Economy: Manufacturing

Lord Shipley Excerpts

Thursday 3rd July 2014 Lords Chamber

[Lord Shipley (LD)]

My Lords, I thank the noble Baroness, Lady Wilcox, for enabling this debate. I agree with almost everything that the noble Lord, Lord Monks, and my noble friend Lord Young of Graffham have been saying.

There used to be a fashion for suggesting that the decline in UK manufacturing did not matter given the rise of our service economy. In my view, any commentators who still believe that are profoundly mistaken because we need both. Having a strong manufacturing sector creates jobs and helps our balance of trade. It still represents half our exports and over two-thirds of our research and development investment. It can contribute much more, particularly in high-value manufacturing. It has, recently, been expanding at almost twice the rate of the rest of the country. All this is important because manufacturing growth will substantially be located outside London and the south-east, and this can help to rebalance the UK economy away from overdependence on financial services and on London and the south-east.

I first draw attention to the nine High Value Manufacturing Catapult centres—all outside London and the south-east—which provide manufacturing companies with access to equipment and facilities that they might not otherwise have, and join up academia with industry and government to develop new technologies. Output growth and rising business investment now suggest that recovery is sustainable because it is no longer consumer spending that is driving growth. Now, business investment is too. Demand for UK manufacturing is now strengthening as part of that. The recession had a heavy impact, but manufacturing output is now back to similar levels to before the recession and is growing, helped by lower corporation tax, better employment allowances, tax incentives for investing in new equipment and increasing the level of financial support for exporters—all introduced by this Government.

However, a large number of potential SME exporters are reportedly unaware of UKTI and UK Export Finance. It seems clear that our export performance could be much stronger, particularly if there were a clearer regional remit, a set of regional targets for UKTI and better connections for SMEs with export finance.

I take absolutely what my noble friend Lord Young of Graffham said about robots, but new figures show that the UK’s automotive industry now employs 750,000 people, having added 44,000 jobs last year. That is partly about demand for new models and partly about companies reshoring, but a very important increase is happening. The F-35 project, which will have a 70-year life and in which BAE Systems has a 15% stake, is another example of the UK’s leading role in innovation.

The Government have been helping to create jobs, many of them in manufacturing. There have been jobs for young people, with some 2 million apprenticeships by the end of this Parliament, and jobs across the country, as the noble Lord, Lord Monks, said. Some £3.2 billion has been available through the regional growth fund. Like him, I sit on the independent advisory panel as deputy chair. Of course there are also all the green jobs—£3 billion to fund the world’s first Green Investment Bank.

This debate is about strengthening manufacturing. I was very interested by the Engineering Employers’ Federation report published recently, Pioneering Great British Products, which said that we had failed to celebrate UK inventions by setting no example for young people to aspire to. It is important to rectify that when we think of all the things that the UK has invented.

I want to raise the issue of women in engineering, which is the lowest percentage of the workforce in Europe at 8.5%. When you look at Scandinavia, which has a quarter, or Italy and France, which have a fifth, you realise that we need 100,000 new engineering graduates each year to meet current demand—twice current levels. More needs to be done but half our state schools send no girls on to university to study maths and sciences. It is a massive loss of talent given this expanding sector. Early careers advice to choose the right courses and enter careers in engineering and sciences is very important.

The greatest threat to a manufacturing-led post-recession recovery is the lack of skilled labour. Retaining skilled people with manufacturing and engineering skills is of paramount importance to companies. Too often, skilled employees struggle to find skilled work after they have completed a contract or been made redundant, and they end up leaving the sector. I am pleased that Vince Cable, Secretary of State for Business, Innovation and Skills, responded to this challenge by requesting senior industry leaders to find a solution. As a result, a new programme, the Talent Retention Solution—TRS—was developed and financed by the sector for the benefit of all companies and individuals wishing to work in advanced manufacturing and engineering. It puts skilled individuals looking for work in touch with companies searching for new employees. It is a UK-wide scheme which now includes employers from aerospace, automotive, civil engineering, defence, energy, marine, nuclear, power generation and renewable industries. It has an employers’ group, chaired by my colleague and noble friend Lord Willis of Knaresborough, and it provides specific, easy-to-use recruitment advice and services to companies.

For the first time in our manufacturing history, we have a system to capture talent before it is lost. That system is now expanding to include undergraduates and FE students, so I hope that the expensive waste of talent will become a thing of the past. Interestingly, BAE Systems said that TRS has helped to place more than 400 people leaving the shipyards on the Clyde and in Hampshire since closures were announced last November.

There is clear potential in reshoring more. In its economic outlook, published in March, PricewaterhouseCoopers concluded that up to 200,000 jobs could be created in the UK in a decade through reshoring, particularly in textiles, advanced manufacturing, research and development and business support. I hope the Government will encourage that process because it is very important.

In my home region of the north-east of England, it is really exciting to see the amount of investment and activity now taking place. High-value companies are expanding, exporting, growing and generating jobs. Manufacturing industries are leading the north-east economic recovery. Confidence is high; orders are up; productivity is up, and two-thirds of north-east manufacturers anticipate a rise in orders in 2014.

This Government have put in place the foundations to grow the manufacturing sector and it should be commended for doing so.