Businesses (North of England)

Debate between David Rutley and John Stevenson

Wednesday 14th January 2015 Westminster Hall

[David Rutley]

It is difficult to contain the enthusiasm of my hon. Friend the Member for City of Chester (Stephen Mosley) for this subject, and it is great to see, because it makes a difference. I understand and accept the points that he raised. He makes an important contribution through his passion and interest in these matters and through the Science and Technology Committee. At Prime Minister’s questions last week, in response to my question about what we can do at Alderley Park for life sciences, the Prime Minister talked about how it had a crucial part to play in the improvement of life sciences in the country. He said that we need to get more growth deal funding and other initiatives to help bolster life sciences in the north-west.

My hon. Friend the Member for City of Chester anticipated my next point: this is not just about life sciences; it is also about astrophysics. My hon. Friend the Member for Congleton (Fiona Bruce) will appreciate the importance of the Square Kilometre Array initiative. It is the world’s biggest radio spectrum telescope, and it is based in Cheshire. It is a globally significant project. We have seen the initial project phase based in Jodrell Bank, and we are pushing to ensure that further phases are headquartered there. I very much hope that the Minister will have a few things to say in support of that, because it will put astrophysics and science firmly on the map in the UK once again. That will not only ensure that the north is known as a leading edge in science, but encourage more leading-edge thinking across industry.

I will move on to infrastructure, because many other colleagues want to speak. One of the things we need to do in the north is ensure that we can get to it and get around it a lot more effectively. There is another powerhouse, I understand, in the south. Some refer to it as London, but people recognise that it is a conurbation of towns and villages from Uxbridge to Upminster and beyond. Crossrail will improve connectivity in that conurbation, but the truth is that we need to do a lot more in the north. As many people will know, it takes longer to get from Liverpool to Hull than from London to Paris, and that has to change. There are exciting positive initiatives such as the big new trans-Pennine high-speed rail project, which some people call High Speed 3, or overdue rail electrification, to which others have referred.

All those things are vital. HS2 will bring greater connectivity, but I want to ensure that we continue to have good, vibrant services with the same regularity and speed on the west coast main line. People will fully understand that HS2 is about driving capacity, which is what we need to ensure that we have the right connectivity. That will ensure that skills are easily transferred among the different clusters in the north that we need to see thrive and succeed in the years and decades ahead.

My last point on strategic priority is on transferring power to the north. It is compelling to see the Government propose an agenda that resonates with local authorities that might not have the same political sympathies and views. Anyone looking at the economic development of the north will realise that it is wrong to think that London should do everything. That is an over-centralised, metropolitan and outdated view of how a modern economy should run.

In the United States and in Germany, economic prosperity is much better balanced across major cities. We need to ensure that the situation is the same in the UK. I am delighted that the Government secured an agreement with Greater Manchester council and the Greater Manchester area to create a new mayor with powers brought in from the existing police and crime commissioner. That has gained real support from local leaders. It might not sit well with Labour Front Benchers, but locally it is sitting extraordinarily well with leaders who want more power. I welcome giving it to them, because with success and progress in Greater Manchester, the counties around will succeed, too, if we create those partnerships.

[John Stevenson (Carlisle) (Con)]

I fully support decentralisation. I am very supportive of elected mayors—the metro mayor concept is definitely a positive for the north—but I am always concerned that places such as Cumbria do not get left behind. Can my hon. Friend envisage an elected mayor for Cumbria as a counterweight to the powerhouse of Manchester?

[David Rutley]

It is probably way above my pay grade to try to think through what should happen in Cumbria. Like my hon. Friend, I love Cumbria and do not want to see it get left behind. The infrastructure points raised about rural broadband and transferring power must link into rural communities. Otherwise, the northern powerhouse initiative will not achieve the potential that the north deserves. His idea is worth exploring, but I am sure that he has more expertise in that than me.

In drawing to a conclusion, I want to focus on the lessons from Alderley Park, which was an important experience in my career, to see how partnerships between city and county can bring about successful results. In further reference to the point about Cumbria, let us learn the lessons from such experiences to ensure we take the maximum from them.

Manufacturing and SMEs

Debate between David Rutley and John Stevenson

Wednesday 4th September 2013 Westminster Hall

[John Stevenson]

The right hon. Gentleman makes a valid point. I assumed that many people would raise the question of lending, so I have specifically avoided it, but it is good that he has raised the issue.

My simple conclusion is that, if our economy is to rebalance and grow, and if our nation is to prosper, manufacturing must be central to that change.

[David Rutley (Macclesfield) (Con)]

I thank my hon. Friend for securing this debate. Manufacturing is critical to the economy, and he is making a powerful case.

Interestingly, the statistics show that not only is manufacturing vital to our economy but average weekly earnings in manufacturing are £557, which is second behind only finance and business services. Does my hon. Friend agree that that is good not only for the economy but for those who are fortunate enough to work in that important sector?

[John Stevenson]

My hon. Friend makes a valid point. People sometimes forget that in manufacturing there are many highly paid jobs—it is not a low-wage sector, as many think.

There are already signs that our economy is beginning to recover and that manufacturing is playing its part. In the food and drinks industry, exports are up to more than £12 billion; the manufacture of cars is now at its highest level since the 1970s; we are still a world player in pharmaceuticals; we are a leading nation in aviation; and this Monday there was the announcement of a significant rise in manufacturing activity—all welcome signs. It is easy, however, for parliamentarians and Ministers to get caught up in the larger, more glamorous companies with the sexier products such as cars and planes, rather than with the more mundane products, such as storage doors or food, even though those are equally important and often produced by SMEs.

In reality, SMEs are central to the future success of manufacturing, whether as part of a supply chain or as a stand-alone entity with a local or national market share, whether innovating and expanding alone or as part of the next national or international conglomerate. The purpose of today’s debate is to examine what Government can do to support, encourage and enhance the SME manufacturing sector. Government support, assistance and encouragement are critical to the success of our manufacturing sector. The debate is about a few specific issues whereby a role for Government can help businesses of varying sizes to prosper.

Other Members will have their own ideas, as will Government, lending being the obvious one—it has already been referred to, but I am avoiding lending today, because I am sure that others will touch on it. It is important that we all share ideas, to ensure maximum benefit for the manufacturing sector and the industry. It is a given that Government should create an environment in which all businesses can succeed: a tax regime that is friendly, rewarding and supportive; regulation that is sensible and proportionate and ensures a level playing field for businesses to work and compete on; and the confidence that it is important for Government to give to business, so that they are supportive and consistent, without any big surprises for industry.

I want to touch on four specific key areas; first is the definition of an SME. According to European Union law, the main factors determining company size are the number of employees, the turnover and the size of the balance sheet. Those factors can then be divided: micro-businesses have fewer than 10 employees, turnover of less than €2 million or a balance sheet of €2 million; small businesses have fewer than 50 employees, turnover of €10 million or a €10 million balance sheet; and medium-sized businesses have fewer than 250 employees, turnover of €50 million or a €50 million balance sheet.

There are, however, varying definitions in the UK, with one under the Companies Act 1985 and a different one under the business bank scheme. For the purposes of research and development schemes, Her Majesty’s Revenue and Customs defines SMEs in a different way again. In fact, depending on which definition is used, an SME can have anywhere between 10 and 500 employees or a turnover of between £1.7 million and £86 million.

The real issue is that the actual definition of an SME is not helpful. It would be far better to break the definition down into different sizes and types of businesses with their own reference. A clearer idea of exactly what type of businesses we are discussing is necessary, rather than lumping them all together.

More definitions would be beneficial and help to target support to the right businesses in the right circumstances. For the manufacturing sector, that would demonstrate and recognise the importance of companies and raise their profile, and identify a sector as important in its own right. Any definition needs to acknowledge that larger manufacturing companies often have little in common with smaller ones and they should therefore not necessarily be linked together.

Size and numbers matter: they have an impact on how businesses structure themselves, how they function and what type and level of support they seek. I certainly find it hard to equate a manufacturing company with a turnover of several million pounds and, for example, 200 employees, with a two-man engineering business with a turnover that does not even exceed the VAT threshold. A better group of definitions, certainly in the manufacturing sector, would help to simplify a business’s ability to access the correct support, help and guidance that it may be seeking. That might also help Government to steer a business of a particular size or industry towards the appropriate support.

My second issue is simply what support there is, and whether it reflects the actual needs of manufacturing. What can Government actually do? What is the real support and help that Government can give to the manufacturing sector? Clearly, small businesses have their own particular issues; large businesses that want to expand are likely to have different requirements and problems; and there are individuals who want to start their own small manufacturing businesses.

A significant number of issues therefore need to be addressed for businesses of different sizes and complexity within the manufacturing sector: strategic advice and business plans will vary depending on the size of the business; procurement, too, is different for small and large businesses; there is involvement with UKTI—UK Trade & Investment—for exporters; skills and qualifications depend on the needs of the different sizes of businesses; there is the issue of funding, grants, loans and, as mentioned, banking facilities; there is involvement with trade federations, because larger organisations invariably hold greater sway and influence, or relations with the chamber of commerce; there is legal, accountancy and intellectual property rights advice; there is dealing with relevant regulation, because cars, for example, are very different from the food industry; and, equally important but sometimes forgotten, there is succession planning.

I appreciate that the Government are helping where they can—the manufacturing advisory service is an example—but there needs to be accessibility and relevance to the manufacturer. A common complaint is that the Government do not understand the user, and that their support is inaccessible or inappropriate. I appreciate that the amount of such support will vary considerably.

Larger manufacturers will contact Ministers or officials and have an ongoing dialogue. They are more likely to work through the trade organisations, and many will have the resource to research matters or to take paid advice. To be honest, a small manufacturing business in Carlisle with five employees is unlikely to contact central Government, while a 200-employee company with a £30 million turnover may well do so. Often, however, the smaller businesses have the greater needs, but they find it more difficult to access such help from Government.

I acknowledge that the Department for Business, Innovation and Skills is having some success. The best example is the R and D credit uptake, which has been welcome and demonstrates a successful policy and implementation. My concern, however, is that much of the effort is not as effective as it could be for many businesses. AXA Business Insurance carried out a study in the UK suggesting that many are unaware of the initiatives designed to help them. Darrell Sansom, the managing director of AXA Business Insurance, said:

“The numbers of small businesses in the UK continue to climb rapidly, but it seems that many could be missing opportunities to help their business along the way through a lack of awareness of the support that may be available to them.”

That leads me on to my next two points. Talking about government can be slightly misleading. What do we actually mean? Which aspect of government is the most appropriate? Today, I am clearly ignoring the EU, but we still have central Government as well as local government. There are clear issues with central Government: where to go, who to talk to and what Government should be doing. What advice and level of support should they be giving? That applies equally to local government, which really does matter. In many respects, the local council matters more for small manufacturers and businesses than central Government.