Economy: Manufacturing

Baroness Harris of Richmond Excerpts

Tuesday 30th November 2010 Grand Committee

[Lord Brooke of Sutton Mandeville]

My Lords, in a debate where, due to its popularity, Procrustes has reduced most of us to speeches of four minutes, I hope that I shall speak for everyone when I thank the noble Viscount, Lord Montgomery, for his choice of subject and his introduction of it. My only hesitation is that the wording of the Question carries a mild ambiguity as to whether the answer expected is to be quantitative or qualitative.

I am, however, taking it as a given that, in our present parlous circumstances, it is a case of all hands to the pumps and that any enhanced contribution to the economy by the manufacturing sector is profoundly to be welcomed. Although, after leaving Harvard Business School, I made my living across the whole face of the economy and, within that, across a wide range of manufacturing, it is easier if I confine these remarks to a particular part. I shall dwell on engineering, not least because it has had a notable role in Britain’s industrial past, but also because Germany, now the premier European exporter, is still so powerful a force within it.

It is awesome even in this Ashes week to be batting immediately before the noble Lord, Lord Bhattacharyya, who has a personal cricketing reputation as well, and I risk being told that I am wholly out of date, but I am genuinely impressed, diminished though our engineering sector is, at the health of those British engineering companies which have survived the industry’s decline. I put it down to survivors surviving because of the quality of their products in market niches where product quality and utility are at a premium.

When in the 1960s and 1970s in the private sector I was assisting companies such as Rolls-Royce, we were wont to be told that Rolls-Royce’s American competitors enjoyed the advantage of a component manufacturing sector which could produce to the most precise of specifications in an industry where such were required, often in new materials, whereas Rolls-Royce had to design and manufacture its components itself. If there is anything in this hypothesis, even in a global market, then the growth that we are seeking beyond exports will be assisted by an expansion in self-sufficiency in components at home and by entrepreneurs who create new leads for them. I am also assuming that there are still market opportunities similar to those experienced in the United States in the application of electronics to what I shall call the rust belt industries.

An encouraging example that applies to both my hypotheses is the recent decision of the Department for Transport to fund 1,200 new trains on the Thameslink line, specifically with up-to-date and innovative signalling instrumentation, taking us away from the historical poverty of obsessively British-built signalling technology. One sad characteristic of British industry, not only at the time of the original Brookings Institute inquiry of 1968 but lasting to revisiting the issues in the 1980s, was the charge that we were short of engineers to an extent whereby we were using scientists to do the jobs of engineers, thus robbing the science base. The Division Bell is ringing. Do you want me to finish the speech or stop? I think that I have one more minute.

[The Deputy Speaker (Baroness Harris of Richmond)]

One more minute, and then we will have 10 more minutes.

[Lord Brooke of Sutton Mandeville]

Thus we are robbing the science base of the scientists that it could otherwise have used in research. The institute attributed it to the low value that our economy put on the utility of engineers in the 1970s. It always disturbed me that the financial incentives of industry were so comparatively low. Although in those days, the accountants were more of a salary competitor than the totality of the financial sector, the explosive effect of the big bang compounded the problem thereafter, taking engineers straight into the City. In this respect, globalism has helped by introducing international salary arrangements into our marketplace.

Finally, in the four-year period when I was a Treasury Minister, I was the only one of the eight of us in that overall period who had never worked in the City. Shortly after I went there, Douglas Wass asked me what I was responsible for and categorised my answer as the housekeeping end of the Treasury. Of course, I understood then my colleagues’ views that the decline of manufacturing did not matter if the financial sector was growing as fast as it was, but happily—in some ways—we now know different, and the terms of economic trade are moving back to what we were always once good at.

--- Later in debate ---

[Baroness Wilcox]

Unless I get this terribly wrong and they make me sit down—no, I had best not answer. Shall we write? It would be easier. We shall make a minute now, and I shall get through my brief. I will come back to the noble Lord, although I think that we have explained this fairly well.

Where is the growth White Paper? Our priority is to secure the economic recovery. Our growth paper and review, launched yesterday, set out how we will create the conditions for private sector growth. The decisions of business leaders, entrepreneurs and individual workers will build our future economy, which is why we are launching a growth review where the Government are inviting business to take part in a review of how each part of Government can address the barriers that are facing industry. It will include a detailed look at advanced manufacturing, producing an action plan at Budget 2011.

The noble Lord, Lord Bhattacharyya, is one of the great gurus of this country and it is always a great delight to listen to him speak. It does not matter to me which side of the political spectrum he stands on to speak; it is wonderful to hear him. On foreign direct investment, the UK has the third-largest stock of inward foreign direct investment in manufacturing in the OECD, for what that is worth. About one-third of the 1,600 new inward foreign direct investment projects in 2009 were in the areas of advanced manufacturing, life sciences, ICT and environmental technology. However, I will reflect on the noble Lord’s words today. I can always learn something whenever he speaks.

The noble Lords, Lord Brooke of Sutton Mandeville and Lord Cotter, talked, rightly, about the shortage of engineers. We recognise that it is still a problem for us. We welcome the comment by the noble Lord, Lord Cotter, and we support the move towards vocational training. He spoke in particular about apprenticeships. I think that is about all I can manage at the moment. Two minutes left—okay.

There is no question that manufacturing has a central role to play in the growth agenda. The UK has strengths in a diverse range of sectors from well established industries, such as aerospace and chemicals, to fledgling ones such as plastic electronics and composite technologies. We also know that major opportunities exist in new materials and new markets, especially in low carbon. Britain is the largest single market for offshore wind in the world and is already an attractive place for inward investment. Gamesa, a Spanish wind turbine manufacturer, is just the latest company to announce its intention to move here. It intends to invest £130 million by 2014 and expects to create more than 1,000 jobs, stimulating about 800 more jobs in the supply chain. There are further signs that manufacturing is beginning to move in the right direction after weathering what was, we hope, the worst of the global recession. For example, in 2009-10, inward investment in manufacturing generated 94,000 jobs, which was a 20 per cent rise on the previous year. Last week, a survey of 300 companies conducted by the Engineering Employers Federation found that UK manufacturing is growing at its fastest rate since 1994.

Let me see how quickly I can go. Both government and industry want to see UK manufacturing grow further. We cannot leave this to chance. We will shortly be launching a new manufacturing framework setting out the necessary conditions for a resurgence in UK manufacturing. The opportunities are there in overseas markets characterised by rising incomes and burgeoning demand, in the availability of new technologies and materials from our own science base and in the new business models that combine manufacturing and services to maximise revenue. Indeed, the framework will lay the foundations for a more co-ordinated approach that will complement the review of advanced manufacturing that I referred to previously.

Although it is the conviction of this Government that growth will best be achieved through a combination of private investment and a propitious business environment, we are under no illusions that the latter is yet within reach. Indeed, the former is heavily predicated upon the latter, and investors expect much more than warm words. Nevertheless, we are confident that our approach is the right one, and we will pursue it with vigour in order that Britain once again becomes synonymous with manufacturing. It only remains for me to thank the noble Viscount, Lord Montgomery of Alamein, for raising this issue of such national importance today.

[The Deputy Speaker]

My Lords, that completes the business before the Grand Committee. The Committee stands adjourned.

Committee adjourned at 7.59 pm.