]
In the short time that I have today, I should like to consider what has been achieved in the 17 months since I made that speech and what more can be done to support manufacturers, particularly in Pendle and east Lancashire.
A couple of weeks ago, I was delighted to attend the Lancashire Telegraph business awards. It was a night that helped to highlight the best of manufacturing and engineering in east Lancashire, when the prestigious business of the year award passed from one Barrowford-based company, ACDC Lighting, to another, Merc Engineering, both of which are located in my constituency. I have visited those companies, which are both tremendous examples of fast-growing smaller firms that are constantly innovating, winning new orders and expanding their operations.
In Pendle, those companies are not the exception to an otherwise gloomy manufacturing picture. There are other businesses, such as Protec in Nelson, which has just installed all the fire alarm systems for the Olympic games stadium and venues; Hope Technology in Barnoldswick, which produces top-of-the-range components for bikes used by the best cyclists; and Kirk Environmental in Nelson, which is a leader in green technology. I have enjoyed visiting all those local manufacturers, as such businesses drive the local economy and will get the British economy out of the state it is currently in.
As Pendle’s MP, my No. 1 priority is jobs and supporting our local manufacturers. As someone who ran my own small business until I was elected to the House, I understand the pressures that companies are under in these tough economic times. Last autumn, the Government launched the £1.4 billion regional growth fund, which has directed investment towards many manufacturers in Lancashire and the north of England. Particularly important to Pendle is the £8.8 million to reopen the Todmorden curve—a transport improvement that residents of east Lancashire have been calling for for more than 40 years.
The Government have also agreed to fund the Regenerate Pennine Lancashire bid for an additional £7.5 million in business support. Its Accelerating Business Growth in Lancashire scheme is designed to meet the needs of local manufacturing SMEs by offering them capital investment for expansion projects, including premises, plant and machinery. There was a successful bid from North West Aerospace Alliance, which I shall meet again in a few weeks’ time.
Those regional growth fund announcements came just two weeks after the Government said that they would back the bid from the Visions Learning Trust to open a new £18 million university technical college in east Lancashire—a huge investment in ensuring that our young people have the skills that employers are looking for. That is great news on top of new figures showing that 810 people have taken up apprenticeships in Pendle in the past 12 months—a 70% increase on the number in the last academic year and a bigger proportional increase than in either the north-west or the rest of England.
All this comes on top of policies such as cutting corporation tax and red tape for manufacturers, promoting exports and getting the banks to lend more money, but there are some areas where I believe that Ministers could perhaps go further, a crucial one being support for the aerospace sector. I am delighted to have just been elected as treasurer of the new all-party parliamentary group on aerospace. Aerospace is crucial to Pendle’s manufacturing base. The UK aerospace industry is the second largest in the world. It is worth more than £23 billion and employs thousands of people in Pendle in highly skilled jobs, working for firms such as Rolls-Royce, Euravia or Weston EU. That sector of the economy is vital to Pendle and growing in terms of orders and jobs, but the long-term future of the aerospace industry in the UK cannot be secured without a long-term commitment to research and development. Ministers are already working closely with trade organisations such as ADS on the issue. I hope that the Minister will propose specific policies to help the aerospace sector.
Another issue that I should like to discuss is empty property rate relief—a problem that, of course, stems from the previous Government’s reforms. It has been raised with me time and again by manufacturers in my area. John Getty, the managing director of PDS Engineering and the president of the East Lancashire chamber of commerce, recently singled this out as the biggest concern to many local businessmen. In east Lancashire, industrial unit after industrial unit has been pulled down because owners simply cannot afford the rates on old mills and buildings. The effect, when some of the small and medium-sized enterprises that I mentioned look to expand, is that there will be nowhere left for them to do so. I have written to Ministers on the issue many times. I appreciate that the Government have prioritised rate relief for small businesses for the time being, and that benefits more than 1,000 small businesses in a constituency such as mine. However, on behalf of the east Lancashire manufacturing community, I ask that the issue of empty property rates be looked at again in the near future.
In conclusion, with the exception of the two key issues that I mentioned, the Government have, over the past 18 months, made huge progress in supporting manufacturing, through their approach to investment in infrastructure, grant funding, taxation policy, skills and apprenticeships. Solid foundations for our economic recovery are being laid.
Chris Williamson (Derby North) (Lab)
I congratulate and thank the hon. Members for Hexham (Guy Opperman), for Warwick and Leamington (Chris White), and for Burnley (Gordon Birtwistle) and my hon. Friend the Member for Huddersfield (Mr Sheerman) for securing the debate. I have been greatly encouraged by the quality of the debate and the consensus across the Chamber. It gives me some hope that manufacturing does have a future after all.
This country has a wonderful manufacturing heritage, and the constituency that I represent in Derby was the cradle of the industrial revolution. It is home to the world’s first factory, and to Rolls-Royce and Bombardier—the railway industry has a great heritage there. Just outside the city there is Toyota, which is one of the biggest, if not the biggest, car manufacturer in the UK today. We have a great manufacturing base, a great heritage, and a great reputation in this country, and particularly in Derby, for high-tech manufacturing skills. Promoting manufacturing as an occupation of first choice for our young people is key. We need to do more to encourage young people with skills to go into manufacturing rather than the service sector or finance, as they have done.
I was encouraged by the Prime Minister’s commitment to rebalancing the economy in favour of manufacturing industry, and was particularly pleased when he brought his Cabinet to Derby to emphasise that commitment, but there was a rebalancing of the economy in the 1980s. The Government of the day turned their back on manufacturing to some extent and used financial services—the big bang in the City—as an alternative engine of economic growth. We were fixated on the financial services industry for far too long, and when the crash came we were overexposed as a consequence.
The Government have recognised, perhaps rather belatedly, the importance of manufacturing, and it is important that they demonstrate their commitment to it. I reiterate a good point made by the hon. Member for Pendle (Andrew Stephenson), who is the new treasurer of the all-party group on aerospace—I am its newly elected secretary, so we are certainly singing from the same hymn-sheet on that issue—about research and development. As the autumn statement approaches, it is absolutely key that the Chancellor seizes the opportunity to demonstrate the Government’s commitment to manufacturing and aerospace.
The UK is the second biggest aerospace centre in the world. If we are to retain that position, the Government need to demonstrate their commitment to aerospace through investment in, and support for, research and development. Although Rolls-Royce has its roots in Derby and is the city’s largest employer—indeed, in the past 12 months it has recruited 900 additional members of staff, which is extremely welcome news—it is, in the end, a global company, and has factories in all four corners of the world. We must not be complacent, and I reiterate the point made by the hon. Member for Pendle on research and development.
The other thing the Government must get right is procurement. I cannot contribute to a debate such as this without mentioning the Government’s decision to appoint a German company as the preferred bidder to build the Thameslink rolling stock, rather than Bombardier. It is not too late to revisit the decision, as they are only at the preferred bidder stage and, despite Minsters’ protestations to the contrary, the invitation to tender documentation gives the Secretary of State the opportunity to stop the process and retender. There is no reason why the retendering process would take two to three years, as he has suggested, because the procurement of new trains before and after privatisation was carried out in just six months.
I urge the Government to reconsider their decision, even at this late stage, because although smaller contracts will hopefully come Bombardier’s way, such as those for Southern trains and the eVoyager carriages, we could still lose the ability to design trains in Derby, and if we lose that we lose the ability to design trains in the United Kingdom as a whole. Winning those two smaller contracts might put off the day when Bombardier pulls out of the UK, but it might not secure the train-building industry long into the future. It is absolutely key that the country that gave the world the railways continues to be able to build the trains that run on British railway lines.
Hon. Members on both sides of the Chamber, myself included, have mentioned globalisation. Globalisation can be a threat or, as I prefer to see it, an opportunity. We need to seize the opportunities presented by growing markets in China, India, Brazil and other parts of the world. Although we should not seek to compete on low wages, we should seek to be ahead of the game when it comes to the high-tech skills that this country has in abundance. We must nurture those skills and invest in them through research and development and investment in education, by encouraging young people to go into manufacturing and by looking not only at the opportunities available through support for our railways, aerospace and other existing industries, but at climate change as another opportunity. Engineering skills could be the salvation for tackling climate change and creating huge new employment opportunities in our country through geo-engineering solutions, which are being spearheaded by the Institution of Mechanical Engineers.
I am fairly optimistic and delighted at the cross-party support we have seen today. I hope that Government Members will use their influence to persuade the Government to invest in research and development and reconsider their decision on the Thameslink rolling stock programme.
Jessica Lee (Erewash) (Con)
I am delighted to participate in this extremely important debate and thank the hon. Members and colleagues who secured it. I also thank my hon. Friend the Member for Hexham (Guy Opperman) for his fine opening speech.
The constituency of Erewash, which I have the honour of representing, is in the heart of the east midlands manufacturing base. The east midlands has the highest employment level in manufacturing in the United Kingdom. We have been manufacturing products in Erewash for over 300 years. It is the base for one in five of the 2,400 firms in my constituency. To put it another way, 30% of the jobs in Erewash rely on the manufacturing sector.
The range of products is also diverse, and it has developed as the technology has changed over the years. We have made everything in Erewash, from pencils to lace and drainage covers to railway carriages—the list goes on. Indeed, the town’s contribution to manufacturing has continued in peacetime and wartime. At the Stanton Gate works, 873,500 bomb casings were produced during world war two, and my late grandfather, who grew up and worked in nearby Nottingham, was an engineer on the local railways all his life and one of the many engineers asked to help in factories throughout the war, producing, making and helping us to win world war two.
One industry with a proud legacy in Erewash, especially in the town of Long Eaton, is furniture making. In recent years, there has been a resurgence in the trend for Union Jack-themed home accessories and furniture, and I confess that in the Lee household the occasional Union Jack cushion has appeared from time to time, but to me it is a great symbol, because it shows that we support British products and furniture makers, such as Meadowmead in Long Eaton. I am an active member of the all-party group on the furniture industry, and I will continue to do all I can to support the industry.
High-tech engineering and educational suppliers are also successful. We have companies such as TecQuipment, which provides sophisticated engineering training products that are then exported to universities around the globe. We also have Atlas Composites, whose carbon composites are used by top companies, also around the globe.
Being located between Derby and Nottingham, Erewash is a significant supplier to larger companies such as Rolls-Royce and Bombardier, and I note the comments of my hon. Friend the Member for Pendle (Andrew Stephenson) and am delighted to hear about the recently formed all-party group on aerospace. If an application form is sent to me, I shall happily join that group, as it is important.
Through the Industry and Parliament Trust, several MPs recently visited Rolls-Royce. It is an extraordinary site, and I encourage all Members to go. The hon. Member for Hartlepool (Mr Wright), who is seated on the Opposition Front Bench, also attended, and that day everybody was completely mesmerised and impressed by the company’s workmanship, expertise and groundbreaking work.
Indeed, Rolls-Royce is responsible for 2% of the nation’s GDP, and through its encouragement of apprenticeships and its employment, in particular, of skilled graduates from around the globe it has created a fantastic working environment. For the overwhelming majority of employees, once they start working for Rolls-Royce they simply do not want to work anywhere else, a fact that is reflected in the small number of people who ever leave.
The lace industry has also been important in Erewash, and I have spoken about it several times in the House, but I cannot let this opportunity go by without mentioning again Cluny Lace in Ilkeston, the last traditional lace manufacturer in the country. That company made part of the lace on the Duchess of Cambridge’s wedding dress, and we were honoured and delighted to participate in that great day.
I agree with the hon. Member for Derby North (Chris Williamson) that a debate about this topic could not really pass without local MPs mentioning Bombardier. Supply-chain firms in Erewash will be particularly affected by the decision, but we are all agreed in the House, and I am pleased that the Government take the view, that we must review the procurement rules that the previous Government put in place and ensure that we make the best for this country of the procurement process.
I think that I am the first woman MP to participate substantially in the debate, so I should not let this opportunity pass without mentioning women and encouraging them to go into manufacturing and engineering. I have been working with a school in Erewash, and we are looking to set up a scheme. We are going to have an open day, involving as many schools as possible, to show young women and girls currently at school why careers in manufacturing and engineering can be exciting for them—and the wealth of opportunities and interesting careers that they might not have considered.
I was delighted by the Government’s recent announcement of 5,000 new mentors to encourage women entrepreneurs. The scheme should include manufacturing as well, and I look forward to seeing how it develops.
In conclusion, I particularly welcome one other Government proposal: the “Make it in Great Britain” exhibition, which will take place at the Science Museum next year. We need to do all that we can to showcase what we make in Britain and see what we do best. I will be doing all that I can to take schoolchildren from my constituency to visit that exhibition.
We are united in the House about improving manufacturing. The Government have made a good start, but there is much to do. We must celebrate what we do best, talk up the whole of manufacturing in this country and build on those successes to create strong foundations for the future.
The Minister for Universities and Science (Mr David Willetts)
It gives me great pleasure to respond to the debate. I congratulate the hon. Members who tabled and secured the debate: my hon. Friend the Member for Hexham (Guy Opperman) who began with an excellent speech, my hon. Friend the Member for Warwick and Leamington (Chris White) and the hon. Members for Huddersfield (Mr Sheerman) and for Burnley (Gordon Birtwistle).
This is a very important debate, and I welcome the fact there has been very little partisanship. There have been a lot of shared themes, which I hope to touch on in my remarks. Perhaps the main difference is almost a temperamental one, between the people who take a more optimistic view and those who take a more pessimistic view. I am certainly with the optimists. We can be proud of the revival in our manufacturing sector that is already under way.
Instead of drawing attention to the overall statistics, perhaps I can reflect on the announcements that we have had this week, which tell us what is going on. Today, the Prime Minister has been able to welcome Toyota’s plans to build its new generation family-sized hatchback at its UK factory in Burnaston near Derby during his visit there. That investment of £100 million will secure many jobs. In addition, Airbus has today announced 200 extra engineering jobs at Feltham, and Nestlé has announced a £110 million investment at its Tutbury plant, which will involve 300 extra jobs. Those are today’s announcements. Yesterday, Coca-Cola announced a £50 million investment in a new bottling facility at Wakefield and other investments as well.
If one considers the build-up of announcements, there is clearly the sense that a revival is under way in our manufacturing industry. It has been very encouraging to hear from hon. Members on both sides of the House about the strong support that there is for manufacturing. There is a recognition that the future of our economy must include manufacturing, just as our proud history has manufacturing at its heart.
My hon. Friend the Member for Hexham made an excellent opening speech, and I shall briefly respond to two themes that he touched on, particularly as they were picked up by other hon. Members. He called for there to be a Minister for manufacturing. Let me make the role of the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford (Mr Prisk), clear. Incidentally, he is not here to respond to the debate because Ministers are fanning out across the country today as a result of all the excellent news on manufacturing. The Prime Minister is in one part of the country, my hon. Friend the Member for Hertford and Stortford is elsewhere and, of course, the Secretary of State is somewhere else.
My hon. Friend the Member for Hertford and Stortford, who deals with business and enterprise, has the following responsibilities: aerospace, the defence sectors, the automotive sector, professional and business services and the delivery of the advanced manufacturing growth review. In addition, he is the architect of our next manufacturing summit in Bristol, and he has overall responsibility for manufacturing and materials. Although he does not have the word “manufacturing” in his ministerial title, he is for all practical purposes our Minister for manufacturing. Several Members have asked: who is the go-to Minister? He is the go-to Minister for manufacturing and he does an excellent job. Of course, the Secretary of State also has a clear personal commitment to manufacturing. My view, therefore, is that there is a key Minister in the Government with that responsibility and a Secretary of State with very strong personal commitment to the subject. We are all, as Ministers in BIS, working on this and trying to contribute in our different ways and with our different responsibilities, whether they be for universities, research, science, high tech, skills or apprenticeships.
A second question put by my hon. Friend the Member for Hexham concerned access to bank finance. That subject is raised regularly in the House, as I often notice in BIS questions. His particular point, which has been pursued by several Members on both sides of the House, is about whether we can do more to enable new banks, especially new small banks, to set up. One of the key recommendations in the report by the Independent Commission on Banking was that we should look at barriers to entry, which are too high. It should be easier for new entrants to come in and set up banks, and we are now pursuing that recommendation. There has already been a round table meeting with challenger banks—the banks that want to come in and do more. The Chancellor himself touched on the subject in a major speech on the subject on 3 October.
Given my responsibilities for research, high tech and science, I have been frustrated by the time it has taken to establish Silicon Valley bank, which originates, as its name implies, in silicon valley and is a specialist in venture debt that lends to start-up businesses at early stages. I was told that it took it a year just to assemble the paperwork that was necessary for the Financial Services Authority approvals process, and another year for the FSA to consider that paperwork. We in BIS, and the Government as a whole, with the Treasury in the lead, are absolutely persuaded by the argument that we need to think about whether we have ended up with a system that has barriers to entry that are too high. That is why we are looking to see how we can pursue the recommendations of the Independent Commission on Banking.
Guy Opperman
Would the Minister be interested in facilitating a meeting with the FSA and the Treasury? While I have no doubt that BIS may be fascinated by the idea of local banks and better business banking, the Treasury and the FSA seem a little more reluctant to oil the wheels, if that is the right term.
Mr Willetts
Perhaps such a meeting could be arranged through BIS or the Treasury. Lowering barriers to entry is one way of ensuring that a market is dynamic, that new entrants can come in and that innovation happens, and that is as true in banking as it is in the rest of the economy. My hon. Friend’s suggestion of a meeting is very welcome.
We heard a range of excellent speeches. I congratulate the hon. Member for Huddersfield on his contribution and welcome his support for Huddersfield university. Although my hon. Friend the Member for Weaver Vale (Graham Evans) is no longer in his seat, I pay tribute to the excellent work that he has done in support of Daresbury, which I have been happy to visit with him. It is a crucial R and D centre for the future where we are committed to strong investment and which has enterprise zone status. We heard from the right hon. Member for Wolverhampton South East (Mr McFadden)—
Mr Sheerman
The Minister said that we have a Minister for manufacturing; we will have to think about that, because some of us were not convinced. Two themes that have come out of the debate—I am sure that the Minister will get round to them—are the need for a long-term strategy for manufacturing and the role of Made by Britain. Does he endorse Made by Britain, and does he think that all Members of Parliament should find a fine design or product in their constituency? We are over halfway there, so will he support our going even further?
Mr Willetts
The hon. Gentleman says that he is not convinced. I think that if the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford, who has responsibility for business and enterprise, were here, he might have shed a quiet tear at that, because there he is, doing all this work in the Government and being responsible for all these sectors, including manufacturing and delivering the advanced manufacturing growth review. There are arguments about the titles that people should have, but the reality is that he does an enormous amount for manufacturing.
On strategy, if the hon. Gentleman looks at the growth review that we published with the Budget, he will see that there was a range of specific commitments, ranging from our advanced manufacturing review to commitments across a host of manufacturing sectors. We are doing further work on the future of manufacturing through the foresight exercise that my right hon. Friend the Secretary of State is leading. Manufacturing was a crucial strand of the growth review and there is now a forward-looking exercise in the foresight framework.
I will briefly take the House through some of the things that we are doing to strengthen manufacturing, which as I said were covered in the Government’s “The Plan for Growth”. Lowering business taxes is fundamental. That is why we are planning to cut corporation tax year on year. Although some people have criticised our decisions on the structure of corporation tax, it is worth remembering that we have legislated to extend the capital allowances and short-life assets scheme for plant and machinery from four years to eight years to improve the tax incentives.
We are also backing innovation. Several Members from both sides of the House have referred to the importance of the research and development base. I am particularly pleased that we have been able to draw on the lessons from Germany, which has been referred to favourably on both sides of the House, and to learn from its Fraunhofer institutes. Those were a model for the technology innovation centres that we are setting up with £200 million, even in these tough times. We have already identified some of those centres, notably in advanced manufacturing. Indeed, my right hon. Friend the Secretary of State is opening the National Composites Centre in Bristol today. That is the new home of world-class innovation in the design and manufacture of composites. We have also announced that there will be technology innovation centres in cell therapies and offshore renewables, and that there are more to come. We are trying to plug the gap between the pure research in universities and the commercialisation for which individual companies are responsible—the so-called valley of death. The technology innovation centres are one way in which we can plug that gap.
We are also committed to improving our performance on exporting. That is why we launched the national export challenge, a series of initiatives to help SMEs take the first steps to break into new markets. Currently, only one in five companies in Britain export. We want to increase that to one in four. That means reaching out to mittelstand businesses, or SMEs, that have not thought about exporting. That is why we have set UK Trade & Investment the target of doubling its client base to 50,000 businesses in the next three years.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
I have heard a lot of compliments about UKTI. However, when I met my local enterprise partnership earlier this week, the concern was expressed that UKTI reacts to requests, perhaps from bigger companies, rather than having a proactive strategy. Do you have any thoughts on how that might change?
Mr Willetts
In the absence of Madam Deputy Speaker responding to that challenge, I will. The Prime Minister urges all of us in his Government to be as proactive as possible whenever we go abroad, ensuring that we are properly equipped with a sense of the key business opportunities that are relevant to the particular mission that we are on. We have asked UKTI to set out what we call a high-value opportunities programme to identify really big projects around the world where there are opportunities for British companies and suppliers to invest and provide. We are systematically reviewing the high-value opportunities provided by large-scale projects around the world, which we believe British companies can take advantage of by going out and battling for contracts. We are improving the tax system, we are backing R and D and innovation and we are committed to improving our performance on exports.
David Mowat (Warrington South) (Con)
I have been listening carefully to the Minister’s points about how his Department is helping parts of the manufacturing sector. Many manufacturers tell me that the big issue for them is differential energy prices. Can he assure the House that his Department is on top of that issue, and that we will not lose process manufacturing in particular to countries such as France and Germany, and of course to the far east, due to high electricity prices and high energy prices in general?
Mr Willetts
I can assure my hon. Friend that the Department is very well aware of the particular pressures facing energy-intensive industries, and we are considering them very carefully.
Mr Sheerman
The Minister has mentioned tax twice. When I talk to manufacturers and people in the business sector, they ask why the Government want a blanket cut in corporation tax rather than something that would actually give a tax break to innovators and entrepreneurs.
Mr Willetts
We are also providing specific support for innovators and entrepreneurs, for example by increasing the value of the R and D tax credits. We are doing specific things, but the coalition’s overall philosophy is that if possible, we like to bring down the basic rates of tax in a simpler tax system. I think that is an admirable objective.
I do not want to take up too much time, because I know that other Members still wish to speak, but I will briefly go through some of the other things that we are doing, in addition to the lengthy list that I have given—I will not repeat it, but I am sure hon. Members agree that it is very impressive.
Several hon. Members have mentioned apprenticeships, and we can be very proud of the rate of growth in their number that we have delivered. We now estimate that the really extraordinary figure of 440,000 apprenticeships have started in 2011. I pay tribute to my hon. Friend the Minister for Further Education, Skills and Lifelong Learning, who we all know has an intense personal commitment to apprenticeships. We are absolutely committed to their being of high value. Level 3 equivalent is a minimum, and in July the Prime Minister announced a £25 million fund to support up to 10,000 advanced and higher-level apprenticeships in companies, particularly SMEs.
Of course, we announced only last week a package to encourage small firms to take on their first apprentice, with an incentive payment of £1,500 for up to 20,000 apprentices aged 16 to 24. There are still too many regulatory burdens and too many problems of red tape, and we have made it clear that companies do not need to add extra health and safety burdens to the basic framework that all employees should have. We are committed to reducing bureaucracy, speeding up processes and boosting employer engagement in apprenticeships.
We are also committed to supporting and improving the image of manufacturing and engineering, which several Members have mentioned. There is much mythology about manufacturing and engineering. I am sure that Members of all parties find when they go around manufacturing facilities that they are very different from the oily rag image of manufacturing that too many people still have. They are sophisticated places in which highly skilled workers work with large amounts of sophisticated equipment. That is why, with my responsibilities as Minister for Universities and Science, I am very pleased with the increase in the number of science, technology, engineering and mathematics graduates.
Another announcement just in the past week is that the university of Lancaster is reopening its chemistry department, which was closed in 1999, because of the increase in the number of students coming forward with A-levels in the relevant subjects and because the university believes that in our new regime, it will be able to attract more students as it breaks free from the quota controls of the past. We have secured further investment in skills that are related to the improvement in the image of science and engineering.
As has been mentioned, there is also the new Queen Elizabeth prize for engineering, launched by the Prime Minister, the Deputy Prime Minister and the Leader of the Opposition earlier this month. We thank the range of private sector partners who have contributed to the endowment of the prize fund. There will now be a £1 million prize, awarded biennially by the Royal Academy of Engineering.
Mr Sheerman
The Minister mentioned £1 million and we have 1 million young unemployed people. Will he join my right hon. Friend the Member for South Shields (David Miliband) in his call for every young unemployed person to be given training and a job? Is there not room for such an imaginative proposal, which would boost manufacturing and everything else in our country?
Mr Willetts
With both the Work programme and the increase in the number of apprenticeships, we are discharging our obligation to young people. Of course, more can always be done and we are absolutely committed to doing everything necessary to help young people into jobs.
Let me conclude by assuring the House that the Government are committed to encouraging and supporting British manufacturers. We are determined to create the environment in which they are free to thrive and compete in a global marketplace. The points that have been made by hon. Members, and particularly by those who called the debate, are well made. The Government absolutely understand the importance of skills, innovation and R and D, and the importance of ensuring that the barriers to bank lending are torn down. All that added up makes it clear that we have a strategy for manufacturing, which will be at the heart of our agenda for rebalancing the economy. I very much congratulate hon. Members on their interventions, which I welcome.
Mr Iain Wright (Hartlepool) (Lab)
I agree with the Minister that this has been a good and important debate. Manufacturing is not discussed in the House as much as it should be, which is perhaps a reflection of the perception of manufacturing more widely in the country. People could be forgiven for believing that Britain used to make things but does not any more. I therefore congratulate the hon. Members for Hexham (Guy Opperman), for Warwick and Leamington (Chris White) and for Burnley (Gordon Birtwistle), and my hon. Friend the Member for Huddersfield (Mr Sheerman), on securing this interesting and vital debate.
I agree with the Minister that the debate has been relatively consensual—the House should not worry; I will break that. The debate has been split not by party, but between optimists and pessimists. I am a bit of both. I am proud of the fact that our nation engineered the first industrial revolution. We became the workshop of the world. By the eve of the first world war, we produced one quarter of the world’s total manufacturing output.
To go back to my earlier comments, there seems to be a consensus out there, put forward by the media, that this country has somehow lost its grip on manufacturing and closed its factories one by one or sent them over to China. Today’s debate has made a good start in dismissing such myths, because we still make things. Indeed, as the Minister rightly points out, there is much to be optimistic about. Output from British manufacturing reached an all-time high, even adjusting for inflation, not in 1867 or 1907, but in 2007. In the decade 1997 to 2007, UK manufacturing achieved a 50% increase in labour productivity, which is the best rate of progress we have seen in our country’s history. Despite that perception out there, we remain the world’s seventh largest manufacturing nation. Our manufacturing is based predominantly on high value-added activity, including the production and manufacture of toilet rolls—in that high value-added activity, we are world leaders.
In high-technology manufacturing, the UK is second only to the US in the developed world. In some industrial sectors, our companies are some of the best anywhere on the planet, including in aerospace, which several hon. Members mentioned, and in automotives, oil and gas, chemicals, pharmaceuticals and bioscience.
As the hon. Member for Hexham will know, the north-east region has a world-class, efficient plant in Nissan, with all the supply chain opportunities that that provides. As the Minister rightly pointed out, today’s announcement that Toyota will build its new car plant in Burnaston is particularly pleasing, especially after the disappointments in that city for Bombardier, on which my hon. Friend the Member for Derby North (Chris Williamson) has been an absolute champion.
We in the north-east have always valued manufacturing. My constituency of Hartlepool has been particularly strong from the start of the industrial revolution in the 1840s and 1850s right through to the post-war era. We have huge potential now in some world-class sectors such as offshore wind, nuclear and biotechnology, but we need to grasp the opportunities. Global trends mean that British manufacturing should have considerable opportunity in the next few years. Rising incomes for households in many developing economies will create billions of extra customers to whom British firms can sell their goods—a point that was made by my hon. Friend. The need to manage global resources more efficiently and the move to a low-carbon economy will provide new markets for new and innovative products designed by ambitious firms in environments conducive to stable and certain R and D and capital investment. New technologies such as life sciences will revolutionise health care and the way in which drugs are developed, patented and brought to market. Despite the difficulties and issues that I have with the Minister about the science budget, I know that he is a champion of science, and Britain, with its strong science base, should be a leading global player in such fields.
Today’s debate has allowed the argument to be somewhat more sophisticated than is normally the case. We often see the argument in very blunt terms: we used to do manufacturing, but now we only do services, and we need to go back to making things. As my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) said, there has been a tendency in the structure of such debates to look in the rear-view mirror. In the past 60 years, this country has often chosen the stark model of economic sectors, selecting a service-based economy over manufacturing. That has meant that, despite our remaining a strong manufacturing nation, the sector constitutes only 11% of our economy, compared with 20% for Germany. As my hon. Friend the Member for Huddersfield said correctly, we have lurched too far away from manufacturing over the last 30 to 40 years. Manufacturing should constitute a much bigger share of our economy, but it should not be an either/or situation; nor should it be at the expense of our service sector. There should not be an artificial distinction, because services growth boosts manufacturing, and vice versa.
I can think of no finer example than Rolls-Royce, whose Derby plant I visited last month, as did the hon. Member for Erewash (Jessica Lee). The company is synonymous with British excellence—indeed global excellence—in engineering and manufacturing, but as we found out on our visit, it now derives half of its revenues from services, in providing long-term customer service contracts. The long-term revenues to be derived from such services are reinvested in manufacturing capability.
Mr Sheerman
I just want to correct a possible misapprehension. The members of the all-party manufacturing group are not rear-view mirror people: we actually believe that our manufacturing sector is superb in many aspects. It is just that we want to grow it and invest in it, as well as to encourage more entrepreneurs to lead it. That is the purpose of this debate. We are not negative: we are positive, and I congratulate my hon. Friend on choosing a product made by Britain, and I hope that every hon. Member will join the Made by Britain campaign.
Mr Wright
I absolutely agree, and my hon. Friend and I share the view of my right hon. Friend the Member for Wolverhampton South East that we should be bold and ambitious about manufacturing. We do not hark back to the past, but we want to engender that spirit of enterprise, innovation and ambition to ensure that we are the best engineering nation anywhere on the planet, that people can go into a career in manufacturing engineering secure in the knowledge that it is rewarding and produces products that we can sell to the rest of the world, and that Britain leads the world in that area.
Guy Opperman
May I take the shadow Minister back to the future? Does he agree that the idea of local banks, as outlined by several hon. Members, and an industry bank such as KfW, should be supported by Opposition Members?
Mr Wright
I listened closely to what the hon. Gentleman said in his excellent contribution, and in a moment I will mention the problems that companies—especially manufacturing companies—have in accessing funds that would allow them to grow, especially in export markets. I have a particular suggestion to put to the Minister on whether the Government are trying to do anything about that.
I hope that I have mentioned the huge potential and the enormous scope for us to be a leading player in manufacturing and engineering in the 21st century. None of that is inevitable, of course, and nor will it happen by chance. In the era of the most intense global competition imaginable and with economies such as China—known for its low-cost manufacturing—anxious to move up the value-added chain, Britain needs to put in place the best possible policy framework to ensure that our ambitions are realised. In the words of Richard Lambert, the former director-general of the CBI, the Government, particularly the Department designed to champion British growth, enterprise and industry, need to provide
“a vision of the kind of economy we want to have in ten years time and what it’s going to take to get from here to there”.
Instead, however, a leading global manufacturer has stated flatly:
“The government is not giving us a reason why we should be in the UK in 10 to 15 years’ time.”
The Government are not doing all that they can to allow British manufacturing to fulfil its potential. Worse than that, decisions taken by Ministers in the Department for Business, Innovation and Skills in the past 18 months have ensured that British manufacturing has taken a backward step. Our economy has grown by just 0.5% in the past year compared with 1.5% in the US and 2.3% in Germany. Export activity is stalling, and both output and sentiment are at their lowest levels since the height of the recession two years ago.
That situation is confirmed by today’s publication of the CBI’s industrial trend survey, the briefing on which reported:
“UK manufacturers reported a weakening in order books in November, with export orders in particular deteriorating significantly… As a result, firms expect a fall in production over the coming quarter”.
Not all of this is the Government’s fault, but an awful lot of it is—far more than BIS Ministers will acknowledge. BIS, charged with being the Department for growth, is weak and out on a limb in Whitehall. Whether trying to secure a stimulus for the economy—we will see what happens on Tuesday with the autumn statement—or support for the UK train manufacturing industry, the solar panel industry, Sheffield Forgemasters or long-term investment in oil and gas, the Secretary of State always plays the game but always loses. Worse than that, though, he always loses by putting the ball in his own net. The CBI’s director-general, John Cridland, described the appalling decision, which the House debated yesterday, on feed-in tariffs and the threat to the solar panel industry as
“the latest in a string of government own goals”.
Richard Harrington (Watford) (Con)
I agreed with much of what the hon. Gentleman said until he claimed that the Government should take much of the blame over the past few months. I must return his mind to the fact that more than 1 million manufacturing jobs were lost under the tutelage of the previous Government. I would like to hear his comments on that.
Mr Wright
I do not know whether the hon. Gentleman has been following my comments but, over a 40 or 50-year period, we have lurched too far away from manufacturing to the service sector. In the past 10 or 15 years, though, productivity in manufacturing has risen faster than ever in this country. My right hon. Friend the Member for Wolverhampton South East touched on these matters. Given the rise of China and other players, globalisation and the fact that we were the first country to industrialise, it was almost inevitable that there would be a relative decline. However, our manufacturing industry has declined too far, too fast, and we need to do something about that on a cross-party basis. Nevertheless, there has been great cause for optimism over the past 10 to 15 years.
Mr Sheerman
This has been a refreshingly all-party discussion but I want to come back to feed-in tariffs. The industry in green technology and green innovation is growing dynamically and people in my constituency in the business know that the feed-in tariff had to be modified, but for God’s sake why not give them six months to adjust, rather than allowing companies to go out of business and lose all that growth?
Mr Wright
My hon. Friend is correct, and to conclude this part of my speech, I shall quote the director-general of the CBI with specific regard to that decision on feed-in tariffs, which was taken without notice to the industry. In keeping with our football metaphor, the director-general said:
“Moving the goalposts doesn’t just destroy projects. It creates a mood of uncertainty that puts off investors. They wonder what’s coming next…Industry trust and confidence in the government has evaporated. This bodes poorly for investment in future initiatives…A new industrial policy needs to recognise the real-term costs of bad decisions and should set out a clear path that investors understand and can believe in.”
We certainly agree with that, as the country has not got the clear strategic direction we need from this Department. We sometimes get warm words; we often get welcome, albeit ad hoc, announcements. Industry, however, is uncertain of the strategic direction in which the Government and this Parliament want to take the country in manufacturing.
Mark Hendrick (Preston) (Lab/Co-op)
Coming back to the point about job losses, many manufacturing jobs were lost under the previous Government over the 13-year period, but some of them have moved, as the Minister said, to the far east and elsewhere. Many of these jobs were not particularly high-skilled, and modern technology and manufacturing has moved on. The problem was that those jobs were not replaced quickly enough by more modern, hi-tech skilled jobs. That is the challenge the Government must face for the future.
Mr Wright
I heartily agree with my hon. Friend. My questions for BIS Ministers relate to having an active industrial policy. Where is the assessment of the sectors in which Britain has unique competitive advantages and of where we can sell our unique products to the rest of the world rather than lamely following the rest of the pack? Where are the clear milestones along the way that would allow investment and business decisions to be taken with some degree of certainty and stability?
A recurring theme of today’s debate has been the role of research and development and associated capital allowances. Again, I want this country to be the best place for any investor in manufacturing to invest in research and development, but R and D tax credits, the industry tells me, are not working. What can we do on capital allowances and R and D spend? When can we expect some clear vision from the Government about the road map that is needed as part of an effective and active industrial policy? We have had welcome announcements about funding for technology and innovation centres—I think the Minister mentioned them in his remarks—but the ad hoc decision is a diluted version of what was set up and planned under the Labour Government, with businesses now unclear about how they fit into the bigger picture. The Department promised us its manufacturing framework document over a year ago, but it has still not been published. Where is it?
Another common theme has been the concern—expressed by the hon. Members for Hexham and for Burnley (Gordon Birtwistle)—about the inability of manufacturers to secure access to finance for growth. The Secretary of State’s initiatives have not worked. Project Merlin has not secured its aims and the regional growth fund is not delivering on the ground. In the space of 55 seconds—I timed it—in yesterday’s debate, the Secretary of State went from claiming that as a result of the RGF,
“factories have been built and the jobs are being created”—[Official Report, 23 November 2011; Vol. 536, c. 333.]
to acknowledging, in response to the Chair of the Select Committee on Business, Innovation and Skills, that he could not provide a figure on the number of jobs created by that fund at all. Will the Government look again at this crucial issue of access to funding?
Many companies are sitting on a pile of cash on their balance sheets, largely because they have little confidence in economic prospects, but is anything being done by this Minister and the Department to free up some of that cash to provide much needed finance to manufacturers? I hope that the Minister will intervene to provide a degree of clarity on that; otherwise, I am happy to wait for the Chancellor’s autumn statement on Tuesday.
Several hon. Members mentioned the huge opportunity for export markets. We have been behind the curve in emerging markets for some time. The CBI and Ernst and Young have just published a report, which demonstrated that UK businesses tend to rely on the US and continental Europe for their main export markets. The report quotes the chairman of a Mexican automotive parts manufacturer, stating:
“Overall I think the UK and its companies should pick the right battles and the right countries, and focus on specific sectors within those markets. There’s a lot of goodwill out there that’s not been exploited.”
Will the Minister respond to that and set out what has been done—he touched on it in his opening remarks—to strengthen our export capability? Time and again, firms say that they cannot exploit their potential by gaining access to export finance, that the range of such finance is limited and that things such as the export credit guarantee do not specifically address business needs. How can the Government address that?
Industry states that the supply chain to UK manufacturing needs to be improved. That is crucial in ensuring that British manufacturing is competitive in global markets throughout the world. The Secretary of State acknowledges that. In his speech to the Policy Exchange last month, he talked about how
“Government can support UK supply chains across a number of sectors critical for future growth.”
Since then, however, we have had no information or detail, or even an announcement as to when we might be given any. Industry is crying out for that as a means of boosting its competitiveness, so it would be helpful if the Minister could provide further detail.
Mr Bailey
Given the potential to expand the supply chain in the west midlands through the Jaguar Land Rover development and the possible repatriation of the supply chain for many of the Japanese manufacturers because of the problems in Japan, does my hon. Friend agree that the Government must come up with measures to bridge the capital funding gap, so that small businesses can exploit these opportunities?
Mr Wright
I entirely agree. One of the central themes of my remarks is that we have a huge opportunity, and that in the long term we can thrive as a leading manufacturing nation, but first we must overcome some very serious short-term difficulties involving finance and both domestic and international demand. Despite the warm words and fine rhetoric from the Government, I am not convinced that we are addressing the issues that industry wants us to address.
Manufacturing can play a leading part in Britain’s 21st-century economy, but in order to succeed in the modern era we need an active industrial strategy of partnership, where the join between industry and Government is not visible. Instead, we have a Department and a Government who lurch from one ad hoc announcement to another, via a series of wrong industrial policies. We need something better and more ambitious, so that we can tap into this country’s enormous potential and ambition in manufacturing, including in innovation. I want Britain to be the best place anywhere in the world in which to carry out manufacturing, but in order to secure that for the long term we need Government to act now.
John Stevenson (Carlisle) (Con)
I am delighted to have the opportunity to take part in this important debate, and I congratulate the Members on both sides of the House who secured it. The subject is central to the economic well-being of this country. Manufacturing matters both locally and nationally.
On the local scene first, in my constituency of Carlisle there are five major manufacturing plants, as well as many smaller manufacturing businesses. Those five major plants are big employers; between them they employ between 3,000 and 4,000 staff, producing for national and international markets world-class products, such as Pirelli tyres, Carr’s water biscuits, Quality Street—whose tins of sweets we all have at Christmas—and, most important of all, the humble custard cream. Manufacturing also matters nationally, as it is a key part of our past and must be a key part of our future. We have to start making things again.
It was interesting to hear the shadow Minister, the hon. Member for Hartlepool (Mr Wright), talk about being an optimist and a pessimist, because before this debate, I concluded that our country has reasons to be pessimistic, reasons to be realistic, and, most important, reasons to be optimistic. If we are pessimistic, we can look back and consider that in 1980 manufacturing accounted for 24% of our economy, but the figure now is just 11%. Over the last 14 years we have lost 1.7 million jobs in manufacturing. We now rank between the sixth and the ninth largest manufacturing country, and we are sliding down that list. We rank 18th highest for machine tools investment, which is lower than Mexico. Germany has nine times more investment in plant and machinery than the UK, and many areas of our manufacturing have completely disappeared or have greatly reduced, such as textiles.
We have to be realistic. This country has less than 1% of the world’s population and we are no longer the engine-room of the world. Other countries will inevitably grow their manufacturing sectors and become larger manufacturing producers than us, and we have to accept that. We also have to accept that low-cost countries are hard to compete with in many ways. Technology and productivity also mean that fewer workers will often be required to produce the same amount of output. Although we must not lose sight of the fact that manufacturing is only part of our economy, it is important. Our trade gap was £100 billion but that reduces to about £37 billion when we take into account the surplus from services.
We have reasons to be optimistic about the future of manufacturing: Britain remains a major manufacturing country; manufacturing contributes £140 billion a year to our national economy and provides 55% of our exports; we remain a major force in aerospace and pharmaceuticals; and our manufacturing industry is innovative. We often forget about the food and drink industry, but it is our largest manufacturing sector, producing 15% of our output. It also produces 8,000 new products annually and it has survived the recession extremely well. Indeed, by 2017 it will need to recruit about 137,000 people just to replace those retiring.
We also need to take into account investment. There is investment going on in this country: £500 million from BMW; £192 million from Nissan; and the £55 million that Coca-Cola announced just yesterday. Business does want to invest in manufacturing and it wants to invest in Britain. I am pleased to hear the Minister being positive about manufacturing and demonstrating that the Government are interested in manufacturing and want to be proactive. I congratulate them on the “Make it in Great Britain” campaign, which is to be warmly welcomed.
We must also remember that the nature of manufacturing is changing. It is becoming more high-tech and more skilled, and that might be favourable to a country such as ours. In the future, there will be growing markets. We have talked about the BRIC countries—Brazil, Russia, India and China—but other countries in Asia give us opportunities for the future. As countries become wealthier, there is a diminishing gap between the emerging and the mature markets. That also gives us an opportunity to be more competitive in the global market and to tackle the new markets that are being created. So I believe that there are reasons to be optimistic about the future. To misquote Mark Twain, the reports of the death of manufacturing are greatly exaggerated.
What can we do and what do we need to do to ensure that British manufacturing has a prosperous future? Clearly there is no panacea, but a combination of issues and ideas can help manufacturing. Undoubtedly, the Government have an important role to play and it is good to be reassured by the Minister that they are aware of the issues in manufacturing and want to support it. I am talking about things such as reducing unnecessary regulation, adopting a sensible tax regime, the Government supporting, talking about and promoting manufacturing, and helping the supply chain and helping with energy costs. The Department for Business, Innovation and Skills is to be congratulated on its support for that.
We have had real successes. On skills, apprenticeships are being created up and down the country. The number has increased by 300 to 1,000 in my area, and that is to be welcomed. We have also seen the expansion of the university technical colleges and the targeted funding through the regional growth fund—for example, £2 million is going into Pirelli, with its plant in my constituency. Central Government form just one part of government; local government, which is another part, also has a role to play, for example, through the planning system. I welcome the changes in that area, but local government must take those opportunities, and be sensitive to business and help it. Local authorities are often property owners and they also have an opportunity to help business and support its development. Industry must also help itself. It must take responsibility for research and development investment, long-term planning and the training of its staff, and it must help to promote its own image. Engagement by the industry with councils, schools, colleges and universities is equally important.
I shall conclude by saying three things. First, I fully support and endorse the idea of my hon. Friend the Member for Hexham (Guy Opperman) that there should be a Minister for manufacturing. Such a person would be the champion for manufacturing, working across Departments and ensuring that manufacturing is heard and has a loud voice within government. Secondly, education and skills are vital, and I know that the Government are working hard in that area. I am talking about skills that industry actually needs: the skills that will help us to develop our manufacturing sector for the future. Finally, probably the most important thing we need is a cultural change. We need it in Government at a national and local level, in schools, in the press and in the public’s view of manufacturing. If we have a national cultural change, I believe that manufacturing can have a prosperous future.
Craig Whittaker (Calder Valley) (Con)
As more than 19% of the people who live in the Calder Valley work in manufacturing, it is no wonder that I spend so much of my constituency time visiting fantastic manufacturers and local businesses. If the hon. Member for Huddersfield (Mr Sheerman) classes Huddersfield as the cradle of manufacturing, without question Calder Valley is its family home.
We have not only many small niche and high-end manufacturers who supply locally and internationally but many world-leading firms that fly the flag for Britain. They include companies such as Heights, which supplies graphic arts equipment to major photographic companies, such as Kodak and Fuji, and Calrec, which supplies high-quality audio consoles to television studios all around the world, even to Japan. Hon. Members will all be pleased to know that the consoles that allow the nation to watch “The X Factor” every week come from Calrec in Hebden Bridge. We also supply 40% of the European market’s caravan industry with caravan looms made in Elland by BCA Leisure. They are Great British companies, flying the Great British flag. The fantastic thing that I am hearing from our local manufacturers is that we really are starting to fly, especially those who manufacture to export.
The absolute evidence of that is the huge investment we are seeing in new machinery, jobs and factories in the local area. No fewer than four brand-new factories are about to open. Boxford Ltd, which manufactures computer-aided design—or CAD—based lathes for education is about to move into its purpose-built £6 million new factory next week. That was delayed by a month because of a huge order received from Argentina, which was not following the lead of America or Europe in the way that the hon. Member for Hartlepool (Mr Wright) suggested earlier.
Decorative Panels is in the process of building its £8.5 million factory to incorporate two new factories for production and it will be up and running in April. KT Hydraulics should also be fully operational by February with its £2.5 million factory and Heights, which I mentioned earlier, has just got planning permission to double the size of its current factory up in Wainstalls. That is all evidence that when companies are stable and low geared, they make a difference to our economy.
There is a but, however. Although the companies are doing well and investing in our future, this really is a tale of two halves. At the business breakfast forums I hold every eight weeks—I have done so for the past three years—there has been a unanimous chorus about the banks. Many Members have mentioned the banks and how they are doing business. The banks would have us believe that they are lending money to businesses and I have no reason to doubt them, but the only problem is the conditions that they are imposing on our businesses, normally at huge cost.
I recently visited a local manufacturer that is a subsidiary of a larger world player in electronics. It supplies a large proportion of the Korean market and 20% of the Japanese market and recently got a fantastic deal from a bank that perfectly met its business needs. The bank was the Silicon Valley Bank in California. Why? Because in the words of the managing director of that company, it totally understood the business and its business needs.
I was also asked recently to attend a meeting with another local manufacturer and its bank manager. The company borrowed £100,000 several years ago to buy a building and a further £50,000 more recently to expand the business. Business is up by 20% this year. After sitting through the meeting for two hours listening to the bank manager sing the company’s praises and even saying he wished all his customers were like it, I left for another meeting only to learn later on in the day that the bank manager had said after I had left that the bank would like to take a debenture over its fixed and floating assets and have a joint and several guarantees from the directors. It was explained to them that that was all to the benefit of the directors as it would move them down the queue when the bank came asking for its money back. That is the type of thing that I hear week in and week out from my manufacturers.
Calder Valley manufacturers are among the world’s best. Indeed, in many cases, they are the very best at what they do. They do not want a hand up or handouts—just a plain, old-fashioned level playing field. They tell me week in and week out that they will do their best to get on and play their part. We need the Government to put pressure on our banks to look at their practices and to get to know intimately what their local customers do. For far too long, business account managers in banks liaise with customers but then decisions about financial transactions are made by faceless people who are often miles away and have no idea or clue about what the businesses that are asking for the loans do. That needs to change. If it does not, the manufacturers that are still in business will turn more and more to banks such as the Silicon Valley bank, which, in the words of a Calder Valley managing director,
“totally understood our business and our business needs.”
The current situation cannot be good for manufacturers, business or the country as a whole.
We accept the need to charge full business rates on empty buildings. That was mentioned earlier and would have been my third example had I more time. Some businesses might need to benefit from an extension or a deferment plan; otherwise some of the businesses that are really struggling are going to fold. It is clear that our manufacturers in Calder Valley are a beacon for our economy. Let us make sure that we can facilitate greater growth by listening to our manufacturers, by putting pressure on the banks and by helping manufacturers when they need support.
Mike Weatherley (Hove) (Con)
I shall be brief and hope not to take up the full eight minutes I have been allotted. I want to concentrate on smaller manufacturers. My hon. Friend the Member for Warwick and Leamington (Chris White) might be interested to know that I come to the debate with a certain amount of expertise. First, I am a chartered management accountant and that profession is geared towards manufacturing. In addition, I was previously the owner and finance director of a manufacturing company in East Sussex. While I was there, we won a Queen’s Award for Export, a Queen’s Award for Enterprise, and Sussex company of the year. The company exported to 48 countries worldwide and had five satellite offices overseas. I pay tribute to my previous business partners Hugh Burnett and David Westcott and to all the staff at Cash Bases.
The two areas I would like to highlight today are staffing and finance. When I owned that company in the late ’90s we had enormous trouble recruiting staff at all levels. We even laid on buses from outlying areas. That was in the boom years after the Conservatives had put the economy on a good financial basis but the shortage of both skilled and unskilled workers was exceptionally high. The fact that our education system was, and almost certainly still is, geared towards service sector jobs rather than traditional engineering and machine operation is to our detriment. I recognise many of the points that the hon. Member for Huddersfield (Mr Sheerman) made about education, so I shall not revisit them. I appreciate the apprenticeships that the Minister mentioned earlier, but we need more of those to cover the skills gaps.
A far more worrying issue, which is a huge hindrance to growth generally but manufacturing in particular, is the availability of funds, which my hon. Friend the Member for Calder Valley (Craig Whittaker) mentioned. The banks can give very small loans but when the requirement creeps over the £10,000 mark, it gets very difficult. The enterprise finance guarantee scheme is supposed to fill the gap between equity investment and the lower levels at which banks are lending, but it fails on two counts. First, the banks do not like it and will not lend with the 25% risk factor. Secondly, the amounts being loaned are just too small.
There are 4.8 million SMEs in this country, but the Government are currently targeting loans at only 6,000 for this year. In comparison with previous years, the amount of funding has decreased. There was £1.3 billion in 2009-10 and £700 million in 2010-11, and the figure has gone down to £600 million for 2011-12. They are not just grants; they are loans that the Government get back.
I recognise what the right hon. Member for Wolverhampton South East (Mr McFadden) was saying about the creative industries. To my knowledge, not a single small firms loan guarantee has been given to the music industry, and that is a great shame. In the first half of 2011, just 1,779 firms were successful in obtaining such loan guarantees, and the average amount is just under £100,000 per loan.
My second point is the funding gap. Anything under £5 million is difficult to finance. When I purchased the company in Newhaven, East Sussex in 1997, we bought it for £4.2 million. The venture capital company that backed us then has said that it would not back a similarly low investment again. Anything under £5 million is considered totally uneconomic. That and the funding for small businesses trying to grow our industries need to be addressed.
Exports are another financing-related issue. I was pleased to hear what the Minister said about the Government’s growth targets. I will certainly hold the Government to account to try to reach the levels that we would like to achieve. However, funding for exports is not balanced sufficiently when compared with inward investment. Of course, inward investment is good for a short-term fix for jobs, but we must substantially address the fact that exporting is an important part of any recovery in the long term.
In summary, the enterprise loan guarantee scheme must be improved. The 25% collateral that the banks require puts them off making proposals. Indeed, the amount available under such schemes must be increased to get closer to where equity investment becomes sufficiently realistic. Lastly, let us not forget the staffing implications. We must gear towards manufacturing, not just the service sectors.
Mr David Ward (Bradford East) (LD)
We have heard advice to not go back in time, but I should like to go back 170 years to 1840, when two thirds of the country’s wool products were made in Bradford. In fact, by 1850 it was the world capital for wool. In 1876, when Sir Titus Salt died, 100,000 people lined the streets during his funeral to commemorate his work. Now, of course, Saltaire village is a world heritage site, but the huge mill closed down in 1986.
Some hon. Members might be aware of the Jowett motor car, which was produced in Idle in Bradford. Idle is where I live. I was in fact, yes, the Idle councillor for 26 years. Jowett closed and was taken over by International Harvester, which closed in 1983. I get quite cross when I hear people who are old enough to remember the ’80s recession compare this one to that one. There is no comparison. When International Harvester shut, the council estate in the ward that I represented had 70% male unemployment and men who did not work again and had children who did not work. That was the scale of things in those days.
I shall explain the relevance of those two examples. Salt’s mill was brought back to life by the brilliant work of the remarkable Jonathan Silver. It is now the home of the Saltaire art gallery, where David Hockney has an exhibition. More pertinent to the debate is the fact that it is the home of Pace plc, which is the largest Yorkshire technology company and has more than 500 staff there. The International Harvester site became a large Morrisons complex, with a shop for itself and a large retail outlet. Particularly important to this debate is the fact—not many people understand this—that Morrisons is a large food manufacturer. In fact, it provides 5,000 food manufacturing jobs. Those are examples of two important sites that were part of Bradford’s previous manufacturing glory and have had a second life.
I ought to compliment both Morrisons and Pace on the fact that, like Titus Salt, they are reinvesting in the community. Top graduates from Pace visit schools in our deprived communities as part of the Teach First programme to put something back into the community. Morrisons offers a university degree in food manufacturing, and is providing work for 1,000 homeless people across the country. The textile industry still exists in Bradford. We have Haworth Scouring, which is the largest wool-processing business of its kind in the world, and some 70% of its produce goes to China for carpets.
I praise Labour as much as I possibly can whenever it is warranted, to try to ensure that I have some credibility when I point out the things that it did wrong. In Bradford, between 1998 and 2008, we lost 15,000 manufacturing jobs—or 40%. That was at a time when there were 40 successive quarters of growth in the economy. I say that not just to have a go at Labour, but to point out why this debate is crucial. I do not for a second believe that that was the deliberate intention of the Labour Government; it happened in error as a result of neglect. We need to understand why this debate is so important; it is so that we have a focus on the future, as was said earlier, and the future must include manufacturing.
Bradford is not just about manufacturing. It has a financial services sector, and that, thank goodness, kept us going through some of the dark days. There is Yorkshire building society and Provident, which was formed in 1880 in Bradford. Provident’s representatives were here yesterday, along with representatives from Westfield and Morrisons, to sell Bradford to the City.
We are UNESCO’s first city of film; we have a tourism offer; and we have wonderful theatres, universities and colleges. We are not just about manufacturing, but the future of Bradford must lie in a successful, thriving manufacturing sector. We have the largest single-site chemical plant in the UK, but most of the manufacturing businesses—71%, or 1,300 of them—have fewer than 10 employees. The newly created Bradford and Airedale Manufacturing Alliance is contributing to the regeneration of the manufacturing industry through networking, providing new business opportunities, looking at co-operative working, and the spreading of best practice, advice and guidance. There is very much a renaissance taking place.
To conclude, as a Bradford MP I have a duty to speak out and remind Members of the history of places such as Bradford. Without manufacturing, there would have been no Bradford as we know it, and manufacturing must be an integral part of the future. The message to the Minister is please not to let places such as Bradford down. Bradford is ready to rise to the challenge, and to make its contribution to rebalancing the economy. It is a new dawn in Bradford, but in that new dawn manufacturing must be centre stage. I understand that manufacturing is 3% of the economy in London; it is 13% in Bradford. A total commitment to manufacturing is therefore not only part of the very welcome rebalancing from the service sector to manufacturing, but a crucial part of rebalancing from the south and the south-east to the regions. That is long overdue, and those of us with an interest in manufacturing, and all of us with an interest in the north, are impatient for that.
David Morris (Morecambe and Lunesdale) (Con)
I am delighted to be called to speak in the debate, not only to highlight the needs of my constituents and the manufacturing industry, but to support my room-mate and hon. Friend—he is not right hon. yet, but headed that way—the Member for Hexham (Guy Opperman). I like to think that I have taught him everything he knows.
My constituency is heavily reliant on energy production and manufacturing. Like many north Lancashire constituencies, we make high-spec components for clients in the energy, defence and constructions industries. When we watch programmes on television about the amazing engineering feats involved in BAE Systems, in nuclear submarines at Barrow-in-Furness and in the nuclear power station at Heysham, in all likelihood the vital components we see will have been made or designed in my constituency. North Lancashire has a skills base that allows it to compete favourably with areas that have low labour costs. Manufacturers in China and India, for example, are unable to offer their products with a 10-year guarantee because they are often not of the same quality. The situation is similar to that of BMW in Germany: it has never produced the cheapest cars but is popular because of its build quality and reliability. Our manufacturing sector is struggling not as a result of a lack of orders, but because of the perennial problem of recent years: lack of money.
Any manufacturer of high-quality components needs to invest large sums in three keys areas: machinery, IT packages and training. It is worth going through each in turn. On machinery, I was talking recently to a manufacturer in my constituency who used to import 5,000 plumbing hoses a year. The products were no cheaper to order from China than they were in UK, but placing an order gave 30 days’ credit and the outlay is lower than buying a machine. It took the company several years to save enough money to buy the machine needed to make the hoses, but once it did it began making 7,000 a year. Obviously, British workers were employed to operate the machine, cutting unemployment in the constituency. Whatever we do in this difficult economic period, we must find a way of ensuring that businesses are able to access money and buy vital machinery.
On IT packages, the modern computer developed from an idea that came out of Bletchley Park during the second world war. We have always been world leaders in IT, but as computer packages have become more sophisticated the costs have risen. Although the packages save staff time and improve productivity, they also require capital outlay. I have heard plenty of examples of manufacturers being unable to turn ideas into viable products because the IT package required is just too expensive. I am not complaining about IT costs per se, as the people who design the products deserve to be properly paid. My complaint is once again that banks and the old regional development agencies were so poor at supporting businesses with the capital they needed to buy the products in the first place.
On training, I suppose a purist accountant would not view training as capital expenditure, but manufacturers are often required to pay for expensive training before a product is ever made. In practical terms, that means that lack of credit and poorly administered grants have an impact. Training for some IT packages can cost £1,500 per member of staff. When a company needs large numbers of staff to be trained, it is easy to see how costs soon mount up.
I have laid out three problems, but what are the solutions? First, we must accept that for small and medium-sized enterprises the regional development agencies simply did not work. They were too unresponsive and too focused on larger businesses. Many companies that I have spoken with got the impression, rightly or wrongly, that RDAs would step in only if a product would fail without them. That makes sense on paper, but in reality it is not about a product falling; it is about how quickly it can be brought to market and where it is made. Grants were not always available for speculative investments such as the machinery, IT packages and training I have mentioned. Things need to change and enterprise zones are a step in the right direction.
I know everyone will agree that we also need to get credit moving. I have now accepted that the big six banks cannot or will not help. We need greater diversity in our banking sector, so that the big banks are forced to serve business better. We need a regulatory environment that encourages more banks to enter the UK market and encourages more British companies to establish banks.
“Made in Britain” is still a mark of quality throughout the world, and our products still command a premium that makes our manufacturing viable. From the new plumbing system at Sidra hospital in Qatar to the A380 super-jumbo jet, British manufacturing is a vibrant part of our economy. Contrary to popular myth, we are still the world’s seventh largest manufacturer, but without solutions to the capital outlay problem we will never reach our full potential. We must give our companies the money that they need, because it is vital to invest in the future and in manufacturing. They maintain our skills base and are vital to the diversity of the British economy.
We should take this debate forward and act upon it. I again thank everyone for taking part in it, and my hon. Friend the Member for Hexham for bringing it forward in the first place.
Richard Harrington (Watford) (Con)
I, too, congratulate my hon. Friend the Member for Hexham (Guy Opperman) on bringing about this debate. I also congratulate the Minister on his comments so far and, in particular, the shadow Minister, the hon. Member for Hartlepool (Mr Wright), not only on his contribution, but on the resilience of his bladder, which has enabled him to stay in his place for such a long time. It is always a pleasure to see him. On these occasions, it is difficult to think of something to say that is different from the contributions that other Members have been making for what seems like 25 hours. But I shall do my best.
I was born into a family with a modest factory, and I saw the decline of British manufacturing through my own experiences and my own eyes, because my father was similar to most small manufacturers of clothing in Leeds, near to the constituency of the hon. Member for Bradford East (Mr Ward), and he had a similar business to those in Bradford. He was put out of business by imports, but we have to look beyond that and ask, “Why has manufacturing failed?” [Interruption.] The shadow Minister shakes his head, but it has failed, and I will explain why.
Manufacturing has failed as a type of business for entrepreneurs to go into as a start-up. We all know that in Britain most large businesses started off not with big foreign investment, which has been very successful, but with people deciding to start businesses in a small way and to build them up to medium-sized businesses and then into some of the great businesses, such as those that the hon. Gentleman mentioned in Hartlepool.
Manufacturing has failed for three reasons. First, there has been a failure of capitalism in this particular field. Members might think it strange to hear a Conservative Member using Marxist terminology—[Laughter]—particularly for the amusement of the hon. Member for Huddersfield (Mr Sheerman)—but I mean that although a lot of capital has been employed in businesses in this country, comparatively little has been used by manufacturing. That is because capital is invested to obtain a return, and in my generation manufacturing enterprise has not generally led to significant returns.
Capital that belonged to families has grown in other ways. My father is a classic example of a person who, having found that his business was worthless, sold a small site to property developers and probably made more money than he could have in years of business. That is the story of many family manufacturing businesses in this country.
Secondly, there has been a failure of management. The hon. Member for Huddersfield, in an excellent contribution, mentioned being shown around Magdalen college, Oxford, where he was told that the bright undergraduates were going into the City. When he made that point, he was looking at my right hon. Friend the Minister, who I remember from my time was in fact at Christ Church rather than Magdalen, but I am sure he accepts that in our generation exactly the same thing happened.
Why did people go into the City? First, those people who were business-minded went, perfectly reasonably, into businesses where they felt they could make a lot of money. Secondly, and to draw another a Marxist analogy, for more than 100 years the class system in Britain looked down on manufacturing industry, so all that people such as my father, who was in manufacturing, wanted was for their sons not to have to put up with what they had put up with. These days people would say that manufacturing is not “cool” or “culturally acceptable”, but for many years has fallen, let us say, out of fashion.
Craig Whittaker
I have a lot of empathy for what my hon. Friend is saying. I mentioned in my speech the companies Boxford, Heights, BCA Leisure and Decorative Panels, all from the Calder Valley. They started from very small premises indeed and have built up. Does he agree that the biggest problem at the moment is that the banks just are not investing in research and development?
Richard Harrington
I very much agree with my hon. Friend’s intervention, but that issue has been covered in other hon. Members’ speeches, and in the remaining time I am trying not to mention it for that reason—valid though it is.
The reality is that for bright young people, manufacturing is not, by and large, something for them to go into. For some reason it is different in the United States. Very bright graduates—the brightest that Harvard and other places have—could always join firms such as Ford, General Motors and IBM. At those companies, they could expect to make as much money—if it is, indeed, money they are interested in—as the people who joined Goldman Sachs or such firms in Wall street or the City. We have not had that here so, in my experience—and that of the hon. Member for Huddersfield at Magdalen college and of the Minister at Christ Church college—people who were interested in making a lot of money from our generation did not go into manufacturing.
I have mentioned capital and management. The third issue is labour. I am not falling into the ridiculous trap of saying, “It’s the fault of the unions and the workers that we don’t have manufacturing.” Nevertheless, the issue of labour is a contributory factor. In Watford, where we have a few very good manufacturing companies, notwithstanding that there are 3,000 people on jobseeker’s allowance in the constituency, manufacturers have a problem getting unskilled labour because they cannot get people who will do night shifts and consistently do the kind of work that is expected. It is not dangerous work, but it is fairly mundane. Consequently, they have to import labour from Poland.
It is not right in the remaining nanosecond I have left to go into detail about the benefit culture, but we have to accept that if manufacturing is going to return, we must have people who believe it is a perfectly respectable and proper occupation to work in a factory. We want them to, and they should be properly rewarded for doing so. However, we cannot have a situation in which people feel it is not the right thing to do.
Manufacturing has been the victim of imperfections in capital and in management, its status in society and the attitude of labour towards it. Such a situation needs to be corrected, but that should be done on the true basis of entrepreneurship, which relates to people who may be called greedy by some. They want to make money, but they will pay their taxes and employ people as a by-product. It is a great thing to employ people but, for somebody going into business, it is a by-product rather than the reason they are doing it. When manufacturing becomes easier than property development, easier than the City, easier than management consultancy, easier than the law or, indeed, politics, it will come back—but only then.
Guy Opperman
I thank colleagues who have contributed to the debate, in which there has been a cross-party optimism about the fundamentals of manufacturing. It is a noble profession and a wonderful sector to work in. There is optimism for the future of manufacturing, and that is what this debate is about, rather than the past.
There has been an understanding of the past difficulties from which successive Governments and businesses down the years have suffered and of the present problems of globalisation, the Chinese influence, energy prices and the extent to which the state is struggling with the debt and difficulties faced by each country in the eurozone, particularly this one. There has been recognition that we must subsidise and support individual businesses and manufacturing organisations, whether with a form of capital allowances, R and D, tax credits or the like.
Although there is a tradition for men to be involved in manufacturing, I was particularly heartened to hear my hon. Friend the Member for Erewash (Jessica Lee) contribute so robustly to the debate. As a female Member of Parliament, she spoke very eloquently of the role of women entrepreneurs. I strongly support the view that this is a profession not only for men but for women. I apologise to all women for saying, when I described the need for a Minister for manufacturing, that we needed a go-to guy; of course, it could just as well be a go-to woman.
Guy Opperman
Or gal, as my right hon. Friend on the Front Bench so eloquently puts it. The learned Minister has intervened on many previous occasions, and we have another bon mot at last.
I listened to the 19 speakers who contributed to the debate. We finished, last but by no means least, in Watford, having journeyed north to Morecambe and the bay, taken in Bradford East and Hove, and travelled back up to Yorkshire and Calder Valley and then on to Carlisle and Hartlepool. At this stage, the Minister appeared. I must apologise to him, because I think I said that he was from Bognor. Of course, I have nothing against Bognor—everyone loves Bognor—but he is the representative of Havant, as we all know, except the hon. Member for Hexham. We then journeyed to Erewash, Derby North, Pendle, Blaenau Gwent, Warwick, West Bromwich West, Burnley, Wolverhampton South East, Weaver Vale, and then to Huddersfield and up to the finest constituency of them all—which is, of course, Hexham.
The future of manufacturing is worth our taking up the debating time of the Backbench Business Committee. The three co-sponsors of the debate—my hon. Friends the Members for Warwick and Leamington (Chris White) and for Burnley (Gordon Birtwistle) and the hon. Member for Huddersfield (Mr Sheerman)—have done so much to try to put manufacturing back in the frame in the House of Commons, and that is the right thing to do. It is noticeable that we are already receiving press coverage on the need for a Minister for manufacturing.
There seems to be widespread agreement that the banking system needs reform and improvement so that these businesses, which we all so cherish and want to receive support, receive that support, whether it is from a local bank or an industry bank such as that championed so well by the Germans with the KfW model. Such possibilities give businesses an endless ability to thrive in future. We all agree that that is the model for the way ahead. I look forward to the forthcoming meeting with the Financial Services Authority to discuss the local bank project. The Government should clearly be picking winners; manufacturing is a winner, and it has a very good future.
Question put and agreed to
Resolved,
That this House has considered the matter of the future of manufacturing.