UK Manufacturing Industry

Lord Bilimoria Excerpts

Thursday 8th December 2011 Lords Chamber

[Lord Bilimoria]

My Lords, we had a debate on manufacturing almost exactly a year ago. Looking at the speech I made then, I felt that I could almost repeat it verbatim today. My point is that not a lot has happened and not much has changed in the past year with manufacturing. What has changed is that the economy has become more and more gloomy. The Government's predictions are completely up the spout, with us going into recession almost throughout this year, bumping along the bottom, with the risk of a double-dip recession. On top of that, we have had the domino effect of the subprime crisis, starting four years ago, now to the eurozone crisis, which in turn threatens to pull the whole world into depression.

What has happened to manufacturing all this time? The Government talk about a balanced economy, but what is the reality? In his autumn Statement last week, the Chancellor mentioned manufacturing only three times. What are the Government doing to incentivise manufacturing? It is a sector that in the early 1970s made up 30 per cent of GVA, employing 5 million people, but today makes up just 11 per cent of GVA and employs only half the number, 2.5 million people. I ask the Government bluntly: are they all talk? In fact, are they doing enough talking? Are the Government making manufacturing a priority? Can the Minister respond to this?

I thank the noble Lord, Lord Haskel, for initiating the debate at this time because just this week we have heard that British manufacturing is heading for a sharp slowdown as confidence, orders and output tumble. The EEF and BDO revised their forecasts for 2012 manufacturing growth from 2.2 per cent to 0.9 per cent. In October, the manufacturing sector shrank 0.7 per cent. Furthermore, if the Government were serious about manufacturing, we would be taking steps to incentivise the sector. At the moment, taxes are too high. The 50p tax rate is pushing away inward investment, with national insurance being increased, and employment laws are coming across from the EU with no talk about us repatriating our powers while the EU crisis is going on. It would seem that now is the ideal time to be having that discussion.

What has helped Britain over the years has been our open economy and our flexible labour force. But the more we get hampered by EU regulations, the less attractive we are to inward investors. Manufacturing is about not just home-grown manufacturing, but attracting manufacturing from outside. The Tatas invested in Jaguar Land Rover, a company that was in the doldrums, a company that no one wanted to buy. When the Tatas went to the Government for help, the noble Lord, Lord Mandelson, chose not to support them. They supported themselves and stood by their guns. Look at the company now: even in this environment it has made a £1 billion profit. Tata is an Indian company founded by a Zoroastrian family, my community of which I am proud to be a part. It is now one of the leading manufacturers in Britain.

What about India? India broke on to the world stage through IT, outsourcing and BPO, but it is actually a manufacturing nation, with manufacturing making up 25 per cent of its economy. India wants to increase that. We are going to be left behind. We have the cutting-edge capability which we have heard about. We have the support of the best creative industries, the best design, the best accountants, the best lawyers in the world; it is all there. The knock-on effect is that every two manufacturing jobs created lead to another seven jobs further down the supply chain.

I say to the noble Lord, Lord Lee, that I practise what I preach. As the founder and chairman of Cobra Beer, I always say with pride that, first and foremost, I am a manufacturer. We have a joint venture with Molson Coors, one of the largest brewers in the world, and produce our beer in Burton-on-Trent, the biggest brewery in Britain, where, I am proud to say, in the past year since the previous debate on manufacturing, we have won two Monde Selection medals in the world quality awards, taking our total tally to 55 gold medals in 10 years, most of them produced here in Britain.

We can do it. We are capable of world-class, world-beating manufacturing. The Government have just got to make it a priority. On exports, I am proud to say that in the past year Cobra’s exports, made in Britain, have increased 16 per cent year on year. We are outside the euro. We are in control of our own destiny. In India as a child, when I saw that a product was “Made in Britain”, it said “quality”. We are still capable of being the best of the best.

What about finance? Research shows that 70 per cent of SMEs cannot get finance. As reported through the CBI, a leading bank has been telling clients not to apply for the Government's Enterprise Finance Guarantee scheme, the replacement for the Small Firms Loan Guarantee scheme that helped my firm get off the ground, because the bank does not want to take the 25 per cent risk even though the Government are guaranteeing 75 per cent. The Government have got to make the banks support businesses.

On top of this, are the Government doing enough to create today’s 3i? When the Government backed the creation of the Industrial and Commercial Finance Corporation, which was to become 3i, in 1945, it did so much to nurture the entrepreneurial potential of Britain in bleak times. Can we not create similar large-scale organisation backed by the Government?

To conclude, we have to act now. The situation is getting desperate. Manufacturing means the creation of jobs and employment. It means generating taxes, which means paying for the public services from which we all benefit. I am sorry to say that my impression is that the Government's vision for manufacturing is a little blurred. It needs a target. We need 20/20 vision. Perhaps 20 per cent of GDP by 2020 is a bit ambitious, but the Government need to be focused, concentrating and confident with regard to manufacturing. I do not want to be standing here a year from now quoting from my speeches this year and last year. To quote the poet and Nobel laureate, Rabindranath Tagore, the 150th anniversary of whose birth we are celebrating this year:

“Where the mind is without fear and the head is held high …into the dreary desert sand of dead habit… into ever-widening thought and action… Into that heaven of freedom, my Father, let my country awake”.