Manufacturing

Gavin Williamson Excerpts

Thursday 24th November 2011 Commons Chamber

[Graham Evans]

I am grateful for the hon. Gentleman’s intervention. At the beginning of my speech, I made the point that all Governments of all political persuasions have contributed to the overall decline. I take on board the closures in his constituency. All Governments need to learn the lessons of the past, but that does not mean that we should underestimate the problem.

Let us consider energy-intensive manufacturing sectors, which include the chemical, steel, glass and paper production industries among others. The chemical industry is of particular importance in my constituency, where Tata and INEOS Chlor are still major employers in Northwich and Runcorn. According to Waters Wye Consulting, policies such as the EU’s emissions trading scheme and the unilateral carbon price floor mean that the average energy-intensive company’s energy bill will rise from £3 million now to £17 million in 2020—an untenable level for the majority of these firms, which simply cannot afford to continue production in the UK. Proponents of these policies argue that energy-intensive sectors account for only 1% of GDP and so do not matter. If we quantify that figure, it equates to a potential loss to the UK economy of £15 billion and 290,000 jobs. More widely, the Royal Society of Chemistry claims that £220 billion of GDP and 5.1 million jobs are partly reliant on UK chemical research alone. Clearly, the visible threat to UK manufacturing is only the tip of the iceberg, but the problem is that most people do not realise that.

British industrial decline, relatively speaking, is in sharp contrast to the experiences of our neighbours—in particular, Germany. German long-term support for manufacturing means that it now possesses the economic clout to dominate Europe. Given the UK’s and Germany’s widely different starting positions 60 years ago, it is clear that it has done something that we have not, and that something is valuing industry. From post-war restructuring to reunification, Germany has always recognised that manufacturing was the backbone of its economy and therefore never enacted policies that would endanger it. Indeed, political infrastructures were set up to nurture industry, especially mittelstand—or, as we refer to them, small and medium-sized companies or SMEs. Foremost among those tools stands KfW, the state-backed bank that ensures that mittelstand can access funding even when the commercial banks are unwilling to lend. The value of such an institution was seen in the financial crisis. According to its accounts, in 2010 KfW financed a record €28.5 billion for SMEs, amounting to approximately 94% of all its commitments for the year. Without KfW, the potential for many extra jobs and exports would have never been realised for Germany.

It is hard to understand how far the value of German industry goes. Youngsters are encouraged from an early age to appreciate the importance of making things.

[Gavin Williamson (South Staffordshire) (Con)]

Does my hon. Friend agree that one of the key elements of Germany’s success is its investment in research and development? We need to be encouraging that. Jaguar Land Rover is building a new factory in my constituency and investing in R and D, and the Government could go a long way towards helping that by reviewing R and D tax credits, which the Treasury is considering at the moment.