UK Manufacturing Industry

Baroness Wilcox Excerpts

Thursday 8th December 2011 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, I thank the noble Lord, Lord Haskel, for securing this debate on a very important subject and I pay tribute to the work that he has done as an advocate for the textiles industry. I reflect, too, that he was a Trade and Industry Minister in the previous Government, so he knows where all the bodies are buried. He also knows how difficult it is for me to stand up here and be able to respond to this debate as positively as I can in these difficult times. I reflect on what the noble Baroness, Lady Randerson, pointed out. We are trying to turn this super-tanker around into the right direction, and it all takes time—more time than we would really like.

The noble Lord, Lord Young, always speaks at the end and I very rarely get a chance to answer his questions, so I thought for once that I would just say that it is always a pleasure to listen to him because he really knows this subject and knows particularly about apprenticeships. I will answer on apprenticeships and procurement a little later, when I answer the noble Lord, Lord Bhattacharyya, if the noble Lord will accept that. I may not get to the noble Lord, Lord O’Neill, to say thank you for finding candidates for the “red tape challenge”. I was interested to hear his comments on the Select Committees. The usual channels would do all that, but it is good to hear it. As for the noble Lord, Lord Giddens, and reshoring, I have an answer for him later. We are not likely to do this, but I am interested to hear it.

As we know, the UK is recovering from the biggest financial crisis for generations and faces an intensifying sovereign debt crisis in the euro area. That has further damaged global confidence, which does not help us. In the Budget in 2010, we set out the Government’s plan to reduce the deficit and rebuild the economy. The actions taken have, at least so far, helped to restore stability and consolidated the UK’s AAA credit rating, which is a very precious thing to have and keeps this country attractive to investors. In common with other industrialised countries, the share of manufacturing in the United Kingdom has fallen. There are structural factors which have led to this decline, such as technological change, a shift in demand for services, and tough competition from low-wage countries, especially in high volume, labour intensive products. The Government cannot control these forces, but we can help to ensure that the UK is in the best possible shape to compete in global manufacturing markets by upskilling and encouraging new investment.

Contrary to popular belief, the UK is still one of the world’s biggest manufacturers. We actually make more from manufacturing than we do from financial services, which some people might find quite comforting at this stage. Manufacturing contributes disproportionately to overall levels of productivity as well as generating over half the UK’s exports of goods and is responsible for much of the business R&D in this country. I welcome the contributions from my noble friend Lord Northbrook and the noble Lord, Lord O’Neill, on the R&D tax credit.

British companies, both large and small, are building global reputations in sectors such as pharmaceuticals, the automotive industries, chemicals, aerospace, off-shore oil and gas supply industries, among others. There are big new industrial investments taking place, even in these difficult times. Two weeks ago Toyota announced a £100 million investment at its factory near Derby. At the same time Airbus has announced 200 extra engineering jobs at Feltham, and Nestlé has announced a £110 million investment at its Tutbury plant, with 300 extra jobs. It all goes to help. We recognise that the external economic position is very difficult but we are determined to promote recovery and rebalancing.

I will try to answer as many questions as I can as I go through, so that noble Lords do not all have to wait for the letter to come. In the Plan for Growth published alongside the Budget in March, we set out a range of actions to support the manufacturing sector, including measures to improve technology commercialisation, boost access to a skilled workforce and promote the image of the sector. The noble Lord, Lord Haskel, spoke of a coherent strategy for manufacturing, and this strategy has been developed through consultation with industry. We are working with the sector to implement the actions set out in that strategy.

In answer to the questions from the noble Lord, Lord Bhattacharyya, on procurement, we recognise that there is a need to manage the procurement and investment processes in the public sector so that we can sustain a competitive supply base. The next phase of the growth review has been looking at how the Government can support businesses and ensure that when they compete for work, they are doing it on an equal footing with their competitors. My right honourable friend in another place, the Minister for the Cabinet Office, announced a series of measures at the strategic suppliers’ summit on 21 November, including a more strategic approach to the way we buy public goods, works and services. Building on the good progress in implementing these actions, further measures, as I have said, were announced in the Autumn Statement last week. The £40 billion credit-easing scheme will underwrite bank loans to small businesses. Alongside our £20 billion guarantee scheme to lower the cost of loans, this should help those SMEs struggling to get finance on reasonable terms.

Although I am sorry that the noble Lord, Lord Bilimoria, feels that we have not moved at all since last year, I might say that I was thrilled to hear poetry quoted in this place. Usually, when I go to the European Union I sit there and listen to everybody else quoting poetry, thinking, “This never, ever happens here”, but today it did, so there we are and I thank him for that. In answer to the noble Lords, Lord Bhattacharyya and Lord Bilimoria, regarding access to finance and banking, under the Project Merlin agreement Barclays, Royal Bank of Scotland, Lloyds, HSBC and Santander have promised to lend £190 billion to businesses in 2011, including £76 billion for SMEs. During the first nine months of 2011, the Merlin banks have achieved total gross new lending of £157.66 billion, including £56 billion to SMEs. They expect to deliver their 2011 commitments, and we will of course keep a close watch on lending in the fourth quarter to ensure that the banks really meet those targets.

There will be a £1 billion increase in the regional growth fund to help regional rebalancing. We are also investing £5 billion in new transport and broadband infrastructure, streamlining public procurement, developing a new approach to supporting local supply chains, and introducing measures worth around £250 million to help our energy intensive industries to reduce their energy bills. I can reassure my noble friend Lord Northbrook that we carefully consider all environmental and energy regulations from the European Union. Our energy intensive industry package, announced in the Autumn Statement, is evidence of this and I encourage him to read it.

Only this week, the Secretary of State announced the advanced manufacturing supply chain initiative. Up to £125 million will be used to improve the global competitiveness of the UK’s advanced manufacturing supply chains by supporting innovative projects where the UK is well placed to take a global lead. The fund will be run on a competitive basis by the Technology Strategy Board. Expressions of interest will be invited this month and formal applications in the new year. It will be flexible in the type of support offered to successful proposals. We welcome the proposal from the noble Lord, Lord Sugar, for incubator units. The £1 billion increase in the regional growth fund offers potential opportunities for that type of support. To plug the gap between pure research and commercialisation, we are investing £200 million in a network of elite technology and innovation centres, to be known as TICs. The high-value manufacturing TIC will receive more than £140 million over a six-year period and is now open for business. We are also capitalising the green investment bank with £3 billion from next year.

The noble Lord, Lord Haskel, asked about design. Support for innovation and technology commercialisation is a crucial part of our strategy to support UK manufacturing, and design is an integral part of commercialisation, making products desirable for end users by improving performance and recyclability at the end of the product’s life. Design impacts on the product’s whole life cycle and is crucial. We are looking at more and more ways of being able to work with design.

My noble friends Lord Selsdon and Lord Northbrook are right that the United Kingdom needs to up its game on exporting, including manufacturing. Currently, only one in five companies exports; we will try very hard to increase this to one in four. That is why we have launched the national export challenge, a series of initiatives to help SMEs to take the first steps to break into new markets.

In response to my noble friend Lord Cope on intellectual property, today we are hosting the first UK-China intellectual property symposium in London. Furthermore, we have appointed our very first IP attaché to the UK embassy in Beijing, who will take up that post next week. This is the start of a new high-level dialogue with China on IP working with relevant agencies. My noble friend also touched on the European Union patent, of which we have been a strong advocate. After forty-one and a half years it looks as though, with our lead, we will actually get a single patent for the European Community. Our worry there is the way that the court is formed to deal with that single patent across the whole of the community. I have just come back from Brussels, where we have been discussing that excitedly.

We have put apprenticeships at the heart of our strategy to ensure manufacturing businesses benefit from a more highly skilled workforce. My noble friend Lord Jenkin of Roding spoke encouragingly of the work of John Hayes on skills and the employer-led skills council; for that, we are very grateful. He also talked about the talent retention scheme in which Mark Prisk is involved. I will pass those comments back to them, as any encouragement is welcome.

We have seen a record year in terms of numbers of people both starting and completing their apprenticeships. The noble Lord, Lord Haskel, mentioned the quality of apprenticeships. The £75 million package announced in March is for advanced-level and higher apprenticeships and includes a £25 million fund to support 10,000 advanced and higher apprenticeship schemes. Last week we announced the £18.7 million from the higher apprenticeship fund, which will support the development of 19,000 new higher apprenticeships in a range of sectors, including advanced engineering. At an apprenticeship summit last month, we announced measures including an incentive to encourage small firms to take on their first apprentice. The Government will offer employers with up to 50 employees a payment of £1,500 to take on up to 20,000 apprentices aged 16 to 24. That does not actually read right; I do not think it means that people who employ 50 employees will be allowed to take on 20,000 apprentices, so perhaps I read that wrong.

I agree with my noble friend Lord Lee that it is vital for the future that our young people need to have careers in manufacturing made more attractive to them. The noble Baroness, Lady Donaghy, and my noble friend both spoke about heroes. I would like to take that idea away, if I may, to Mark Prisk because I think he would like to work on that. The Government are working with industry to highlight to young people exciting careers in manufacturing through the See Inside Manufacturing programme. More than 35 companies and organisations from the automotive sector were involved in the pilot phase in June and October, involving open days for teachers, careers advisers, and young people. We plan to roll out a SIM in another manufacturing sector next year.

The noble Lord, Lord Haskel, might like to know that we at BIS have been holding regular displays in our foyer to showcase British design. I wanted to mention that because it has been very exciting. The building is very boring, and it is lovely to have filled up that great big glass space with something that looks interesting. This may be a small thing, but we have also taken people who work in the reception area out from behind reception and got them standing and walking around in the reception area to talk to people who are a bit bewildered about where they are and do not quite know where they are going, and to interest them in the displays. That seems to have gone down quite well, so I am pleased with that.

In my own role with oversight of intellectual property, I am engaging with the design sector and well understand its contribution to the UK economy. The “Make it in Great Britain” campaign, launched on 5 November, is another strand of our action to raise the profile of manufacturing, so the noble Lord, Lord Sugar, is right to encourage us to promote “Made in Great Britain”. As part of the campaign, BIS will work with United Kingdom industry to stage a high-profile interactive exhibition of cutting-edge UK manufacturing at the Science Museum next summer to coincide with the London Olympic and Paralympic Games.

We are working hard to encourage and support British manufacturers and to create an environment where they are free to thrive and compete in a global marketplace. Government action is already resulting in new industrial investment as a direct result of our commitment to introduce the patent box. GSK has stated that it will invest in the UK, including a proposed biopharmaceutical manufacturing plant costing £350 million to £500 million and creating 400 to 500 new jobs. I look forward to attending a second manufacturing summit in February next year in Bristol to give the Government and industry another opportunity to discuss what has been achieved and what more can be done.

I am confident that we can once again put world-class manufacturing at the heart of our economy. The process always seems too slow. To have to stand here and face the noble Lord, Lord Bilimoria, saying that we have done very little since the last time we had this debate is a bit discouraging for me. I hope that, now that he has listened to some of the answers that I have given, the next time we have a debate on industry and have representation from all sides of the House, for which I have been extremely grateful today, he might be able to get up and say, “Doing better”.