Manufacturing and Engineering

Debate between Ian Swales and Jeremy Lefroy

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.