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Neil Carmichael (Stroud) (Con)
It is a great pleasure to see you in the Chair, Ms Clark, not least because we are both on the much-loved Environmental Audit Committee, where we have some fun, as well as doing some serious work. [Interruption.] It is always good to set the scene and to highlight co-operation.
It is also great to see the new Minister. I congratulate him on his appointment to an important place—the Department for Business, Innovation and Skills. It clearly has some important tasks ahead, so I wish him good luck and good fortune.
This is a timely debate, not least because the north-east has just had the good news that Nissan is making a massive investment in the community of Sunderland. Incidentally, that investment was supported by the regional growth fund to the tune of £10 million, which is great news. I come from the north-east, and I know that people in the area are particularly pleased with the way Nissan has supported employment and contributed massively to our export position over a number of decades.
The debate is also timely because the Engineering Employers Federation conference is under way today. That is emblematic of the importance of manufacturing and engineering. The Leader of the Opposition will say a few words there, but so, too, will the Chancellor of the Exchequer. That is obviously worthy of mention.
Before I go into the meat of what I want to say, it is critical to underline the importance of the Government’s deficit reduction programme, which will lead to stability in the economy and to low interest rates. We cannot talk about rebalancing the economy if interest rates are not low enough to encourage investment and to support long-term, sustainable economic development. Fundamentally, our macro-economic policy is absolutely right, and we should rest every other argument on that central point.
In April, I am holding a festival of manufacturing and engineering in my constituency, and I am pleased to say that the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford (Mr Prisk), is coming along to open it. The festival will run for five days, and I have three reasons for holding it. The first is to celebrate manufacturing and engineering in my constituency, because we have a large number of very effective firms making high-added-value, innovative products that are often destined for export.
The second reason I am holding the festival is that I want to create an environment in which people feel they want to invest even more in my constituency. It is necessary to point out where we are strong and to say that we can be stronger, with appropriate support.
The third reason I am holding the festival is that I am obsessed with the idea that young people need to be channelled towards manufacturing and engineering when they think about a future career. We have to make it clear that young people should think about manufacturing and engineering. They should do that for themselves because manufacturing and engineering would be a good prospect for them, and they should do it for the economy because it is absolutely necessary that we have the people with the right skills.
Jack Lopresti (Filton and Bradley Stoke) (Con)
I congratulate my hon. Friend on securing this important debate. On apprenticeships, is he aware that 30% of the senior management at Rolls-Royce, which has a large facility in my constituency, started their professional lives as apprentices? That demonstrates what a fantastic career people can carve out in manufacturing. It also clearly demonstrates social mobility in action.
Neil Carmichael
My hon. Friend is absolutely right, and I will talk about apprenticeships later. I notice that he has Airbus literally around his neck—its name is on his lanyard—and that is a signal that he understands the importance of large firms such as Airbus and Rolls-Royce in developing our manufacturing and engineering.
The programme for my festival will include investment. I will, for example, highlight the good work of Handelsbanken, which is an effective bank; I have mentioned it on the Floor of the House in connection with investment. We need the right banks—ones that know and understand the sectors they are trying to invest in and the people they are investing with. It is a question not simply of checking out the assets and borrowing against collateral, but of understanding business planning and recognising opportunities for business growth.
Next, the festival will talk about supply chains, which are critical to the economy. It is all very well saying that things are made in Britain when a large number of those things contribute to a bigger thing that is perhaps made in Europe. The importance of supply chains—certainly to my area—cannot be underestimated. The same applies to Wales, Scotland and all parts of England, and it has to be understood. I therefore welcome the measures that the Government are taking to promote good supply chains.
We will also have to talk about women in manufacturing and engineering. We cannot go on with just 2% of girls thinking that physics is a good subject to take; we have to encourage more girls to take it. If we check the economies that are doing as well as, or better than ours, we see they are better at recruiting women into manufacturing and engineering, and we have to do the same.
I am also going to talk about energy and recycling, because such new technologies are important in generating ideas for the future.
Last but not least, we have to get into schools to make sure that they are properly linked to business and that there is a proper interchange of ideas and understanding. We cannot have schools simply saying, “We’re not interested in business, because that’s beyond our ken.” Instead, we have to make sure that schools fashion their courses in ways that encourage pupils to get involved, and interface with, the world of manufacturing.
David Simpson (Upper Bann) (DUP)
I agree entirely with what the hon. Gentleman has said, and I congratulate him on obtaining the debate, but does he agree that we urgently need to look at the cost of doing business? I was in the manufacturing business for more than 30 years, and the cost of manufacturing in this country has gone through the roof. Something needs to be done to help businesses to export and manufacture more.
Neil Carmichael
The hon. Gentleman is absolutely right. That is at the nub of the issues I am coming to. I thank him for his intervention, and I am grateful for his support.
Lots of firms are supporting my festival of manufacturing, and I should name them because they are doing a huge amount. Renishaw is a fantastic engineering firm with factories in my territory. It is really innovative and good at coming up with new products, and it is determined to promote exports. Incidentally, it is also interested in the protection of patents.
There is also Nampak Plastics. One would not think that designing milk bottles was an engineering activity, but it is. Nampak has come up with a milk bottle that is incredibly handy in terms of getting it out of the fridge, but which also uses recycled plastic. Another firm is BPI, which is very effective at turning farm waste products, such as silage wrap, into raw materials for firms such as Nampak to use. WSP—formerly part of Milliken—is the world’s best manufacturer of tennis ball covering and snooker table cloth. It operates in one of the oldest mills in my constituency, and it is a fantastic firm.
There is also Omega, which is a great recruitment firm in the technology sector. I have already mentioned Airbus. Although it is in Filton, near Bristol, it is also supplied by firms in my constituency. That underlines the point that I made about supply chains. Finally, there is Delphi, which makes virtually all the injectors for large, heavy lorries, and it is in Stonehouse.
The policy areas that I want to talk about are straightforward. To begin with banking, I have already mentioned the need for responsive local knowledge, with more emphasis on the plan than on assets, and I want to ensure that the reform of banking, through the Vickers report, brings that about. We must be certain that high street banks and new banks, with new approaches to investment, will be more flexible, and more willing to take early investment decisions. I would suggest that anyone who does not think that is important should go to Germany and ask businesses there what kind of banking they have. They will say that it is exactly what I recommend, and that that is one reason why German firms get started and keep going.
Jeremy Lefroy (Stafford) (Con)
On that point, does my hon. Friend recognise that in Germany the top four banks account for some 13% of lending to businesses, whereas in Britain the figure is 84%? That gives an idea of the diversity of banking in Germany, which obviously has a more successful manufacturing sector than we do.
Neil Carmichael
That is right, and a good point, which underlines the one I was making. I like statistics that do that, so I thank my hon. Friend. We simply must make sure that we have that kind of range and opportunity.
I wanted to discuss planning. We need a cultural change in local authorities. They must start to think in terms of economic growth, as well as slapping up houses, so to speak. We cannot have them being awkward about business planning applications. I came across a good example yesterday, relating to investment in our super-broadband highway. Too often planning authorities stand in the way of the very investment that is needed, by being awkward about granting planning permission; that is something we must deal with.
Procurement is the next area I want to mention. There is another great firm in my constituency: DuroWipers makes the best wipers imaginable for battleships, or any ships, in really rough weather. They will not break. What does the firm want? It just wants better access to the big buyers such as the Ministry of Defence. We say that we want small businesses to have that access, and we must make sure they get it. DuroWipers is a good example of the kind of firm that would benefit enormously.
My hon. Friend the Member for Filton and—
Neil Carmichael
Yes. My hon. Friend will have to speak up, because I am a bit deaf. He talked about apprenticeships. Training and skills are critical. In virtually every firm in my constituency where I have talked to people, they talk about that. ABB, a global leader in power transmission and distribution technologies, is a good example. In Stroud—in Stonehouse—one of its biggest factories employs 250 people and makes gear for the water and power industries. Sixty per cent. of its products are exported, so that is an example of success not just for local employment but in the sense of reaching out to markets. That firm keeps telling me that we must narrow the STEM skills gap—science, technology, engineering and maths—and it is right to say that.
That is a critical fact, and it means we must focus on maths and science in schools. We must ensure that pupils have access to good teaching, and that they get results that they are comfortable with, so that they can look for the jobs that are available, which will be good for them. That underlines the point I made before—but it keeps coming up in business—about the need for more contact with schools, and the need to get in early, to encourage young people to think of manufacturing and engineering.
One thing that I would like—I am not sure that we will get it, but the Budget is coming up, so I shall mention it—is national insurance relief for companies that support apprenticeships. That is an interesting idea and I am putting that marker down now. We need an update of careers advice, so that careers advisers are fully aware of the opportunities in manufacturing and engineering. Of course, ABB has had some successes in apprenticeships, because one of its apprenticeships is currently in the final of the Gloucestershire Apprenticeships Awards. That is great news; such local recognition is important to businesses and shows what good value apprenticeships are.
The Government have taken some great steps on research and development, but we must be sure that we do the best we can for those who are interested in it. It is true that the manufacturing sector, contains a large research and development sector, and that many firms produce groundbreaking products, but we must carefully manage the transition from academic research into the production of useful commercial products. I referred earlier to patents, and to firms such as Renishaw, which has a good relationship with academic organisations. However, we must think carefully about the question of patents. We need to ensure that the relationship between the academic and business worlds is mutually beneficial, and that it encourages the right degree of investment.
Jack Lopresti
Just for the record, my constituency is Filton and Bradley Stoke. My hon. Friend and I are virtually neighbours, so he should remember.
I wanted to ask whether my hon. Friend recognises the importance of university technical colleges in increasing the range of training and opportunity for young people, and providing the link between business, manufacturing and the education sector.
Neil Carmichael
I thank my hon. Friend for his correction about the name of his seat. I was slightly confused about it, because I know it is getting a new name in the boundary review, and I was discussing that with him yesterday. I apologise for my misunderstanding.
My hon. Friend is right. The UTCs are important. I fully support that initiative and I know that Lord Baker has been pivotal—as, indeed, has Lord Adonis—in supporting those projects. We want more of them. In my constituency, I have been vigorously promoting the engineering centre in Stroud college. Funnily enough, there is another link there with the constituency of my hon. Friend because the college has merged with the one in Filton—and quite right too, because is a good strategic alliance. The point I want to make is that it is necessary for engineering to be promoted in organisations, including colleges.
Mr Iain Wright (Hartlepool) (Lab)
I am enjoying the hon. Gentleman’s speech immensely and agree with much of it. What does he think about the decision of the Secretary of State for Education to downgrade the status of the engineering diploma? How will that help to promote engineering among young people?
Neil Carmichael
I thank the hon. Gentleman for that interesting intervention. Alison Wolf’s report is clear on the need for proper training in STEM subjects before beginning to worry too much about qualifications. It is right that there should be qualifications in engineering—and those are available in Stroud—but, as I have said, the STEM subjects need to be rigorously promoted in schools and colleges. Alison Wolf made a strong case for taking that line, and I hope the Government will pursue it with rigour.
I want to return to the subject of ABB, which is a member of the Enhancing Value taskforce launched by the Council for Industry and Higher Education. A report is coming out in July on how to make the most of UK research. I hope that the Government will read it and draw lessons from it, if it contains significant lessons; judging by the quality of ABB, I am sure that it will.
No discussion of engineering and manufacturing can fail to include a mention of the European Union. It is critical that we should recognise—as the Prime Minister did yesterday, powerfully—that 40% of our exports go to Europe. We are attached to Europe through all the supply chains that I have mentioned, and we must recognise that, in relation to trade development, Europe is a powerful magnet for interests and a strong promoter of our interests globally. A key point that came up in The Economist this weekend is the need to ensure that small firms can become big firms. We must look carefully at how the European Union is regulated and remove any barriers that prevent a small firm from growing.
Glyn Davies (Montgomeryshire) (Con)
I thank my hon. Friend for allowing me to intervene and to associate myself with his speech, almost all of which I agree with. The point he makes about small firms becoming large firms is crucial in a rural area. Manufacturing can be a key part in promoting a rural economy. I have spent quite a long time involved in this industry. In mid-Wales, the proportion of manufacturing has grown over 20 years from about 7% to 25%. In an imbalanced economy in which financial services are dominant, a concentration on manufacturing can be particularly beneficial in a rural area. Does my hon. Friend agree with that assessment?
Neil Carmichael
Definitely. My own constituency is rural. I have been celebrating, and will continue to celebrate, manufacturing on my patch. I have made it clear that there are still great opportunities for developing manufacturing and engineering in my rural constituency. The issue is to ensure that the right infrastructure is available, which I will come on to shortly.
Let me just finish the question on the European Union. The EU matters to us; we need to be there to promote our economic interests and the interests of our manufacturers and engineers, but the terms of the debate about Europe sometimes become confused. It is essential that we recognise, understand and promote the fact that Britain is part of the European Union and that Europe is a place in which we can and should do business in the most unregulated and appropriate way. We need to send out a signal to our businesses that we are behind them in that project.
There are one or two measures that I wanted to cover, but many of the interventions have already touched on them. One area of Government policy that has not been mentioned is the role of local enterprise partnerships. My own in Gloucestershire is doing some useful work in analysing the needs of businesses, the supply of skills, and the supply chain issues in connection with business. LEPs should work well with local authorities. As it happens, ours is coterminous with Gloucestershire county council, which is doing a huge amount of work in promoting economic development in our area.
A £100 million investment programme is under way and is geared towards focusing on better skills, which is consistent with the work of the LEP. It is also geared towards infrastructure. It has already contributed to the campaign to redouble the Swindon-Kemble line, which will improve the speed and quantity of our rail links, thus ensuring that we have infrastructure that is fit for purpose. It has also invested £7.5 million in broadband, to which I have referred. It is absolutely brilliant that our county council and LEP have a local focus. Critically, I applaud the Government for creating LEPs and for ensuring that local authorities work together and have a duty to co-operate in developing economic growth.
James Morris (Halesowen and Rowley Regis) (Con)
I congratulate my hon. Friend on securing this debate. He is making some important points about local enterprise partnerships. The black country LEP, which covers my constituency, has been instrumental in developing a skills agenda for the area, which is absolutely vital, and in getting investment into the i54 enterprise zone. Some £500 million of investment has come from Jaguar Land Rover, which is already having a big impact on the automotive supply chain in the west midlands. I went to visit the high-tech engineering firm Sandvik in my constituency. It said that demand for its machine tools is at a very high level, so I commend the black country local enterprise partnership for the work that it is doing in my area.
Neil Carmichael
I thank my hon. Friend for his appropriate and useful intervention. The fact of the matter is that we need a degree of co-operation; we need to work together. Business has recognised that partnership is a good thing. However, there is also a need for competition, so we need to strike the right balance between the role that Government agencies perform, which is largely through partnership, and the role that businesses perform, which is largely through competition. We need the right framework for partnership and for competition. That is how we should look on our relationship with the European Union, the Government and the local authorities.
As I come to the end of my speech, I must say that I am overwhelmed with this general sense of agreement. That is a message that I will promote not just here to the Minister but to my constituency. I am quite determined to ensure that Stroud is on track for economic growth and, broadly speaking, that the whole of Britain is too. The key issue is ensuring that our businesses can have access to the appropriate investment. We need to work hard to get the banking sector right so that that happens. I urge the Minister to think carefully about that. It is necessary to redouble our efforts to ensure that the STEM subjects have predominance in the school curriculum. It is no good just talking about manufacturing and not actually ensuring that young people are enthused to become involved in that critical sector.
Whenever I visit factories in my constituency, I am always struck by the cleanliness, the modern sense of technology, the new approach, the research and development and the fact that young people would, if they ever got there, be really impressed and encouraged, which is why it is so important that schools have a strong and sustained relationship with the world of business.
Finally, we ignore our relationship with the European Union at our peril. We must recognise that manufacturing and engineering are a core part of our country; they need to be grown, nurtured and developed. We can do that by having good relationships with the European Union—Germany, France, Italy and elsewhere. That is the key point on which I want to rest. I thank all hon. Members for listening.
Jim Sheridan (Paisley and Renfrewshire North) (Lab)
I congratulate the hon. Member for Stroud (Neil Carmichael) on securing this debate, which is crucial, given the stage we are at in the manufacturing cycle.
Let me start with an apology. I will be extremely brief because I have to attend a Select Committee at 10.15 am. I am extremely disappointed by the Opposition’s lack of interest in manufacturing, which is, I think, a result of the political selection processes in our party. We do not have enough people with a manufacturing background sitting on these Benches—not just the Opposition Benches, but the Government Benches. That has manifested itself in the attendance here today. I welcome the Minister to his new position and wish him every success for the future.
I have spent almost all my working life in manufacturing, whether it be in the shipyards of Glasgow, or working for the defence company, Barr and Stroud, which is now Thales, so I understand the importance of engineering and manufacturing. I take the simple view that we in this country will not survive by cutting hair alone. We need a strong manufacturing and engineering base.
The hon. Member for Stroud touched on the importance of apprenticeships. The previous Labour Government rightly focused on the need for education, and the need to get people into university. We have now reached a level where we need the same resources put into non-vocational skills, and we need to get people back into manufacturing.
Manufacturing is not seen as a sexy industry. In my time working with Thales, I saw many examples of young people coming into engineering as, say, lathe turners only to be seduced into the collar-and-tie side of the section—the buying section, the materials section, or whatever. They would not stay on the engineering side of the business, getting their hands dirty. However, I must say that I am greatly encouraged by the number of young women coming forward to become involved in high-tech engineering. Apprenticeships are extremely important if we are to survive as a country.
The other issue that I want to raise is procurement. Successive Governments have been dismal in using their procurement muscle to secure contracts and jobs. There is no worse example than the contract for the recently announced MARS project, for which, apparently, no British tenders were received. For the sake of Hansard, I should say that MARS is the military afloat reach and sustainability programme. I genuinely believe that there must be an inquiry into why British companies are not tendering for such contracts. I believe that, these days, some of our defence companies are becoming rather snobbish, in that they only want certain defence contracts on the high-tech side—contracts to build ships or whatever. The MARS ships will be massive supply carriers. As I have said before, when I was a shipyard worker, when I woke up in the morning I did not really care what I was building as long as I was building something, keeping myself employed and looking after my family.
I am extremely disappointed that we are losing the MARS contract to South Korea, a country that almost destroyed British shipbuilding in the 1960s and 1970s. Here we are again, going back down the road of giving contracts to foreign competition, such as South Korea. That could seriously damage our shipyards, because there are gaps coming up between the contracts for aircraft carriers that could have been filled by the MARS project contract. For us to surrender that contract and for none of our major defence contractors to have tendered for it is disgraceful; questions should be asked.
Jeremy Lefroy
Does the hon. Gentleman agree that it is absolutely vital that this country maintains a major shipbuilding capacity, and that we cannot simply let it go?
Jim Sheridan
The reality is that we live on an island; we therefore depend on ships, not just to supply us, but to defend us. It is important that we invest in skills in shipyards, and that we get people back into working in shipyards. I was there when the shipyards were almost closed in Glasgow and Govan; if it was not for Government intervention, they would have closed. I am pleased that they are now thriving, but there is still some work to be done. The hon. Gentleman is absolutely right that we need to invest in shipbuilding.
I want to touch on the issue of Europe. My other experience is of a situation that I found myself in with regard to the Ferguson shipyard, a very small shipyard at the tail of the bank on the River Clyde. That shipyard almost went out of business because of European legislation. Ferguson plays by the rules, as most British companies do; it listens to the civil servants who tell them what to do, while the French, Germans, Polish and others find ways—including by being economical with the truth—of getting shipbuilding contracts at prices that British companies such as Ferguson just cannot compete with. That is something that, from a European perspective, we need to find out about.
I spoke to the management of Ferguson at the time, who said quite clearly that bids for contracts were being tendered by Polish companies that were clearly using European objective 1 funding, and that under no circumstances could Ferguson compete for them; even if Ferguson would not make a profit from the contract, it could never have had any impact on the contract process at all. Again, we need to look at the legislation surrounding Europe, and see how we—and everybody else—compete within Europe, to make sure that we are operating on a level base and are not being sidetracked by people who are being economical with the truth.
The other issue that concerns me greatly—it has already been referred to—is the supply chain. Big multinational companies can survive, but the supply chain to those companies is crucial. I have found that small and medium-sized enterprises experience problems not just with banks—although the banks are important, in terms of lending money to make sure that companies survive—but with the paying of invoices by big companies. Those companies would hold money back from SMEs; the SMEs could not get paid. They therefore could not pay their bills and struggled to survive, or even went out of business. There is a responsibility on major defence contractors to treat the supply chain properly and pay their bills on time, so that we keep these small companies in business.
Rolls-Royce is an absolutely first-class company, and it is well organised, but unfortunately it has just announced, in my patch, that it is not taking on apprentices. That is somewhat disappointing, and we need to look at that, as do the Government. All of us have to consider why companies such as Rolls-Royce, which has an operation in Inchinnan, are not taking on apprentices. After all, Rolls-Royce is one of the leading companies in this country, and if it is struggling to take on apprentices, we need to find out why.
It would be remiss of me, as a Labour Member, not to mention employment legislation. I know that Government Members might disagree with me, but it is somewhat disappointing that a number of major companies left our island simply because it was cheaper to manufacture in the Czech Republic, China or wherever. A classic example from my patch is Hewlett Packard, which basically surrendered all its manufacturing base in Scotland and gave it to the Czech Republic. The workers in Scotland did nothing wrong. They were told, as we were all told, that if they worked hard, delivered on time, delivered quality, and so on, their jobs would be safe. That was what they did. That was the deal: “We, the workers, will work hard and deliver on time, to make sure that the product gets there on time, and on cost.” As for Hewlett Packard, some director sitting somewhere in Texas decided, “No, we can get this work done in the Czech Republic,” and that is what the company has done.
That story takes me back to my point about employment legislation. I know that people have different views on employment legislation, but it is far too easy for companies, particularly multinational companies, to say, “I’m sorry, we can get it done in another country”—wherever that country is—“far cheaper,” and exploit the labour in that country. That is why we have lost, and are still losing, a lot of our manufacturing base. Putting politics aside, we need to understand why manufacturing companies can easily up sticks and move.
It is annoying that after Hewlett Packard transferred that manufacturing base to the Czech Republic from Scotland, the company applied to the Scottish Government for a £7 million grant—and got it, which was rather foolish of the Scottish Government, in my view—to set up a call centre in exactly the place where the manufacturing operation had been. I disagreed with that at the time. The company was transferring manufacturing and we were losing all those skills, and then we as taxpayers gave a multimillion-pound company £7 million of taxpayers’ money to set up a call centre in exactly the place where its manufacturing operation had been.
Those are just some of the issues that I feel strongly about. I am passionate about manufacturing. I genuinely believe that if we do not have a strong manufacturing base, this country will be in a serious state. Again, I must say that I am somewhat disappointed in the turnout for this debate. I had hoped that there would be a lot more people interested in manufacturing. Perhaps we politicians need to look at how best we can get people with a manufacturing background, or a sense of manufacturing, involved in politics. I do not want to be discourteous, but I do not just mean business people in manufacturing; I mean people who have actually worked in manufacturing, and who have a feel for it. That will help to ensure that we go forward as a manufacturing nation.
Katy Clark (in the Chair)
I remind Members that if they wish to speak in a debate, they should stand up when a Member has finished his speech. I call Chris White.
Chris White (Warwick and Leamington) (Con)
Thank you for calling me to speak, Ms Clark.
I am pleased to follow the hon. Member for Paisley and Renfrewshire North (Jim Sheridan). I applaud his comments about shipbuilding, and his speech made very clear his passion for the manufacturing sector. I congratulate my hon. Friend the Member for Stroud (Neil Carmichael) on securing this debate, and on giving us the opportunity to discuss this important area of economic policy. I would perhaps disagree slightly with the previous speakers, in that sometimes in this House, it is when there is general agreement on the importance of a subject, as there is in this debate, that there is a smaller number of speakers. May I also congratulate the Minister on his new post?
As someone who has worked in the automotive sector, for MG Rover, I could not be more delighted to hear the news from Nissan this morning. Although I might be expected to say this as co-chair of the all-party group on manufacturing, it needs to be stressed that no long-term economic recovery is possible for our country without a long-term recovery in our manufacturing and engineering sector. Throughout the world, countries that have managed to protect and support their manufacturing capacity in the good years have bounced back stronger from the financial crisis that has weakened the sector. At present, 88% of our economy is in the service sector; industry comprises only around 11%, and agriculture 0.9%. In Germany, industry makes up nearly 30% of the economy, services 68%, and agriculture 2.5%.
None of us believes that we can turn the clock back completely to the days when Britain was the workshop of the world. However, if we are serious about rebalancing our economy towards a stronger manufacturing sector, we need a credible industrial policy. Only if we are able to focus the full attention of Whitehall on rebuilding our manufacturing sector will we be able to lay the foundation for future success in our economy. This is not a call for central planning or the nationalisation of industry, but a call for every Department and every official to pull in the same direction. We need the same level of consideration to be given to manufacturing as has been given to the financial and services sectors over the past 30 years. That will come about only if there is a co-ordinated strategy across Government, headed by a dedicated Minister for manufacturing, who pulls together the different strands of industrial policy, and who can be held accountable by Parliament, by industry, and by the public.
The all-party group on manufacturing will focus on the issue of the development of such a strategy in the weeks and months ahead. However, in general, the strategy will need to encompass three key areas: skills, export and finance. We need to have the skills in place to give our businesses access to the pool of labour that they need to grow and compete. We need to ensure that we give manufacturers, and particularly small and medium-sized companies, enough incentives to invest in skills for their employees, so that they feel confident in hiring new people and supporting their employees’ skills development over the whole life cycle of their careers in business.
Making our industry fit to export is vital. That does not mean that we should ignore manufacturing for domestic supply. Indeed, import substitution would be one of the best ways to enable us to reduce our balance of payments deficit, strengthen our economy and create a base for future export growth. In the long term, we need to be able to access the growing, emerging markets in China, India and south America. This means putting in place a strong system of export guarantees that match or beat those of our competitors; putting more resources into UK Trade & Investment so that it can champion the work of our manufacturers; and ensuring that we continue to push internationally for the reduction of trade barriers.
On finance, we need to ensure that our manufacturers are adequately supplied with credit. Britain historically has a low investment rate in its manufacturing sector. For example, on machine tool consumption, despite being the world’s eighth largest manufacturer, we are the world’s sixteenth largest consumer of machine tools. Without considerable investment in our manufacturing business, we will not be able to compete in the long term with emerging economies or advanced competitors such as Japan, Germany or the United States. Bold and radical policy prescriptions are necessary if we are to redress the balance; there could be a bank for industry, for example.
However, in the short term, the Government can take measures in the upcoming Budget to help support the sector, the most important of which would be to put in place 100% capital allowances for a two-year period, a proposal that has been put forward strongly by the EEF. This short-term measure would encourage companies, many of which are sitting on large cash reserves, to invest in new capital equipment to ensure not only that we make our manufacturers more competitive over the long term, but that we give a short-term boost to many businesses and improve order books. I urge the Minister to encourage the Chancellor to look favourably on that proposal. It would have a minimal cost to the Treasury, but a big impact on our manufacturers.
When it comes to manufacturers, we cannot afford to tinker round the edges indefinitely. I hope that the Government will continue to be bold in their thinking, so that we can, to quote the Chancellor, bang the drum for the “march of the makers”.
Jeremy Lefroy (Stafford) (Con)
It is a pleasure to serve under your chairmanship, Ms Clark. I congratulate my hon. Friend the Member for Stroud (Neil Carmichael) on securing this extremely important debate.
My first job after university was as a production foreman with Ford in Bridgend. I am delighted that that factory, 30 years on, is still there. In fact, Ford recently announced a £240 million investment in that engine plant. At the time, it was supposed to be the most efficient engine plant in the world. I believe it is still one of the top ones. The UK has a major role in manufacturing engines not only for the motor industry, but for all types of vehicles, including, for instance, construction equipment, which I will come on to later.
I have been passionate about manufacturing from the start of my career. I welcome the comments made by all Members who have spoken so far. In the past couple of years, there have been major announcements of investments, particularly in the motor industry. As has been referred to this morning, there has been a very welcome announcement by Nissan in Sunderland. There have also been announcements from: BMW in both Oxford and Hams Hall in Warwickshire, near the constituency of my hon. Friend the Member for Warwick and Leamington (Chris White); Toyota; Honda; and Vauxhall. Of course, there is also the welcome announcement that Jaguar Land Rover is building an engine plant at the i54 site, close to my constituency. The UK is a world leader in the design, development and manufacture of engines for motor vehicles.
In my constituency, the largest employer in the private sector is Alstom, which employs nearly 2,000 people. It is the only remaining transformer manufacturer in the UK. It is extremely important for the UK electricity supply industry and beyond, as it is involved in manufacturing in the transport and other sectors. I also have in my constituency Perkins, a part of Caterpillar, which makes very large engines to power generators around the world. Some 90% of production in my constituency is exported. As hon. Members have mentioned, manufacturing is by far the greatest earner of export revenue in this country; our manufacturing sector accounts for 54% of our exports.
I absolutely endorse what my hon. Friend the Member for Warwick and Leamington said: we need a long-term manufacturing strategy in this country. I refer hon. Members to my entry in the Register of Members’ Financial Interests. I want to highlight a report from the chairman of JCB, Sir Anthony Bamford, called “UK Manufacturing: Time to Make it Count”. I received it yesterday, which was timely. I recommend that every Member and every Minister reads it, because he makes very powerful points. He has the right to do so, because his is a private company employing several thousand people in the UK and 10,000 in total around the world. It is constantly investing in the UK, instead of choosing to outsource manufacturing to perhaps more convenient places. It continues to invest in people, plants, and research and development here in the United Kingdom.
Hon. Members have already covered much of the scene. I know that others wish to speak, so I will concentrate on two or three areas. On skills, it has already been mentioned that not enough women are going into engineering. In this country, the figure is something like 8.7%; in Germany, it is nearly double that. We can see the results in German manufacturing industry. We need to encourage more people, particularly women, to go into engineering and take it up, not only at degree level, but at apprentice level.
I want to concentrate particularly on finance. I have already referred to the fact that in Germany companies have a far wider range of banks from which to choose. Reference has been made to Handelsbanken; I welcome its growth in this country, because it is committed to this sector, but I want to see more local and regional banks and more mutuals—something to which Sir Anthony Bamford refers. As my hon. Friend the Member for Halesowen and Rowley Regis (James Morris) mentioned, in our area, the Black Country Reinvestment Society is steadily growing and committing funds to local manufacturers.
We have already heard about this country’s export credit guarantee scheme. It is a good scheme, but not nearly good enough. Over the past nine years, Germany’s equivalent scheme has advanced or guaranteed eight times more finance than the UK has done, and the results show. We must do more on export credit guarantee. It is not just a drain on the Treasury. People pay for insurance, and it allows them to get from the Government the backing that they cannot get from commercial markets.
That is particularly relevant if we consider where the world’s growth areas are. Six of the top 10 fastest growing economies in the world are in sub-Saharan Africa. Anyone who goes there now, as I do frequently—I lived there for 11 years—will see huge opportunities. Just last month, when I was in Kenya as part of the armed forces parliamentary scheme, I was delighted to see products by JCB and other British companies; I had not seen that there before. There are huge opportunities, and we neglect them at our peril.
I would like to comment on the provision of equity finance. We in this country are poor at equity finance. I welcome the fact that the banks have set up the business growth fund, which should not be confused with the regional growth fund. The business growth fund is like a renewed 3i—Investors in Industry. However, I urge the banks to consider a slightly lower threshold. At the moment, they are considering investments of £5 million or more, and businesses with a turnover of £10 million or more. Many smaller manufacturing businesses would welcome investment; in fact, they are the ones with potential for growth. I urge the banks not to say that it is too expensive to consider smaller businesses, but to see them as an opportunity.
To return to the question of ownership, we in Britain seem to be good at giving away ownership of our manufacturing businesses. As the hon. Member for Paisley and Renfrewshire North (Jim Sheridan) said, the problem is that however competitive the UK is, if a company is not headquartered in the UK, it will not have the emotional pull to invest here—an emotional pull shown by JCB, for instance, which is headquartered here. I am not saying that we should not encourage foreign investment—we welcome it—but at the same time, let us build up home-grown major manufacturing businesses like JCB, Rolls-Royce and others that have been mentioned.
My final point concerns energy costs. There has been a lot of debate in the House recently about energy-intensive companies, working in areas such as steel, ceramics and glass, which are vital to this country’s manufacturing base. I welcome the Government’s recognition of that importance, but we must ensure that we do not unintentionally cause those industries to migrate overseas as a result of things such as the carbon price, which will come in next year. We can be sure that they will not reduce the amount of carbon that they produce. In fact, in the places to which they go, they might be allowed to produce more carbon. Those industries in Britain have a proud record of cutting their carbon emissions over many years, and I give the last Government credit for that.
Ian Swales (Redcar) (LD)
As vice-chair of the all-party energy intensive industries group, I would like to comment on that point. I am late for this debate because I have just met Tata Steel, which has a £50 million cost disadvantage in the UK compared with its French competitors as a result of energy prices—and that is now, before various other measures have come into effect. I totally support my hon. Friend’s comments about energy costs.
Jeremy Lefroy
I thank the hon. Gentleman for saying that. Considering energy costs should be part of a long-term Government approach to manufacturing, and I welcome the chance to raise the issue in this debate.
Glyn Davies (Montgomeryshire) (Con)
Thank you for allowing me to speak, Ms Clark. I anticipate making a short contribution to the debate. In fact, I did not intend to speak; I came here to listen to the debate, which I congratulate my hon. Friend the Member for Stroud (Neil Carmichael) on securing, as I thought it was hugely important. However, as the debate unfolded I decided that I wanted to contribute a couple of important points. The first follows up on an intervention that I made about the impact on manufacturing in rural areas. I represent and have lived my whole life in a rural part of Britain—mid-Wales. Although I am a farmer by background, I spent a lot of my life involved in regional development, or what we term rural development. I was chairman of a local authority planning department for several years, and then I was chairman of a development agency responsible for mid-Wales.
When I was holding strategy discussions with senior officials about how I would begin to do that job, the British economy was becoming increasingly focused on financial services and the service sector. We did not think it was possible to develop the economy in mid-Wales, or indeed to transform it. It was in serious decline after the loss of jobs in agriculture and steel in neighbouring areas. The view that we took was that manufacturing was the route on which we should concentrate.
Over about 20 years—I gave the figures earlier—the proportion of manufacturing jobs in mid-Wales increased from about 7% or 8% to about a quarter of the work force, dramatically changing it. While the Government had a policy of intervention, which they do not have now, and while there was a Development Board for Rural Wales and a Welsh Development Agency to support it, the whole environment of mid-Wales was transformed. It became a dramatically important place, and we managed to do that on the back of manufacturing. There was no other way that we could have done it.
Another great benefit was that because mid-Wales is a sparsely populated area, the strategy involved growing very small manufacturing companies. That can be done in rural areas. It involved one and two-man businesses. They were success stories for us. We grew them. That is another fundamental platform on which a manufacturing industry can be based.
James Morris
I come from a constituency that contrasts with that of my hon. Friend—the black country in the west midlands. It was a great area for steel-making and industrial capacity, and is now having to be revived. Does he agree that one way that we can re-energise the manufacturing base is through enterprise zones? That is a good policy implemented by the Government. We should be looking to extend those enterprise zones and provide further enhanced capital allowances to encourage manufacturing investment.
Glyn Davies
Indeed. I thank my hon. Friend for that intervention. It is not only about enterprise zones but about learning from them and perhaps extending the principles underpinning them across the country. As Ministers often mention, we have ended up with an imbalanced economy in Britain, because for decades we have not concentrated enough on manufacturing. We have looked to financial services and the service industry as the answer, but manufacturing has not been given its proper place in our economic strategy.
I will comment briefly on the biggest threat to manufacturing in my constituency. Policy on manufacturing is devolved to the National Assembly for Wales—I will not cover that in this debate—but that is not the biggest threat by a long way. Every business that I talk to now is worried about the impact of onshore wind development in mid-Wales. A huge project is proposed, and the whole manufacturing sector faces the prospect of the roads of mid-Wales being completely clogged up for the six, seven or eight years after the mid-Wales connection project is approved.
I cannot overstate the impact that the project will have. Businesses are already discussing moving out, because they will not be able to develop. At least three companies—manufacturing businesses that depend on transport—have written to me already to say that if the project goes ahead, they will not be able to function in the area. The impact of the project must be part of the Government’s understanding here at Westminster of what they are doing when they consign mid-Wales to becoming little more than an onshore wind farm landscape.
My final point is one that my hon. Friend the Member for Stroud referred to in his introduction. Again, I draw on my experience as chairman of a planning authority, which was my first venture into public life. I did that job for seven years, and I realised that it was crucial for the body responsible for the planning process in a local authority to have a close connection to economic development. Apart from dealing purely with planning regulations, looking at a chart and saying yes or no, we have to inject into the process the impact that plans will have on the local economy.
Yesterday I went to a business that wanted to change the use of its site. It would be hugely important for the town where I live, Welshpool. The planning authority is concerned about access. The business has satisfied the authority on access but the authority is insisting on a complete revamp of the whole site. The authority will therefore make it impossible for the business to continue on that site, and the company has said that if it cannot get what seems to be a sensible change-of-use agreement, it will have to move out. That is happening purely because those responsible for dealing with the planning application are not charged with any responsibility to promote economic development. There has to be a close link between those two objectives of a local authority if we are to have a sensible approach that will enable us to maximise the benefits that our nation can get from manufacturing.
Mr Iain Wright (Hartlepool) (Lab)
It is a pleasure to serve under your chairmanship, Ms Clark. I congratulate the hon. Member for Stroud (Neil Carmichael) on securing a timely and excellent debate, and I agree with a lot, if not all, of the points that have been raised.
There was a similar debate on manufacturing on the Floor of the House in November. I mentioned at the time that we do not debate manufacturing as much as we should in the House. However, we have had two debates on manufacturing in the space of about 100 days, on top of an important speech that my right hon. Friend the Leader of the Opposition is making, even as we speak, on the case for patriotism not protectionism in business policy, to the first ever manufacturing conference of the EEF, which the hon. Member for Stroud mentioned. They are testimony to the belief that manufacturing and engineering have to play a central role in our economic future, and policy makers are waking up to that.
A thriving and diverse manufacturing sector, in which British firms design, innovate, engineer and simply make things, is vital if this country is to pay its way in the world. I hope this debate has shown that manufacturing still plays an important role in the British economy. Hon. Members have quite rightly highlighted manufacturing excellence in their constituencies. We remain the seventh biggest manufacturing nation on earth. We have the largest aerospace industry in Europe and the second largest in the world after the United States. That is something to be proud of, and something that we need to nurture and support as much as possible.
The automotive industry has been mentioned a number of times in the debate. Nissan’s announcement today is very welcome news. Once, the British car industry and the phrase “British Leyland” were the epitome of all that was wrong with British industry—it was uncompetitive and obsolete. Now, however, our automotive industry is one of the most productive in the world, and we should be proud of that.
However, let us be honest: we have relied far too much on far too few sectors and too few regions in this country for economic growth. In the past three decades, Britain lost more industrial and manufacturing capacity as a proportion of its economy than any other leading developed nation. As has been mentioned in the debate, the hollowing out of the UK’s industrial supply chain over the past 30 years has made us ever more reliant on our competitors for raw materials, basic products and increasingly, as the likes of China and India move up the value-added chain, innovation, and research and development.
We therefore need a much bigger push towards manufacturing. I was struck by the comments made by the hon. Member for Stafford (Jeremy Lefroy), who mentioned Sir Anthony Bamford, the chairman of JCB, and his report. Sir Anthony knows a thing or two about industry. His warning last week to the Prime Minister is stark:
“Germany’s focus on value-added products sets it apart. It has a manufacturing strategy which the UK doesn’t. If our politicians fail to deliver a coherent long-term manufacturing strategy, and quickly, we will fall into an economic abyss from which we may never emerge.”
That is absolutely right. The whole House needs to pull together in unity to ensure that we have a long-term economic vision with manufacturing at its heart in order to see the jobs and wealth that this country needs.
My first question to the Minister is: what is the Government’s response to Sir Anthony’s report? He made a nine-point plan to boost manufacturing and engineering, including increasing capital investment by tax incentives, expanding the Export Credits Guarantee Department to ensure that we export more, encouraging more banks to set up in the UK to boost competition, and improving in general the public image of manufacturing through media campaigns. Will the Government implement in full Sir Anthony’s recommendations?
Other senior industrialists have echoed that view. Sir John Rose, the former chief executive of Rolls-Royce, has said:
“We need a framework, or a business route map, to create context, drive focus and help prioritise public and private sector investment.”
I absolutely agree.
John Cridland, the director general of the CBI, stated in a speech in November:
“What’s needed is a new form of industrial policy, one that signals ambition, helps develop future capabilities and secures sustainable growth…A new understanding needs to run through all of Government. Industrial policy might be based at the Department for Business, but all Departments need to share the same ambition. They all need to work to join up policies and create a system that’s more than the sum of its parts.”
Again, I absolutely agree with that. We need a more joined-up and co-ordinated approach, not just in the Department for Business, but across Whitehall. The nub of much that I want to say today is that we do not have a joined-up approach to manufacturing and engineering in the Government.
It is not just senior industrialists who are calling for clarity; the Business Secretary is lobbying hard on the matter, as was seen in a letter that he wrote recently. He said:
“There is something important missing: a compelling vision of where this country is heading beyond sorting out the fiscal mess; a clear and confident message about how we will earn our living in the future.”
I could not agree with the Business Secretary more, but I fear that the joined-up approach that is being called for by the CBI and other industrialists is simply not happening.
The Government’s sole economic priority is deficit reduction. I fear that if we cut too far and too fast, far from allowing private sector enterprise to bloom, we will choke off competitiveness and undermine our manufacturing base still further. On the one hand, the Government stress the importance of science, research and development and innovation as a means of supporting our manufacturing and engineering base, but on the otherhand unlike any other developed nation in the world, they are cutting the science budget by 15%. The Government stress the importance of an industrial strategy in defence to help British industrial capability, but at the same time they have published a White Paper that prioritises the purchase of off-the-shelf, sometimes foreign, military equipment. That is why the director general of the CBI, in responding to the White Paper, urged the Government not only to get the best value for taxpayers but to
“take into account employment and industrial implications of decisions.”
My hon. Friend the Member for Paisley and Renfrewshire North (Jim Sheridan) mentioned the awarding of contracts for Royal Navy fuel tankers to South Korea. What was the Department doing when the process was going through Whitehall? Why was it not working with the British supply chain to ensure that UK companies could bid for such contracts? Why on earth did the Under-Secretary of State for Defence, the hon. Member for Mid Worcestershire (Peter Luff), allegedly say:
“We don’t build tankers in the UK”?
Who on earth is batting for Britain in Whitehall on major procurement decisions if that is the attitude of Ministers?
Several hon. Members mentioned the importance of procurement, and they are absolutely correct. Governments can help shape markets—the Government are often the biggest customer and can often drive innovation and competitiveness. It is frustrating that the Government are not using procurement and the power that they have to back British business and support jobs, skills and innovation, and therefore enhance British competitiveness. I agree with the TUC, which stated that the UK should have a
“procurement policy guided by the principle that every pound of taxpayers’ money should contribute to jobs, skills or the strength of the British economy.”
Yes, procurement should be based on securing best value through competition, and sometimes some British firms will lose out, but let us have a procurement regime that looks at value in the widest and most effective sense. I quote again the TUC, which said that
“a procurement regime that is simply based on lower cost, offering nothing to the long-term development of the British economy, has no place if our industries are to reach new levels of competitiveness.”
We saw the debacle of the Bombardier decision on buying trains; let us not have the same mistake again. Let us ensure that our business policy emphasises manufacturing, but also ensures that we can back British business—patriotism is not protectionism.
Jeremy Lefroy
I am following very carefully what the hon. Gentleman is saying. Does he agree that if we allow our capacity to build ships or trains to disappear, we will be held over a barrel by other manufacturers around the world because we will not have an alternative at home?
Mr Wright
I agree absolutely with the hon. Gentleman. Many people accept, quite rightly, the importance of not being too reliant on foreign sources of energy; that is why we need to ensure that we have a diverse energy policy. Frankly, we need the same approach for manufacturing—we should not be too reliant on our foreign competitors. We need a vibrant steel industry and a vibrant shipbuilding industry to ensure that we have that capacity, and that we produce the next generation of ships and use steel for offshore wind—that is exactly what we need to do.
Let me turn to another important issue, which I mentioned in an intervention on the hon. Member for Stroud: the tie-in between manufacturing, engineering, the wider point about business and schools, and our education system. If we are to see engineering and other STEM subjects rise in cultural importance, it is vital that engineering qualifications have at least parity of esteem with more liberal arts-based subjects. That is why, as I mentioned in my intervention, the decision of the Secretary of State for Education to downgrade the value of the engineering diploma from the equivalent of five GCSEs to just one is simply wrong.
In the previous Government, I was the Minister with responsibility for 14 to 19 reform and apprenticeships. I had responsibility for the engineering diploma, so I feel protective towards it. It was, and is, a high-quality and rigorous qualification that has the support of business and backs the interests of many of our brightest young children. The downgrade is the wrong move if we are to promote engineering. Do not take my word for it. Dr Mike Short, president of the Institution of Engineering and Technology, along with 16 senior industrialists, put his name to a letter to The Daily Telegraph that said:
“The Engineering Diploma is widely recognised as a significant route to providing the crucial technical and practical skills that young people will need to build a Britain that can compete effectively and internationally where technology can make such a difference to our digital world. Industry and the professional engineering institutions have worked extensively to make this 14-19 qualification a highly robust and attractive qualification, which now appears to be being undermined by the Government's premature decision to downgrade its worth.”
Ian Swales
Does the hon. Gentleman agree that when I asked the Secretary of State for Education a question on this subject a couple of weeks ago, his answer that the engineering diploma had to be seen as level with physics, chemistry or biology showed a basic misunderstanding of what the engineering diploma actually is?
Mr Wright
The hon. Gentleman is absolutely right. For far too long, we have had a culture that considered academic subjects to be successful, and vocational and engineering-based qualifications to be somehow second rate. Germany does not have that culture, which is why it has a flourishing manufacturing sector. We need a similar parity of esteem in this country; otherwise, we will never be able to achieve our potential in manufacturing and engineering.
The world will not wait for us. We need a sense of determination and urgency in light of the fiercest competition the global economy has ever known. Instead, and to my utter frustration, we have a sense of drift and a lack of co-ordination from the Department for Business, Innovation and Skills, and across Whitehall. The time is now, as senior industrialists, the CBI, the TUC, and hon. Members here today have said, to play to our strengths, seize the opportunity and put manufacturing and engineering at the heart of the economy. The Government need to act now.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Norman Lamb)
It is a pleasure to serve under your chairmanship, Ms Clark.
I congratulate the hon. Member for Stroud (Neil Carmichael) on securing the debate on an important subject. May I also say that all the key points in his contribution were excellent? He is a keen advocate of manufacturing and engineering companies, both in his constituency and nationally. The Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford (Mr Prisk), who has responsibility for business and enterprise, is looking forward to opening the Stroud manufacturing festival on 23 April, which is an excellent initiative that will promote the case for manufacturing. The hon. Member for Stroud demonstrated the most remarkable array of different types of manufacturing in his constituency.
The hon. Gentleman also highlighted the importance of inspiring young people. I heard recently of a survey of youngsters, aged 11 or 12, on what they wanted to do when they grew up. None of them talked about manufacturing, making or designing things. We have to change to that culture and it will take a while. The National Careers Service, which is being launched in April, will work with STEMNET, a body that promotes STEM subjects in schools. It is running a scheme of STEM ambassadors—industrialists, academics and so on—who go into schools to talk to children to try to inspire them, and to think about manufacturing as an option.
Various people have raised the importance of getting women into manufacturing. The hon. Member for Stafford (Jeremy Lefroy) made a comparison with Germany. If we are to make the maximum use of the skills available in this country, we must open up engineering and manufacturing to both sexes, rather than it being the almost exclusive preserve of men.
Mr Iain Wright
Does the Minister think that the downgrading of the engineering diploma qualification is a good and positive thing that will promote engineering to our young people?
Norman Lamb
I absolutely agreed with the hon. Gentleman when he talked about parity of esteem between the vocational subjects, including engineering, and the more academic subjects. In recent years, including during his own party’s tenure in government, that has not existed—there has been no parity of esteem. The vocational, practical subjects have been downgraded in the public mind, and the Government are doing a lot to re-establish them. The university technology colleges initiative is valuable in that regard. On his particular point about the engineering diploma, it is a complex issue with the interaction of school tables. However, the principal learning in engineering—the engineering core of the diploma—will be recognised. That in itself is a vote of confidence. I therefore reject absolutely any idea that the Government do not see the importance of parity of esteem.
I want to mention the fantastic news from Nissan in Sunderland—mentioned by a number of hon. Members—which offers the potential for 2,000 jobs. The shadow Minister was generous in applauding that great news. There are a number of challenges and we hear stories that go in the other direction. However, when we have news that demonstrates a very clear vote of confidence in the UK economy, we should applaud it. The extent to which the automotive industry in this country now leads the way—hon. Members have talked about the fact that we are a world leader in motor vehicle engines—means that we have an enormous amount to build on.
The future of manufacturing is an issue being debated not only in the House, but, as we have heard, at high levels elsewhere today. My right hon. Friend the Secretary of State for Business, Innovation and Skills will address the inaugural EEF manufacturing conference today, as will the Leader of the Opposition. The Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford, has been speaking at the automated Britain conference this morning and will address the Institute of Mechanical Engineers manufacturing conference tomorrow. He and my right hon. Friend will make it clear that manufacturing growth is one of the highest economic policy priorities for the Government. It is important to stress that.
The UK is recovering from the biggest financial crisis for generations and the deepest recession of almost all the major economies. We are still feeling the shocks from the eurozone’s sovereign debt crisis. The recent agreement with Greece, although welcome, is not a panacea. One of our first decisions in government was to place manufacturing at the heart of our economic strategy. I reject the shadow Minister’s charge that there is any sense of drift. The Department is focused on manufacturing. The Minister of State leads on manufacturing: he devotes attention to it, and he is closely interested in doing everything he can to support growth in manufacturing.
In placing manufacturing at the heart of our economic strategy, we were under no illusion about the challenge that we faced in turning UK manufacturing around. In the UK, manufacturing as a percentage of the economy fell from just over 22% in 1990 to around 10% in 2010. The decline of manufacturing has been significant, in marked contrast with Germany, which has sustained that share of the economy much more successfully. We have learnt from the mistakes of previous Administrations
Ian Swales
I welcome the Minister’s comments about the importance of manufacturing. Does he agree that even figures such as 10% or 12% far understate the importance of manufacturing to our economy, because so many service sectors, such as logistics, energy and so on, depend on having a manufacturing sector? Will he join me in welcoming the fact that manufacturing employment in the north-east has risen every month for the past 22 months, which shows that the Government’s policies are helping?
Norman Lamb
I applaud my hon. Friend’s work promoting manufacturing, not only in his region but nationally.
Norman Lamb
May I deal with the previous intervention?
My hon. Friend the Member for Redcar (Ian Swales) is right to stress the importance of manufacturing in its own right and in respect of services. If we are to get out of economic difficulties, building exports partly based on smart manufacturing is essential. I am conscious that time is tight and I have already given way to the shadow Minister—
Norman Lamb
I would prefer to continue to make my points, despite the hon. Gentleman’s tempting.
There is an absolute necessity to shift activity away from consumption and public expenditure, towards investment and exports. The hon. Member for Montgomeryshire (Glyn Davies) made a good point about rural areas and small companies that can grow. In my very rural constituency, more people are employed in manufacturing than in agriculture. Manufacturing is important in all communities throughout our country.
One of the first things that we had to do as a Government was deal with the deficit. There is a divide on this matter between this Government—the coalition parties—and the Opposition. We believe that to re-establish confidence in the UK economy it is essential that we deal with the deficit effectively. We are clearly starting to succeed in that effort. On those foundation stones it is possible to rebuild. The actions we have taken have helped to restore stability and consolidate the UK’s triple A credit rating, which in turn will make this country more attractive to investors. Our job is to help manufacturers maximise their competitive advantages, thereby stimulating economic recovery and reanimating the spirit of industrial enterprise in this country.
Hon. Members have mentioned the importance of finance. In that regard, there are comparisons to be made with Germany, again, which has a large number of local banks, as does America. The concentration of banking in just a few hands in this country is a problem that is well identified. We have to ensure that our successful growing businesses have access to the finance that they need, including equity finance—another matter mentioned by the hon. Member for Stafford.
Hon. Members, including the hon. Member for Montgomeryshire, mentioned the importance of planning. The Government are taking steps to reform radically our planning system, introduce a presumption in favour of sustainable development and ensure that local authorities recognise the importance of facilitating growth in that way.
Last year the Government issued a plan for growth alongside the Budget, which set out a range of actions to stimulate growth in the manufacturing sector, and over the past year we have made progress in a number of areas. I want to deal quickly with some examples.
We are supporting the technological innovation that underpins competitiveness, which is critical. First, we are setting up a network of technology and innovation centres, known as catapults, to smooth the path from original research to commercial success. The first catapult, launched by the Secretary of State at the Technology Strategy Board’s innovate conference last year, is focusing on high-value manufacturing, funded with £140 million over six years. Catapults for offshore renewable energy, an important sector for the UK economy, were launched last month and will be created in 2012, along with catapults for cell therapy, satellite applications and the connected digital economy. The full network of seven catapults will be completed and fully operational in 2013. Many of these initiatives are in accord with Sir Anthony Bamford’s report, which we welcome and are considering. There is a lot of common ground in that report and what the Government are doing.
Secondly, we have modernised the manufacturing advisory service and increased its funding, including an extra £7 million to support supply chains, as mentioned in the debate. The revamped service will work with businesses, especially small firms, to improve their productivity, which is still a challenge for this country.
Thirdly, we have introduced a £125 million supply chain initiative, working with major UK-based manufacturers to rebuild capacity and ensure that more of the components and associated services they require can be sourced in this country. Fourthly, we have introduced a £250 million support package for energy-intensive industries, which the hon. Member for Stafford and my hon. Friend the Member for Redcar mentioned, to help offset the costs of the carbon price floor. The Government want to ensure that those industries can remain in this country and remain competitive.
Finally, we are establishing the Green investment bank, an innovative and exciting new concept, and expect to make an announcement about its location shortly. The bank will invest up to £3 billion, initially in five priority areas: offshore wind power generation, which is essential for this country’s energy security; commercial and industrial waste processing and recycling; energy from waste generation; non-domestic energy efficiency; and the green deal.
Norman Lamb
I have not got time.
On exports, the hon. Member for Stroud mentioned engaging with the EU and ensuring that our largest market—the single market—is exploited effectively by this country. Whatever our views about the EU, we must recognise the importance of taking every opportunity we can to export through the EU. We must also focus on emerging markets, where there is enormous potential to grow our exports.
Let me mention the regional growth fund. An important element in rebalancing the economy is the use of limited public funds to leverage in private investment in areas of the country that have relied too heavily, under previous Administrations, on the public sector. Nissan is a perfect example of how a bit of public money can leverage in substantial amounts of private funding for this successful initiative.
We are working hard to encourage and support British manufacturers and create an environment where they are free to thrive and compete in a global marketplace. Two weeks ago, we held a second manufacturing summit, which gave ministerial colleagues and me the opportunity to discuss and agree what more should be done to help us meet these challenging ambitions. We want UK industry to be our partner in achieving economic transformation and recovery. This strategy places world-class manufacturing at the heart of a healthy and balanced UK economy.