Manufacturing

Guy Opperman Excerpts

Thursday 24th November 2011 Commons Chamber

[Guy Opperman (Hexham) (Con)]

I beg to move,

That this House has considered the matter of the future of manufacturing.

Manufacturing should be at the heart of any long-term plan for economic growth. It is a sleeping giant that, if revived, would become the backbone of a strong UK economy. It is entirely right that, five days before the autumn statement, we should have the opportunity to debate the subject in broad terms in the House. I thank the Backbench Business Committee and the House of Commons staff for their assistance in bringing this matter before the House and, in particular, I pay tribute to my co-sponsors, the hon. Member for Huddersfield (Mr Sheerman), my hon. Friend the Member for Warwick and Leamington (Chris White) and the hon. Member for Burnley (Gordon Birtwistle), who have adopted an all-party approach to this problem which affects us all.

It is well known that I used to be a jockey and a lawyer, so it is legitimate to ask how on earth I can have any credibility in speaking about manufacturing. All MPs do, because we all have small and medium-sized enterprises that make something in our constituencies. We all have credibility on this issue.

My family came to this country as immigrants. They were engineers, specialising in gears. In May 1924, in the depths of a very bad recession, they set up Opperman Gears in a basement in Albemarle way in Clerkenwell. It had four staff—my great-grandfather and his three sons—who worked in the basement on two lathes, three milling machines and a couple of tools. They had borrowed £110 from a distant relative to set up the business. It grew rapidly and by early 1939 it moved to Newbury, where my family set up a larger firm that was able to produce the parts for the Wellington bomber with its long-term partner, Vickers.

We do not run that company any more, but I should declare that I am a shareholder in the small manufacturing business run by my father and that my family members are involved in a number of different manufacturing businesses up and down the country. I should also make it clear that I resigned my directorship of the family business in 2009 and am not paid by it in any way.

I should also declare that I am a wholehearted supporter of my local manufacturing businesses in the north-east, notably Kilfrost, EGGER, SCA, Agma and others, and their financial support allowed the charitable functions I ran this summer in the constituency. I should declare an indirect link, in that a director of one of those firms made a contribution to my association.

I hope I am doing my bit to try to create jobs. I was the second Member of this House to employ an apprentice and I urge those Members who have not to do so. She is a young lady who works in my office in Hexham and who has been with me now for nearly a year, and is doing extremely well. Members of all parties can take on apprentices—it is allowed under the rules—and I urge them to do it.

The scale of the manufacturing deficit is huge. The nations that expanded post-war specialised in and pushed manufacturing. Those nations—Germany, Japan, Taiwan, Korea and China—knew what they were doing. Today, the services sector alone can prop up Britain no longer, and there is a strong argument for greater industrialisation and changing things. We have seen the demise of manufacturing—it accounted for 20% of gross domestic product in 1997 and now accounts for 11%—and there is a strong argument for specialising not just in high-tech industry but in other industries, which are often derogatively labelled “metal-bashing”. Their products are unassuming, even if they are created by some of the most precise machines on the planet.

My constituency is in Northumberland and my four biggest non-public sector employers are all manufacturers. The north-east might be the birthplace of ships and steel, but we have reinvented ourselves. I was pleased to see SCA recognised in the Government-backed “Made by Britain” awards, which were so ably organised by the hon. Member for Huddersfield. That company employs about 435 local people in Prudhoe, including 60 apprentices. It could not be doing any more to support its local community. It does not make glamorous, eye-catching products—or perhaps some people think it does—but it produces one in every five toilet rolls in this country, as well as vast quantities of paper towels. I am sure we all agree that those are essential products.

[Graham Evans (Weaver Vale) (Con)]

Flushed with success.

[Guy Opperman]

It is, indeed, flushed with success, as my hon. Friend so ably quips from the sidelines—as always, he is on the money. The wood pulp goes in at one end of the factory and paper products come out at the other. The machinery is highly technical; this is modern manufacturing in the modern age.

In this time of austerity, I am extremely proud that the north-east has a positive balance of trade and is the only region consistently to do so. We should trumpet the fact that the North East chamber of commerce is the only regional chamber of commerce in the country. It represents more than 4,000 businesses and covers more than 30% of the region’s work force. If I had to single out one local concern that it has highlighted to me from the multitude of things it would like to be done, it would be to urge the Minister to conduct the review that it is hoped will be undertaken of the planned carbon floor price and other climate change and energy-related matters.

How are we to address the manufacturing deficit? I have three main suggestions. First, we need a Minister for manufacturing. That is not to decry the efforts of the Minister with responsibility for business or the Business Secretary, both of whom are worthy men, or those of any parties in that Department. However, the fact remains that, according to the House of Commons Library, there has not been a Minister for manufacturing since 1945.

[Gordon Birtwistle (Burnley) (LD)]

In my constituency, I get a lot of requests from local manufacturing companies for advice on various issues, mainly in relation to exports and where to go for help with them. Does my hon. Friend agree that a Minister with responsibility specifically for manufacturing would be a major asset to the Government and the manufacturers of this country? Businesses would be able to go directly to the person who could give them the answer they required rather than having to go through myriad Departments. People get lost in that process—even Ministers sometimes, I imagine—and if we had someone who could be accessed directly and who reported directly to the Prime Minister, that would be a major asset to the Government.

[Guy Opperman]

I completely agree. To put it in the vernacular, we need a go-to guy who is the one person looking after manufacturing.

[Chris Ruane (Vale of Clwyd) (Lab)]

Or a go-to girl!

[Guy Opperman]

Of course, it could be a woman—I accept that entirely. I was using the term generically. Such a Minister could provide co-ordinated responses to the concerns of manufacturing businesses. Having such a Minister would send out a message that this really matters. I challenge anyone to say that that is not a good idea. It is something that successive Governments have consistently failed to do, and I do not blame previous Governments for that, but doing it would send out a positive message for the future.

The second issue I want to address is banking and the chronic deficit that every Member of the House must be facing in their constituency—a lack of bank financing for businesses. Every one of us, in every constituency surgery, will regularly have businesses coming to us and saying, “I cannot get the funding I need,” or “I cannot get the borrowing I used to have.” It is a chronic problem. Much good work is done by business angels and credit unions—those hon. Members who attended the debate on credit unions yesterday will know that very positive steps were discussed there—but when it comes to bank finance, the system of the main banks is clearly logjammed. What can we do about that?

Currently, to set up a bank one needs £110 million-worth of assets—of cash, effectively—or the Financial Services Authority will not allow it. If the FSA relaxed that rule or changed the figure to £10 million, for example, then prominent local businessmen or businesses in a local community could set up a local bank.

Traditionally, the problem has always been that banks go bust, as they did in the 1920s and ’30s, because they over-borrow and over-lend in effect. If there were a restriction such that they could not exceed the money held on deposit with the Bank of England, the only loss that could be sustained would be the funds in that bank. The effect would be true localism. Someone could set up the bank of Hexham—or, in the Minister’s case, the bank of Bognor—and that bank would be specifically focused on providing small and medium-sized enterprise lending to local businesses.

[The Minister for Universities and Science (Mr David Willetts)]

In my case, it might be the bank of Havant, rather than the bank of Bognor.

[Guy Opperman]

There could be competition throughout the region. That would not be difficult. Would it not be great if we had some competition among local banks?

[Andrew Stephenson (Pendle) (Con)]

In Pendle, a local businessman called David Fishwick is trying to do exactly what my hon. Friend suggests. He is trying to create his own bank to help small and medium-sized enterprises in Pendle and Burnley. The regulations are so detailed and engrossing that the FSA has refused to help him, despite his instructing high-flying lawyers. So far, it has even refused to meet him to discuss the creation of a bank that would directly help small and medium-sized manufacturers in Pendle and Burnley.

[Guy Opperman]

I will give way again.

[Lorely Burt (Solihull) (LD)]

The hon. Gentleman has obviously excited a lot of interest with his suggestion. Will he consider the American model of community banks, which have stood the test of time and served their communities?

[Guy Opperman]

My hon. Friend anticipates my next move, which is to say that such matters are already road-tested in other jurisdictions in other countries. Sadly, the FSA is reluctant to change its regulatory system. I have heard other examples of its failing to meet individuals who want to provide local financing—something that would be immensely good for local communities and could provide a flexible approach. Instead of being stuck with a loan from Barclays, for example, people would have a much lower flexible interest rate and adopt a much more interesting way to recuperate their finances at a later stage when the company was in profit. Banking would be local. We all know what happens when we are approached by a constituent when a business is in trouble. The decisions in relation to such financing are made not in Hexham or Newcastle or even in the north-east, but in a place such as Nottingham or Leatherhead or, ultimately, in London. That must change.

[Mike Weatherley (Hove) (Con)]

Does my hon. Friend agree that the banks in his example would facilitate help for some of the failures in respect of the enterprise finance guarantee scheme? There are 4.8 million SMEs, but the Government are targeting only 6,000 of them with help through the EFG at the moment.

[Guy Opperman]

My proposal would provide an alternative way forward for the financing that those businesses clearly need. I suggest that the Minister take it back to the future Minister for manufacturing and the Treasury, with a view to trying to move forward. I am conscious of the time, so I will not take any further interventions.

My next suggestion is an industry bank. We could extend the remit of the existing green investment bank to form a general enterprise bank, for which there are successful models in Germany and the United States. The German KFW—a product of Germany’s social market tradition—and the US Small Business Administration industry bank are specialists in long-term lending to SMEs, and they are effectively financed by their Governments, with a bottom line of commercial viability and social benefit.

The blueprint also exists in this country. What is presently 3i, which is a FTSE 100 company, was originally the UK Industrial and Commercial Finance Corporation, which had tremendous success when it was set up. On practical realisation, given that we have quantitative easing, would it not be better, instead of investing all those sums in bank bonds, for some of that money to go into an industry bank, so that it would go directly to the people who need it most and who are creating the jobs and growth that we all want and need?

I must conclude my remarks. I urge the Government to have a more pro-business policy. Others will talk of what the Government are doing and the positive steps they are taking, but I put in a plea for flexibility. There are repeated examples in my constituency of viable and successful businesses being penalised heavily for being a day late with their tax returns, or three days late with their VAT returns. Effectively, the Government are penalising those who are working the hardest to create the jobs that we need. I thank the House for its indulgence.

--- Later in debate ---

[Mr Bailey]

That issue was recognised by the previous Government, and measures were being put in place to replicate that approach in the context of the British industrial scene. The current Government are, to their credit, taking that up.

Bank lending is a hugely significant issue for small and medium-sized enterprises in my constituency and nationally. The Merlin targets are not being met. That, combined with low consumer confidence and low business expansion expectations on the basis of the domestic market, means that companies are not applying for loans because they do not feel positive about future market opportunities and because they are wary of the banks making their credit lines even more difficult than they already are. That is having a stultifying effect on the ability of small businesses to expand.

Quantitative easing in order to address that issue may, indeed, keep interest rates low, but I have yet to meet a bank that knows how that will help SMEs directly, and I have yet to meet a business that knows how it would make any difference to its relationship with its local bank. Although lower interest rates may be welcome in general, that will not necessarily feed through to more investment in small businesses. I am concerned that the effect low interest rates are having on pension fund incomes could lead to some manufacturing businesses having to pay more into their pension funds, thereby diverting money from other areas in order to sustain their pension levels. This could be a counter-productive step, therefore.

There is now a lack of provision in the crucial area of small grants and loans for small businesses that want to expand to take the market opportunities that will be available to them. The regional development agencies will not be reintroduced—that is a debate for another day—but they did provide small loans to businesses that wanted to expand. Those loans are gone now, and they are not being replaced by the banks. The regional growth fund is not yet delivering for small businesses. If we are to expand the capacity of manufacturing SMEs in the time that they have available to make an impact on employment, that vacuum needs to be filled. Either local enterprise partnerships must be given more powers or the RGF needs quicker and more localised means of distributing money.

[Guy Opperman]

Will the hon. Gentleman give way?

[Mr Bailey]

No; I am sorry, but I am running out of time.

I reiterate the points made about research and development tax credits and capital allowances—they might go some way to dealing with that problem. As they have been mentioned, I will not repeat the discussion of the issue.

The second issue to address is skills. As has been said, Tata has invested £300 million in Jaguar Land Rover in a site to the north of Wolverhampton, with enormous employment potential locally. The concern within the industry is that the extended supply chains of small and medium-sized enterprises that could service JLR may have a shortage of skilled apprentices, and I have already mentioned the potential need for capital investment to improve the capacity to meet the demand from JLR. I have no doubt that JLR will attract all the people it needs, because it is a high-paying iconic company that is very attractive to everybody. It will be the SMEs in the area that will need to recruit, and we need to expand our vocational skills base to ensure that that happens.

The Government have rightly concentrated on apprenticeships. However, there is emerging a picture of apprenticeship provision that will not necessarily address that need. First, a high proportion of the new apprentices are over 24, and there is considerable concern that these are just Train to Gain people rebadged. There is nothing wrong with Train to Gain, because it has an important role to play, but it will not necessarily meet the skills need that it is directed at. Secondly, there is increasing evidence of private providers coming in with short-term courses, which do not meet the historically longer-term need for training in a particular industry to meet capacity. I believe that the black country local enterprise partnership is examining the issue to try to scope out the skills provision that will be needed and ensure that it is provided. That LEP will be able to its job far more effectively if the Government were prepared to back their localism agenda by providing it with the resources to assess the skills need and to deliver on it locally.

--- Later in debate ---

[The Minister for Universities and Science (Mr David Willetts)]

It gives me great pleasure to respond to the debate. I congratulate the hon. Members who tabled and secured the debate: my hon. Friend the Member for Hexham (Guy Opperman) who began with an excellent speech, my hon. Friend the Member for Warwick and Leamington (Chris White) and the hon. Members for Huddersfield (Mr Sheerman) and for Burnley (Gordon Birtwistle).

This is a very important debate, and I welcome the fact there has been very little partisanship. There have been a lot of shared themes, which I hope to touch on in my remarks. Perhaps the main difference is almost a temperamental one, between the people who take a more optimistic view and those who take a more pessimistic view. I am certainly with the optimists. We can be proud of the revival in our manufacturing sector that is already under way.

Instead of drawing attention to the overall statistics, perhaps I can reflect on the announcements that we have had this week, which tell us what is going on. Today, the Prime Minister has been able to welcome Toyota’s plans to build its new generation family-sized hatchback at its UK factory in Burnaston near Derby during his visit there. That investment of £100 million will secure many jobs. In addition, Airbus has today announced 200 extra engineering jobs at Feltham, and Nestlé has announced a £110 million investment at its Tutbury plant, which will involve 300 extra jobs. Those are today’s announcements. Yesterday, Coca-Cola announced a £50 million investment in a new bottling facility at Wakefield and other investments as well.

If one considers the build-up of announcements, there is clearly the sense that a revival is under way in our manufacturing industry. It has been very encouraging to hear from hon. Members on both sides of the House about the strong support that there is for manufacturing. There is a recognition that the future of our economy must include manufacturing, just as our proud history has manufacturing at its heart.

My hon. Friend the Member for Hexham made an excellent opening speech, and I shall briefly respond to two themes that he touched on, particularly as they were picked up by other hon. Members. He called for there to be a Minister for manufacturing. Let me make the role of the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford (Mr Prisk), clear. Incidentally, he is not here to respond to the debate because Ministers are fanning out across the country today as a result of all the excellent news on manufacturing. The Prime Minister is in one part of the country, my hon. Friend the Member for Hertford and Stortford is elsewhere and, of course, the Secretary of State is somewhere else.

My hon. Friend the Member for Hertford and Stortford, who deals with business and enterprise, has the following responsibilities: aerospace, the defence sectors, the automotive sector, professional and business services and the delivery of the advanced manufacturing growth review. In addition, he is the architect of our next manufacturing summit in Bristol, and he has overall responsibility for manufacturing and materials. Although he does not have the word “manufacturing” in his ministerial title, he is for all practical purposes our Minister for manufacturing. Several Members have asked: who is the go-to Minister? He is the go-to Minister for manufacturing and he does an excellent job. Of course, the Secretary of State also has a clear personal commitment to manufacturing. My view, therefore, is that there is a key Minister in the Government with that responsibility and a Secretary of State with very strong personal commitment to the subject. We are all, as Ministers in BIS, working on this and trying to contribute in our different ways and with our different responsibilities, whether they be for universities, research, science, high tech, skills or apprenticeships.

A second question put by my hon. Friend the Member for Hexham concerned access to bank finance. That subject is raised regularly in the House, as I often notice in BIS questions. His particular point, which has been pursued by several Members on both sides of the House, is about whether we can do more to enable new banks, especially new small banks, to set up. One of the key recommendations in the report by the Independent Commission on Banking was that we should look at barriers to entry, which are too high. It should be easier for new entrants to come in and set up banks, and we are now pursuing that recommendation. There has already been a round table meeting with challenger banks—the banks that want to come in and do more. The Chancellor himself touched on the subject in a major speech on the subject on 3 October.

Given my responsibilities for research, high tech and science, I have been frustrated by the time it has taken to establish Silicon Valley bank, which originates, as its name implies, in silicon valley and is a specialist in venture debt that lends to start-up businesses at early stages. I was told that it took it a year just to assemble the paperwork that was necessary for the Financial Services Authority approvals process, and another year for the FSA to consider that paperwork. We in BIS, and the Government as a whole, with the Treasury in the lead, are absolutely persuaded by the argument that we need to think about whether we have ended up with a system that has barriers to entry that are too high. That is why we are looking to see how we can pursue the recommendations of the Independent Commission on Banking.

[Guy Opperman]

Would the Minister be interested in facilitating a meeting with the FSA and the Treasury? While I have no doubt that BIS may be fascinated by the idea of local banks and better business banking, the Treasury and the FSA seem a little more reluctant to oil the wheels, if that is the right term.

--- Later in debate ---

[Mr Wright]

I absolutely agree, and my hon. Friend and I share the view of my right hon. Friend the Member for Wolverhampton South East that we should be bold and ambitious about manufacturing. We do not hark back to the past, but we want to engender that spirit of enterprise, innovation and ambition to ensure that we are the best engineering nation anywhere on the planet, that people can go into a career in manufacturing engineering secure in the knowledge that it is rewarding and produces products that we can sell to the rest of the world, and that Britain leads the world in that area.

[Guy Opperman]

May I take the shadow Minister back to the future? Does he agree that the idea of local banks, as outlined by several hon. Members, and an industry bank such as KfW, should be supported by Opposition Members?

[Mr Wright]

I listened closely to what the hon. Gentleman said in his excellent contribution, and in a moment I will mention the problems that companies—especially manufacturing companies—have in accessing funds that would allow them to grow, especially in export markets. I have a particular suggestion to put to the Minister on whether the Government are trying to do anything about that.

I hope that I have mentioned the huge potential and the enormous scope for us to be a leading player in manufacturing and engineering in the 21st century. None of that is inevitable, of course, and nor will it happen by chance. In the era of the most intense global competition imaginable and with economies such as China—known for its low-cost manufacturing—anxious to move up the value-added chain, Britain needs to put in place the best possible policy framework to ensure that our ambitions are realised. In the words of Richard Lambert, the former director-general of the CBI, the Government, particularly the Department designed to champion British growth, enterprise and industry, need to provide

“a vision of the kind of economy we want to have in ten years time and what it’s going to take to get from here to there”.

Instead, however, a leading global manufacturer has stated flatly:

“The government is not giving us a reason why we should be in the UK in 10 to 15 years’ time.”

The Government are not doing all that they can to allow British manufacturing to fulfil its potential. Worse than that, decisions taken by Ministers in the Department for Business, Innovation and Skills in the past 18 months have ensured that British manufacturing has taken a backward step. Our economy has grown by just 0.5% in the past year compared with 1.5% in the US and 2.3% in Germany. Export activity is stalling, and both output and sentiment are at their lowest levels since the height of the recession two years ago.

That situation is confirmed by today’s publication of the CBI’s industrial trend survey, the briefing on which reported:

“UK manufacturers reported a weakening in order books in November, with export orders in particular deteriorating significantly… As a result, firms expect a fall in production over the coming quarter”.

Not all of this is the Government’s fault, but an awful lot of it is—far more than BIS Ministers will acknowledge. BIS, charged with being the Department for growth, is weak and out on a limb in Whitehall. Whether trying to secure a stimulus for the economy—we will see what happens on Tuesday with the autumn statement—or support for the UK train manufacturing industry, the solar panel industry, Sheffield Forgemasters or long-term investment in oil and gas, the Secretary of State always plays the game but always loses. Worse than that, though, he always loses by putting the ball in his own net. The CBI’s director-general, John Cridland, described the appalling decision, which the House debated yesterday, on feed-in tariffs and the threat to the solar panel industry as

“the latest in a string of government own goals”.

--- Later in debate ---

[Guy Opperman]

I thank colleagues who have contributed to the debate, in which there has been a cross-party optimism about the fundamentals of manufacturing. It is a noble profession and a wonderful sector to work in. There is optimism for the future of manufacturing, and that is what this debate is about, rather than the past.

There has been an understanding of the past difficulties from which successive Governments and businesses down the years have suffered and of the present problems of globalisation, the Chinese influence, energy prices and the extent to which the state is struggling with the debt and difficulties faced by each country in the eurozone, particularly this one. There has been recognition that we must subsidise and support individual businesses and manufacturing organisations, whether with a form of capital allowances, R and D, tax credits or the like.

Although there is a tradition for men to be involved in manufacturing, I was particularly heartened to hear my hon. Friend the Member for Erewash (Jessica Lee) contribute so robustly to the debate. As a female Member of Parliament, she spoke very eloquently of the role of women entrepreneurs. I strongly support the view that this is a profession not only for men but for women. I apologise to all women for saying, when I described the need for a Minister for manufacturing, that we needed a go-to guy; of course, it could just as well be a go-to woman.

[The Minister of State, Department of Health (Mr Simon Burns)]

Or gal.

[Guy Opperman]

Or gal, as my right hon. Friend on the Front Bench so eloquently puts it. The learned Minister has intervened on many previous occasions, and we have another bon mot at last.

I listened to the 19 speakers who contributed to the debate. We finished, last but by no means least, in Watford, having journeyed north to Morecambe and the bay, taken in Bradford East and Hove, and travelled back up to Yorkshire and Calder Valley and then on to Carlisle and Hartlepool. At this stage, the Minister appeared. I must apologise to him, because I think I said that he was from Bognor. Of course, I have nothing against Bognor—everyone loves Bognor—but he is the representative of Havant, as we all know, except the hon. Member for Hexham. We then journeyed to Erewash, Derby North, Pendle, Blaenau Gwent, Warwick, West Bromwich West, Burnley, Wolverhampton South East, Weaver Vale, and then to Huddersfield and up to the finest constituency of them all—which is, of course, Hexham.

The future of manufacturing is worth our taking up the debating time of the Backbench Business Committee. The three co-sponsors of the debate—my hon. Friends the Members for Warwick and Leamington (Chris White) and for Burnley (Gordon Birtwistle) and the hon. Member for Huddersfield (Mr Sheerman)—have done so much to try to put manufacturing back in the frame in the House of Commons, and that is the right thing to do. It is noticeable that we are already receiving press coverage on the need for a Minister for manufacturing.

There seems to be widespread agreement that the banking system needs reform and improvement so that these businesses, which we all so cherish and want to receive support, receive that support, whether it is from a local bank or an industry bank such as that championed so well by the Germans with the KfW model. Such possibilities give businesses an endless ability to thrive in future. We all agree that that is the model for the way ahead. I look forward to the forthcoming meeting with the Financial Services Authority to discuss the local bank project. The Government should clearly be picking winners; manufacturing is a winner, and it has a very good future.

Question put and agreed to

Resolved,

That this House has considered the matter of the future of manufacturing.