Economy: Manufacturing

Lord Flight Excerpts

Thursday 3rd July 2014 Lords Chamber

[Lord Flight (Con)]

My Lords, I add my congratulations to my noble friend Lady Wilcox on both her speech and her commitment to manufacturing. I echo her comments about the noble Lord, Lord Bamford, and pay tribute to what he has achieved for the British economy. It is welcome and good that he has joined this House.

It is great to see manufacturing now recovering, and I would point to two important things. The first is the point made by the noble Lord, Lord Giddens—that much of the supply chain that has been overseas is now starting to come back to the UK. The plates are moving: the financial advantages of manufacturing in China are now far fewer. Secondly, although productivity has, disastrously, not grown overall in the past decade, it has grown by about 1.4% per annum in manufacturing, while actually falling in the service sector. So although it has had a rough time, the manufacturing sector has managed to raise productivity. I do not wish to be complacent, but 16 months of manufacturing expansion and second quarter growth of 2% is pretty good. Productivity is rising further; domestic and international order books are full. This is about the best climate for manufacturing for a generation.

Others have talked about the British car industry, in which 750,000 people now work. Investment is up, as is demand for new models; the supply chain is, as I said, coming back to the UK; and vehicle production of about 2 million per annum is expected by 2017. Domestic car manufacturing is up by 10.3%, representing £64 billion of GNP. There has been a 9.7% increase in investment in new technology, worth about £1.9 billion. My noble friend Lord Lyell referred to the pharmaceutical industry, the gross exports of which amount to £20 billion; with net exports standing at £4.9 billion, not just £2 billion, they have virtually doubled. This is another industry in which Britain is very strong, with the help of Oxford, as has been mentioned; some £4.3 billion was invested in research in the past year.

I welcome some particular things that are happening beyond this. A huge expansion in entrepreneurship is going on. My noble friend Lord Young is to be congratulated on having got this going many years ago. The new generation is much more willing to give it a go. Some 35% of people coming out of school are quite happy to have a go at setting up their own business. The number of new, young businesses is huge: there are now more than 4 million in this country. There is a huge growth in new technology, and not just in the Greater London area. The new technology can be—and often is—exploited easily by SMEs. I declare an interest as chairman of the Enterprise Investment Scheme Association, a government scheme which offers tax incentives to put risk capital into small businesses. The amount put in last year doubled, as it did the year before. Some £12 billion of risk capital has now been put up and it looks as if it will double again this year because there are now a lot more professional parties involved in finding the right businesses to invest in and monitoring those investments. There is also a real boom going on in risk equity for SMEs.

I pay great tribute to what my noble friend Lord Young has just said about motivating people. I am sure that he would want to join me in paying tribute to what my noble friend Lord Baker is achieving. The university technical colleges are brilliant and are supplying a real need, both in motivating young people who often do not get motivated in mainstream schools and in helping them get the skills where employment is good. My wife has been involved in getting a university technical college for Westminster. It will, I am glad to say, specialise in engineering, and its two main business backers are British Rail and British Telecom. Both of those companies need more engineers as a lot of their existing ones are getting old. There is a lot more scope for university technical colleges. In case noble Lords are not aware, the working day at these is 8 am to 5 pm, there are only two weeks holiday a year and students, who are often successfully motivated, are really involved in the areas they are looking at.

My noble friend Lady Wilcox pointed to the high-tech nature of today’s manufacturing, but where is the line between manufacturing and services? It was very easy to consider in old-fashioned thought, but with all the IT and software products and everything going with the internet, what is manufacturing and what is services? I wonder whether government statistics are up to date in this area. I suspect that if what I call “new manufacturing” is included, manufacturing is a lot larger than the 10% of GNP we recorded it as being in old-fashioned terms.

I greatly welcome, as others have done, the Government’s initiative to start, at last, to address our infrastructure needs. For over a decade, Governments have failed to do this in airports, roads, rail and energy supplies. I anticipate that energy will be the rising manufacturing activity, as we will need more of it over the coming years. Candidly, this is partly a result of the misdirection of huge resources to subsidise inadequate and unreliable alternative energy, rather than investing sooner in nuclear power. There is now, to my astonishment, a proposal that the Government should start paying industrial users to shut down to avoid power shortages hitting the public. If there is any truth in that, it is an absolute disgrace and I challenge the Government to make clear that there will be more than sufficient energy supplies for a considerable recovery in British manufacturing.