Manufacturing in the UK

Barry Sheerman Excerpts

Tuesday 14th January 2014 Westminster Hall

[Mr McKenzie]

I will not try the Chair’s patience by travelling down the route of an independence debate, but I and—I hope—Scotland could not agree more with my hon. Friend.

Current levels of UK innovation are insufficient to drive growth and to close the gap with key competitors. UK business enterprise research and development as a proportion of GDP has remained below that of other leading economies such as Japan, the US, Germany and France. Furthermore, there has been a slight downward trend in the intensity of business enterprise research and development in the UK, unlike in most other advanced economies. We need to combine public and private investment better to ensure that we do not fall behind.

Jason Lippitt, managing director of TMAT, which is an acoustic components manufacturer, argues that even with limited resources, smaller businesses must find a way to use research and development if they want to survive.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

My hon. Friend is making a fine speech. Would he compare the experience in his constituency with that in mine? I find that many of my manufacturing employers are worried about, first, access to finance—they are increasingly moving towards crowdfunding and crowdsourcing, which the Government are about to regulate and might destroy —and, secondly, the lack of highly skilled technicians. Yes, graduates are good, but technicians are what most of my employers are desperately looking for.

[Mr McKenzie]

I will explore later business demand for graduates and highly educated people to bring into the manufacturing process.

Jason Lippitt said:

“Research and development is of paramount importance. We haven’t yet invented the products we will be making in five years. Research and development is the lifeblood of business.”

How true that there are products we have yet to discover. In five years’ time, we could be dominating markets, but only if we prioritise and plan for the future of manufacturing in the UK. If we look at the phones or tablets in front of us now, could we have imagined them five years ago, or even believed how essential to everyday life they would become? Devices that we are doing without now will make us wonder in five years’ time how on earth we managed without them. With them will come new careers that we also could not imagine.

That vision is shared by Andrew Johnson, senior economist at the manufacturers’ group EEF, who said:

“There are countries on other continents that Britain will never be able to match labour costs with, but they will never be the dominant part of the selling equation if we continue to develop innovative new products and develop new technology.”

How true. What is the position of the Minister and of the Government on forming a partnership with manufacturers to invest in research and development to create new products and to win existing markets and create new markets? Government policies can either make or break a nation’s manufacturing sector.

For example, Germany has an interventionist industrial strategy. Public-private collaboration enables innovation and technology advancement and promotes talent development. Global leaders in innovation, such as the US, Japan, Germany and Sweden, have well-connected systems that enable the public and private sectors to work together to maximise the economic benefits of manufacturing and innovation.

What of the UK? The UK system would seem not to be as well connected or orientated to the needs of business compared with that of, say, the US Government, which plays a major role in shaping innovation. The USA has a systematic and comprehensive approach to driving innovation and to supporting small businesses through its small business innovation research programme. The Dutch Government, too, have introduced a new policy to promote innovation in strategically important economic sectors.

In contrast, the lack of any coherent manufacturing and industrial strategy from the Government can only prove to be a disaster for the UK economy, as highlighted by Lord Heseltine’s report, “No stone unturned”, which received a positive response from industry and the manufacturing unions and was welcomed by the Prime Minister. Nevertheless, the lack of any real Government economic and industrial growth policy and their failure to take urgent action in developing a manufacturing policy are worrying.

On the whole, manufacturing continues to suffer throughout the UK. We need urgently to see the green shoots of recovery spring to life in all parts of the UK. Research and development tax credits are a move in the right direction, as I said, but what else might the Government do? Education and stimulation of the next generation of manufacturers could be a start, and I recognise the focus placed on that by some education providers throughout the country.

--- Later in debate ---

[Michael Fallon]

I was rather hoping that I was the go-to man and the contact figure within Government. Not only have I had the pleasure of addressing the group in this place, but the group has been to see me at the Department for Business, Innovation and Skills, and although titles vary, if there is a Minister for Manufacturing, I suggest that it is probably me. I am certainly happy to add to that a specific hotline, or an official with whom the group can have contact.

I have already mentioned the Aerospace Technology Institute. Through the construction strategy, we are trying to make the UK the global leader in sustainable construction by 2025, in a market that will grow by 70%. As part of the automotive strategy, we are investing around £1 billion over 10 years in a new advanced propulsion centre to develop, commercialise and manufacture advanced propulsion technologies in the UK. That strategy, too, looks 20 or 30 years ahead.

Hon. Members have referred to the renaissance of our motor manufacturing industry. There is the success of Jaguar Land Rover and Nissan, and also of the MINI plant at Cowley, which I have visited.

[Mr Sheerman]

Very briefly on that point, the big companies such as Rolls-Royce and the companies that the Minister mentioned are wonderful, but does he agree that our real future lies in growing small and medium-sized enterprises into larger companies, as most people who will work in manufacturing will work in SMEs in the future?

[Michael Fallon]

I certainly accept that, but I do not draw a sharp distinction between large and small. Companies need each other, and if I am given the time, I will come on to talk a little about the supply chains. The hon. Gentleman’s point on employment is well made.

On procurement, we have recently published procurement pipelines worth nearly £80 billion, covering a range of sectors. On skills, we are responding to the engineering skills shortage identified by Members by enhancing young people’s engagement through initiatives such as See Inside Manufacturing and Tomorrow’s Engineers. We are also supporting the technologies of the future through the “eight great technologies” strategy, focusing on advanced materials, big data, satellites, robotics, synthetic biology and so on.

I was asked three very specific questions. The first was on supply chains. They are absolutely essential to creating strong, sustainable and balanced growth, but they have weakened or hollowed out in recent years. Our broad objectives there are, first of all, to work with industry to map current supplier capabilities and quantify the opportunity to source more UK content. In each sector—aerospace, automotive manufacturing, marine industry, nuclear and the like—where that mapping finds gaps in supply chain capabilities, the sector will encourage domestic suppliers to expand to fill them, with the support of the manufacturing advisory service.

We are also working to strengthen existing supply chains by encouraging some of the prime producers to adopt a more collaborative and long-term approach to their suppliers. That is part of the answer to the point raised by the hon. Member for Huddersfield (Mr Sheerman). For example, the Rolls-Royce apprentice academy will enable the company to train additional apprentices to work not just for Rolls-Royce, but for other companies in the Rolls-Royce supply chain, as well as other manufacturing firms in the east midlands. We are helping domestic suppliers to build the strength and capabilities that they need to access new opportunities. We underpin that through the advanced manufacturing supply chain initiative, which helps with funding for capital investment for skills and innovation.

Secondly, the hon. Member for Inverclyde quite rightly drew attention to the continuing need for innovation. He was right that it was innovation that drove the first and subsequent industrial revolutions in this country, and when it comes to innovation, the Government have a legitimate and necessary role in ensuring that our future is prosperous. Despite financial pressures, my Department has sought to protect vital investment in future innovation. We have launched seven catapult innovation and technology centres, one of which is focused on high-value manufacturing.

The recent autumn statement pledged a further £600 million of support for the eight great technologies that I referred to, including advanced materials; the Government seek to support investment in innovative materials development and process technologies in manufacturing. For example, this year, the Technology Strategy Board will invest some £7 million in collaborative research and development to help British companies to improve and to enhance manufacturing process through innovation.

Thirdly and finally, the hon. Gentleman mentioned design, but before I come to that, perhaps I should touch on finance, to which several hon. Members referred. Of course it has been difficult for companies large and small in certain sectors, including manufacturing sectors, to access the finance that they need through mainstream lending. Through the business bank and other sources, we are determined to help enhance some of the alternative methods of financing. Again, the hon. Member for Huddersfield made the important point that we do not want to over-regulate the alternative funding streams as they emerge.

On design, which was the hon. Member for Inverclyde’s final point, he is absolutely right to say that it is driving buyers. Last week, it drove buyers to the London boat show to buy high-quality boats and yachts. He referred specifically to the quality of design, and we see time and again that the reason British brands are and will be sought out is the high quality of design.

In conclusion, I think it has been recognised throughout the debate that manufacturing is no longer in decline. I am not over-claiming for its renaissance, but it is no longer in decline. On the contrary, it is recovering hand over foot, and we have seen significant recovery, particularly in sectors such as aerospace, automotives and pharmaceuticals. The Government’s active encouragement is needed on skills, the supply chain and access to finance, and I assure all those who have spoken, including the hon. Member for Inverclyde, that the Government are absolutely committed to ensure that manufacturing continues to recover.

Question put and agreed to.