Manufacturing

Craig Whittaker Excerpts

Thursday 24th November 2011 Commons Chamber

[Craig Whittaker (Calder Valley) (Con)]

As more than 19% of the people who live in the Calder Valley work in manufacturing, it is no wonder that I spend so much of my constituency time visiting fantastic manufacturers and local businesses. If the hon. Member for Huddersfield (Mr Sheerman) classes Huddersfield as the cradle of manufacturing, without question Calder Valley is its family home.

We have not only many small niche and high-end manufacturers who supply locally and internationally but many world-leading firms that fly the flag for Britain. They include companies such as Heights, which supplies graphic arts equipment to major photographic companies, such as Kodak and Fuji, and Calrec, which supplies high-quality audio consoles to television studios all around the world, even to Japan. Hon. Members will all be pleased to know that the consoles that allow the nation to watch “The X Factor” every week come from Calrec in Hebden Bridge. We also supply 40% of the European market’s caravan industry with caravan looms made in Elland by BCA Leisure. They are Great British companies, flying the Great British flag. The fantastic thing that I am hearing from our local manufacturers is that we really are starting to fly, especially those who manufacture to export.

The absolute evidence of that is the huge investment we are seeing in new machinery, jobs and factories in the local area. No fewer than four brand-new factories are about to open. Boxford Ltd, which manufactures computer-aided design—or CAD—based lathes for education is about to move into its purpose-built £6 million new factory next week. That was delayed by a month because of a huge order received from Argentina, which was not following the lead of America or Europe in the way that the hon. Member for Hartlepool (Mr Wright) suggested earlier.

Decorative Panels is in the process of building its £8.5 million factory to incorporate two new factories for production and it will be up and running in April. KT Hydraulics should also be fully operational by February with its £2.5 million factory and Heights, which I mentioned earlier, has just got planning permission to double the size of its current factory up in Wainstalls. That is all evidence that when companies are stable and low geared, they make a difference to our economy.

There is a but, however. Although the companies are doing well and investing in our future, this really is a tale of two halves. At the business breakfast forums I hold every eight weeks—I have done so for the past three years—there has been a unanimous chorus about the banks. Many Members have mentioned the banks and how they are doing business. The banks would have us believe that they are lending money to businesses and I have no reason to doubt them, but the only problem is the conditions that they are imposing on our businesses, normally at huge cost.

I recently visited a local manufacturer that is a subsidiary of a larger world player in electronics. It supplies a large proportion of the Korean market and 20% of the Japanese market and recently got a fantastic deal from a bank that perfectly met its business needs. The bank was the Silicon Valley Bank in California. Why? Because in the words of the managing director of that company, it totally understood the business and its business needs.

I was also asked recently to attend a meeting with another local manufacturer and its bank manager. The company borrowed £100,000 several years ago to buy a building and a further £50,000 more recently to expand the business. Business is up by 20% this year. After sitting through the meeting for two hours listening to the bank manager sing the company’s praises and even saying he wished all his customers were like it, I left for another meeting only to learn later on in the day that the bank manager had said after I had left that the bank would like to take a debenture over its fixed and floating assets and have a joint and several guarantees from the directors. It was explained to them that that was all to the benefit of the directors as it would move them down the queue when the bank came asking for its money back. That is the type of thing that I hear week in and week out from my manufacturers.

Calder Valley manufacturers are among the world’s best. Indeed, in many cases, they are the very best at what they do. They do not want a hand up or handouts—just a plain, old-fashioned level playing field. They tell me week in and week out that they will do their best to get on and play their part. We need the Government to put pressure on our banks to look at their practices and to get to know intimately what their local customers do. For far too long, business account managers in banks liaise with customers but then decisions about financial transactions are made by faceless people who are often miles away and have no idea or clue about what the businesses that are asking for the loans do. That needs to change. If it does not, the manufacturers that are still in business will turn more and more to banks such as the Silicon Valley bank, which, in the words of a Calder Valley managing director,

“totally understood our business and our business needs.”

The current situation cannot be good for manufacturers, business or the country as a whole.

We accept the need to charge full business rates on empty buildings. That was mentioned earlier and would have been my third example had I more time. Some businesses might need to benefit from an extension or a deferment plan; otherwise some of the businesses that are really struggling are going to fold. It is clear that our manufacturers in Calder Valley are a beacon for our economy. Let us make sure that we can facilitate greater growth by listening to our manufacturers, by putting pressure on the banks and by helping manufacturers when they need support.

--- Later in debate ---

[Richard Harrington (Watford) (Con)]

I, too, congratulate my hon. Friend the Member for Hexham (Guy Opperman) on bringing about this debate. I also congratulate the Minister on his comments so far and, in particular, the shadow Minister, the hon. Member for Hartlepool (Mr Wright), not only on his contribution, but on the resilience of his bladder, which has enabled him to stay in his place for such a long time. It is always a pleasure to see him. On these occasions, it is difficult to think of something to say that is different from the contributions that other Members have been making for what seems like 25 hours. But I shall do my best.

I was born into a family with a modest factory, and I saw the decline of British manufacturing through my own experiences and my own eyes, because my father was similar to most small manufacturers of clothing in Leeds, near to the constituency of the hon. Member for Bradford East (Mr Ward), and he had a similar business to those in Bradford. He was put out of business by imports, but we have to look beyond that and ask, “Why has manufacturing failed?” [Interruption.] The shadow Minister shakes his head, but it has failed, and I will explain why.

Manufacturing has failed as a type of business for entrepreneurs to go into as a start-up. We all know that in Britain most large businesses started off not with big foreign investment, which has been very successful, but with people deciding to start businesses in a small way and to build them up to medium-sized businesses and then into some of the great businesses, such as those that the hon. Gentleman mentioned in Hartlepool.

Manufacturing has failed for three reasons. First, there has been a failure of capitalism in this particular field. Members might think it strange to hear a Conservative Member using Marxist terminology—[Laughter]—particularly for the amusement of the hon. Member for Huddersfield (Mr Sheerman)—but I mean that although a lot of capital has been employed in businesses in this country, comparatively little has been used by manufacturing. That is because capital is invested to obtain a return, and in my generation manufacturing enterprise has not generally led to significant returns.

Capital that belonged to families has grown in other ways. My father is a classic example of a person who, having found that his business was worthless, sold a small site to property developers and probably made more money than he could have in years of business. That is the story of many family manufacturing businesses in this country.

Secondly, there has been a failure of management. The hon. Member for Huddersfield, in an excellent contribution, mentioned being shown around Magdalen college, Oxford, where he was told that the bright undergraduates were going into the City. When he made that point, he was looking at my right hon. Friend the Minister, who I remember from my time was in fact at Christ Church rather than Magdalen, but I am sure he accepts that in our generation exactly the same thing happened.

Why did people go into the City? First, those people who were business-minded went, perfectly reasonably, into businesses where they felt they could make a lot of money. Secondly, and to draw another a Marxist analogy, for more than 100 years the class system in Britain looked down on manufacturing industry, so all that people such as my father, who was in manufacturing, wanted was for their sons not to have to put up with what they had put up with. These days people would say that manufacturing is not “cool” or “culturally acceptable”, but for many years has fallen, let us say, out of fashion.

[Craig Whittaker]

I have a lot of empathy for what my hon. Friend is saying. I mentioned in my speech the companies Boxford, Heights, BCA Leisure and Decorative Panels, all from the Calder Valley. They started from very small premises indeed and have built up. Does he agree that the biggest problem at the moment is that the banks just are not investing in research and development?

[Richard Harrington]

I very much agree with my hon. Friend’s intervention, but that issue has been covered in other hon. Members’ speeches, and in the remaining time I am trying not to mention it for that reason—valid though it is.

The reality is that for bright young people, manufacturing is not, by and large, something for them to go into. For some reason it is different in the United States. Very bright graduates—the brightest that Harvard and other places have—could always join firms such as Ford, General Motors and IBM. At those companies, they could expect to make as much money—if it is, indeed, money they are interested in—as the people who joined Goldman Sachs or such firms in Wall street or the City. We have not had that here so, in my experience—and that of the hon. Member for Huddersfield at Magdalen college and of the Minister at Christ Church college—people who were interested in making a lot of money from our generation did not go into manufacturing.

I have mentioned capital and management. The third issue is labour. I am not falling into the ridiculous trap of saying, “It’s the fault of the unions and the workers that we don’t have manufacturing.” Nevertheless, the issue of labour is a contributory factor. In Watford, where we have a few very good manufacturing companies, notwithstanding that there are 3,000 people on jobseeker’s allowance in the constituency, manufacturers have a problem getting unskilled labour because they cannot get people who will do night shifts and consistently do the kind of work that is expected. It is not dangerous work, but it is fairly mundane. Consequently, they have to import labour from Poland.

It is not right in the remaining nanosecond I have left to go into detail about the benefit culture, but we have to accept that if manufacturing is going to return, we must have people who believe it is a perfectly respectable and proper occupation to work in a factory. We want them to, and they should be properly rewarded for doing so. However, we cannot have a situation in which people feel it is not the right thing to do.

Manufacturing has been the victim of imperfections in capital and in management, its status in society and the attitude of labour towards it. Such a situation needs to be corrected, but that should be done on the true basis of entrepreneurship, which relates to people who may be called greedy by some. They want to make money, but they will pay their taxes and employ people as a by-product. It is a great thing to employ people but, for somebody going into business, it is a by-product rather than the reason they are doing it. When manufacturing becomes easier than property development, easier than the City, easier than management consultancy, easier than the law or, indeed, politics, it will come back—but only then.