UK Manufacturing Industry

Lord Bhattacharyya Excerpts

Thursday 8th December 2011 Lords Chamber

[Lord Bhattacharyya]

My Lords, I thank my noble friend Lord Haskel, who is a great ally of British manufacturers, for securing this debate. I have had many private debates with him. I am sure that he is among the very few people in this House who understand manufacturing.

I also wish to declare my interests as set out in the register, and draw special attention to my role as the founding chairman of the Warwick Manufacturing Group. I come to this topic with a great deal of personal interest and experience, having worked with, and for, leading British and global manufacturers for some 45 years. In that time I have participated in many debates about the past decline and worrying future of British manufacturing. I have no desire to go over those debates again. After all, since the crash, manufacturers have provided the good news in Britain’s economy. We have had eight quarters of manufacturing GDP growth, business investment has increased for the past sixth months and while yesterday’s output figures were poor, a “maker’s recovery” continues in key sectors; for example, automotive. For the first time in decades, manufacturing is seen as key to Britain’s growth, not our biggest problem. If we are to solve the challenge of unemployment, we know that a jobless recovery through building warehouses to hold imports to be sold in supermarkets, all paid for on credit, is no solution and never has been. Do we want an economy based only on warehouses and office parks that I see littering our countryside, or a recovery which relies on taxing highly paid clerks in the City? No, we need to make the products that the world needs.

In that spirit, there is news in the Autumn Statement to applaud: increased infrastructure spend; business angels tax relief for small businesses; and credit easing to support British firms seeking finance, although the devil will be in the detail. This stimulus package—for that is what it is—is a step in the right direction, but it is only the first stage of a long-term change. The transformation that we need cannot be delivered at the flick of a switch or by issuing a press release from Whitehall. We need a better, broader capitalism, and that means developing better products for broader markets. This is a point that the leader of my party has made very powerfully. The global market is consumer driven. Consumers, especially British ones, care little where goods are made, only that they are fit for the intended purpose, and I do not blame them.

Government should support the development of globally competitive products in Britain in three bold ways. Procurement is the essential first step. Without a big market to aim for, a focus on new products will not appear profitable for many businesses because in global terms the UK market is small. The UK defence sector prospered because it could rely on a high-demand customer—the Government. Whatever the weaknesses of defence procurement, its great strength is that it procures new British products. We need to expand that insight to the NHS, housing, infrastructure and energy. Compare Hitachi in Newton Aycliffe with Bombardier in Derby. One is secure through procurement, the other is at risk in its absence.

Secondly, we have debated research impact many times in this Chamber. I welcome the progress that the Business Secretary and the Science Minister have made on life sciences and the NHS, but why does this apply to such a limited field? What is the point of a school of manufacturing, if it is not judged on impact? We must make impact the cornerstone of assessing all the applied sciences. We need to make applied research an essential tool for businesses, not a parade of expensive white elephants.

The third step to securing global scale is to attract overseas innovators, whether through asset purchase or partnership. We must attract companies that will invest in the UK and can increase exports. They know what growing markets need and how much they are prepared to pay. Overseas investment also focuses UK plants on being globally competitive. A plant owned by a Thai firm knows how it must change to compete with Thai factories. I am talking about steel.

Next, we should help British firms to develop new products. Too often, we talk a lot about selling but do not make much worth buying. We put our faith in trade delegations without worrying if the delegates have goods to sell. It is all right—the only thing they sell is the financial sector. Then they are worried. I know that in India, for example, all that trade delegations want to sell is the financial sector, but they will not get in to such markets because they are very highly regulated in most countries.

I am proud of our successes—from JCB to BAe and JLR—but we need many, many more. Today, it is hard for a manufacturing business to meet such product challenges. Why? I am often told it is because medium-term finance is hard to secure. That is why we need a real industrial bank. Why not use funds destined for banks through quantitative easing to establish a new ICFC? Success in expanding a firm needs a big high-volume market to aim at, quality products that compete in global markets, and finance to develop those products and processes. The same applies to procurement policy, support for R&D impact and inward investment, and providing the finance needed for expansion. Government can use the current crisis to mould policy for a generation if we have the long-term ambition. Ambition is essential. Caution is no virtue if Britain’s makers are to march. Think of post-war Germany, which built KfW and Fraunhofer from nothing.