Manufacturing and Engineering

Ian Swales Excerpts

Tuesday 6th March 2012 Westminster Hall

[Jeremy Lefroy (Stafford) (Con)]

It is a pleasure to serve under your chairmanship, Ms Clark. I congratulate my hon. Friend the Member for Stroud (Neil Carmichael) on securing this extremely important debate.

My first job after university was as a production foreman with Ford in Bridgend. I am delighted that that factory, 30 years on, is still there. In fact, Ford recently announced a £240 million investment in that engine plant. At the time, it was supposed to be the most efficient engine plant in the world. I believe it is still one of the top ones. The UK has a major role in manufacturing engines not only for the motor industry, but for all types of vehicles, including, for instance, construction equipment, which I will come on to later.

I have been passionate about manufacturing from the start of my career. I welcome the comments made by all Members who have spoken so far. In the past couple of years, there have been major announcements of investments, particularly in the motor industry. As has been referred to this morning, there has been a very welcome announcement by Nissan in Sunderland. There have also been announcements from: BMW in both Oxford and Hams Hall in Warwickshire, near the constituency of my hon. Friend the Member for Warwick and Leamington (Chris White); Toyota; Honda; and Vauxhall. Of course, there is also the welcome announcement that Jaguar Land Rover is building an engine plant at the i54 site, close to my constituency. The UK is a world leader in the design, development and manufacture of engines for motor vehicles.

In my constituency, the largest employer in the private sector is Alstom, which employs nearly 2,000 people. It is the only remaining transformer manufacturer in the UK. It is extremely important for the UK electricity supply industry and beyond, as it is involved in manufacturing in the transport and other sectors. I also have in my constituency Perkins, a part of Caterpillar, which makes very large engines to power generators around the world. Some 90% of production in my constituency is exported. As hon. Members have mentioned, manufacturing is by far the greatest earner of export revenue in this country; our manufacturing sector accounts for 54% of our exports.

I absolutely endorse what my hon. Friend the Member for Warwick and Leamington said: we need a long-term manufacturing strategy in this country. I refer hon. Members to my entry in the Register of Members’ Financial Interests. I want to highlight a report from the chairman of JCB, Sir Anthony Bamford, called “UK Manufacturing: Time to Make it Count”. I received it yesterday, which was timely. I recommend that every Member and every Minister reads it, because he makes very powerful points. He has the right to do so, because his is a private company employing several thousand people in the UK and 10,000 in total around the world. It is constantly investing in the UK, instead of choosing to outsource manufacturing to perhaps more convenient places. It continues to invest in people, plants, and research and development here in the United Kingdom.

Hon. Members have already covered much of the scene. I know that others wish to speak, so I will concentrate on two or three areas. On skills, it has already been mentioned that not enough women are going into engineering. In this country, the figure is something like 8.7%; in Germany, it is nearly double that. We can see the results in German manufacturing industry. We need to encourage more people, particularly women, to go into engineering and take it up, not only at degree level, but at apprentice level.

I want to concentrate particularly on finance. I have already referred to the fact that in Germany companies have a far wider range of banks from which to choose. Reference has been made to Handelsbanken; I welcome its growth in this country, because it is committed to this sector, but I want to see more local and regional banks and more mutuals—something to which Sir Anthony Bamford refers. As my hon. Friend the Member for Halesowen and Rowley Regis (James Morris) mentioned, in our area, the Black Country Reinvestment Society is steadily growing and committing funds to local manufacturers.

We have already heard about this country’s export credit guarantee scheme. It is a good scheme, but not nearly good enough. Over the past nine years, Germany’s equivalent scheme has advanced or guaranteed eight times more finance than the UK has done, and the results show. We must do more on export credit guarantee. It is not just a drain on the Treasury. People pay for insurance, and it allows them to get from the Government the backing that they cannot get from commercial markets.

That is particularly relevant if we consider where the world’s growth areas are. Six of the top 10 fastest growing economies in the world are in sub-Saharan Africa. Anyone who goes there now, as I do frequently—I lived there for 11 years—will see huge opportunities. Just last month, when I was in Kenya as part of the armed forces parliamentary scheme, I was delighted to see products by JCB and other British companies; I had not seen that there before. There are huge opportunities, and we neglect them at our peril.

I would like to comment on the provision of equity finance. We in this country are poor at equity finance. I welcome the fact that the banks have set up the business growth fund, which should not be confused with the regional growth fund. The business growth fund is like a renewed 3i—Investors in Industry. However, I urge the banks to consider a slightly lower threshold. At the moment, they are considering investments of £5 million or more, and businesses with a turnover of £10 million or more. Many smaller manufacturing businesses would welcome investment; in fact, they are the ones with potential for growth. I urge the banks not to say that it is too expensive to consider smaller businesses, but to see them as an opportunity.

To return to the question of ownership, we in Britain seem to be good at giving away ownership of our manufacturing businesses. As the hon. Member for Paisley and Renfrewshire North (Jim Sheridan) said, the problem is that however competitive the UK is, if a company is not headquartered in the UK, it will not have the emotional pull to invest here—an emotional pull shown by JCB, for instance, which is headquartered here. I am not saying that we should not encourage foreign investment—we welcome it—but at the same time, let us build up home-grown major manufacturing businesses like JCB, Rolls-Royce and others that have been mentioned.

My final point concerns energy costs. There has been a lot of debate in the House recently about energy-intensive companies, working in areas such as steel, ceramics and glass, which are vital to this country’s manufacturing base. I welcome the Government’s recognition of that importance, but we must ensure that we do not unintentionally cause those industries to migrate overseas as a result of things such as the carbon price, which will come in next year. We can be sure that they will not reduce the amount of carbon that they produce. In fact, in the places to which they go, they might be allowed to produce more carbon. Those industries in Britain have a proud record of cutting their carbon emissions over many years, and I give the last Government credit for that.

[Ian Swales (Redcar) (LD)]

As vice-chair of the all-party energy intensive industries group, I would like to comment on that point. I am late for this debate because I have just met Tata Steel, which has a £50 million cost disadvantage in the UK compared with its French competitors as a result of energy prices—and that is now, before various other measures have come into effect. I totally support my hon. Friend’s comments about energy costs.

--- Later in debate ---

[Mr Wright]

I agree absolutely with the hon. Gentleman. Many people accept, quite rightly, the importance of not being too reliant on foreign sources of energy; that is why we need to ensure that we have a diverse energy policy. Frankly, we need the same approach for manufacturing—we should not be too reliant on our foreign competitors. We need a vibrant steel industry and a vibrant shipbuilding industry to ensure that we have that capacity, and that we produce the next generation of ships and use steel for offshore wind—that is exactly what we need to do.

Let me turn to another important issue, which I mentioned in an intervention on the hon. Member for Stroud: the tie-in between manufacturing, engineering, the wider point about business and schools, and our education system. If we are to see engineering and other STEM subjects rise in cultural importance, it is vital that engineering qualifications have at least parity of esteem with more liberal arts-based subjects. That is why, as I mentioned in my intervention, the decision of the Secretary of State for Education to downgrade the value of the engineering diploma from the equivalent of five GCSEs to just one is simply wrong.

In the previous Government, I was the Minister with responsibility for 14 to 19 reform and apprenticeships. I had responsibility for the engineering diploma, so I feel protective towards it. It was, and is, a high-quality and rigorous qualification that has the support of business and backs the interests of many of our brightest young children. The downgrade is the wrong move if we are to promote engineering. Do not take my word for it. Dr Mike Short, president of the Institution of Engineering and Technology, along with 16 senior industrialists, put his name to a letter to The Daily Telegraph that said:

“The Engineering Diploma is widely recognised as a significant route to providing the crucial technical and practical skills that young people will need to build a Britain that can compete effectively and internationally where technology can make such a difference to our digital world. Industry and the professional engineering institutions have worked extensively to make this 14-19 qualification a highly robust and attractive qualification, which now appears to be being undermined by the Government's premature decision to downgrade its worth.”

[Ian Swales]

Does the hon. Gentleman agree that when I asked the Secretary of State for Education a question on this subject a couple of weeks ago, his answer that the engineering diploma had to be seen as level with physics, chemistry or biology showed a basic misunderstanding of what the engineering diploma actually is?

[Mr Wright]

The hon. Gentleman is absolutely right. For far too long, we have had a culture that considered academic subjects to be successful, and vocational and engineering-based qualifications to be somehow second rate. Germany does not have that culture, which is why it has a flourishing manufacturing sector. We need a similar parity of esteem in this country; otherwise, we will never be able to achieve our potential in manufacturing and engineering.

The world will not wait for us. We need a sense of determination and urgency in light of the fiercest competition the global economy has ever known. Instead, and to my utter frustration, we have a sense of drift and a lack of co-ordination from the Department for Business, Innovation and Skills, and across Whitehall. The time is now, as senior industrialists, the CBI, the TUC, and hon. Members here today have said, to play to our strengths, seize the opportunity and put manufacturing and engineering at the heart of the economy. The Government need to act now.

--- Later in debate ---

[Norman Lamb]

I absolutely agreed with the hon. Gentleman when he talked about parity of esteem between the vocational subjects, including engineering, and the more academic subjects. In recent years, including during his own party’s tenure in government, that has not existed—there has been no parity of esteem. The vocational, practical subjects have been downgraded in the public mind, and the Government are doing a lot to re-establish them. The university technology colleges initiative is valuable in that regard. On his particular point about the engineering diploma, it is a complex issue with the interaction of school tables. However, the principal learning in engineering—the engineering core of the diploma—will be recognised. That in itself is a vote of confidence. I therefore reject absolutely any idea that the Government do not see the importance of parity of esteem.

I want to mention the fantastic news from Nissan in Sunderland—mentioned by a number of hon. Members—which offers the potential for 2,000 jobs. The shadow Minister was generous in applauding that great news. There are a number of challenges and we hear stories that go in the other direction. However, when we have news that demonstrates a very clear vote of confidence in the UK economy, we should applaud it. The extent to which the automotive industry in this country now leads the way—hon. Members have talked about the fact that we are a world leader in motor vehicle engines—means that we have an enormous amount to build on.

The future of manufacturing is an issue being debated not only in the House, but, as we have heard, at high levels elsewhere today. My right hon. Friend the Secretary of State for Business, Innovation and Skills will address the inaugural EEF manufacturing conference today, as will the Leader of the Opposition. The Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford, has been speaking at the automated Britain conference this morning and will address the Institute of Mechanical Engineers manufacturing conference tomorrow. He and my right hon. Friend will make it clear that manufacturing growth is one of the highest economic policy priorities for the Government. It is important to stress that.

The UK is recovering from the biggest financial crisis for generations and the deepest recession of almost all the major economies. We are still feeling the shocks from the eurozone’s sovereign debt crisis. The recent agreement with Greece, although welcome, is not a panacea. One of our first decisions in government was to place manufacturing at the heart of our economic strategy. I reject the shadow Minister’s charge that there is any sense of drift. The Department is focused on manufacturing. The Minister of State leads on manufacturing: he devotes attention to it, and he is closely interested in doing everything he can to support growth in manufacturing.

In placing manufacturing at the heart of our economic strategy, we were under no illusion about the challenge that we faced in turning UK manufacturing around. In the UK, manufacturing as a percentage of the economy fell from just over 22% in 1990 to around 10% in 2010. The decline of manufacturing has been significant, in marked contrast with Germany, which has sustained that share of the economy much more successfully. We have learnt from the mistakes of previous Administrations

[Ian Swales]

I welcome the Minister’s comments about the importance of manufacturing. Does he agree that even figures such as 10% or 12% far understate the importance of manufacturing to our economy, because so many service sectors, such as logistics, energy and so on, depend on having a manufacturing sector? Will he join me in welcoming the fact that manufacturing employment in the north-east has risen every month for the past 22 months, which shows that the Government’s policies are helping?

[Norman Lamb]

I applaud my hon. Friend’s work promoting manufacturing, not only in his region but nationally.