Manufacturing

Lord Harrington of Watford Excerpts

Thursday 24th November 2011 Commons Chamber

[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”.

[Richard Harrington (Watford) (Con)]

I agreed with much of what the hon. Gentleman said until he claimed that the Government should take much of the blame over the past few months. I must return his mind to the fact that more than 1 million manufacturing jobs were lost under the tutelage of the previous Government. I would like to hear his comments on that.

--- Later in debate ---

[Richard Harrington (Watford) (Con)]

I, too, congratulate my hon. Friend the Member for Hexham (Guy Opperman) on bringing about this debate. I also congratulate the Minister on his comments so far and, in particular, the shadow Minister, the hon. Member for Hartlepool (Mr Wright), not only on his contribution, but on the resilience of his bladder, which has enabled him to stay in his place for such a long time. It is always a pleasure to see him. On these occasions, it is difficult to think of something to say that is different from the contributions that other Members have been making for what seems like 25 hours. But I shall do my best.

I was born into a family with a modest factory, and I saw the decline of British manufacturing through my own experiences and my own eyes, because my father was similar to most small manufacturers of clothing in Leeds, near to the constituency of the hon. Member for Bradford East (Mr Ward), and he had a similar business to those in Bradford. He was put out of business by imports, but we have to look beyond that and ask, “Why has manufacturing failed?” [Interruption.] The shadow Minister shakes his head, but it has failed, and I will explain why.

Manufacturing has failed as a type of business for entrepreneurs to go into as a start-up. We all know that in Britain most large businesses started off not with big foreign investment, which has been very successful, but with people deciding to start businesses in a small way and to build them up to medium-sized businesses and then into some of the great businesses, such as those that the hon. Gentleman mentioned in Hartlepool.

Manufacturing has failed for three reasons. First, there has been a failure of capitalism in this particular field. Members might think it strange to hear a Conservative Member using Marxist terminology—[Laughter]—particularly for the amusement of the hon. Member for Huddersfield (Mr Sheerman)—but I mean that although a lot of capital has been employed in businesses in this country, comparatively little has been used by manufacturing. That is because capital is invested to obtain a return, and in my generation manufacturing enterprise has not generally led to significant returns.

Capital that belonged to families has grown in other ways. My father is a classic example of a person who, having found that his business was worthless, sold a small site to property developers and probably made more money than he could have in years of business. That is the story of many family manufacturing businesses in this country.

Secondly, there has been a failure of management. The hon. Member for Huddersfield, in an excellent contribution, mentioned being shown around Magdalen college, Oxford, where he was told that the bright undergraduates were going into the City. When he made that point, he was looking at my right hon. Friend the Minister, who I remember from my time was in fact at Christ Church rather than Magdalen, but I am sure he accepts that in our generation exactly the same thing happened.

Why did people go into the City? First, those people who were business-minded went, perfectly reasonably, into businesses where they felt they could make a lot of money. Secondly, and to draw another a Marxist analogy, for more than 100 years the class system in Britain looked down on manufacturing industry, so all that people such as my father, who was in manufacturing, wanted was for their sons not to have to put up with what they had put up with. These days people would say that manufacturing is not “cool” or “culturally acceptable”, but for many years has fallen, let us say, out of fashion.

[Craig Whittaker]

I have a lot of empathy for what my hon. Friend is saying. I mentioned in my speech the companies Boxford, Heights, BCA Leisure and Decorative Panels, all from the Calder Valley. They started from very small premises indeed and have built up. Does he agree that the biggest problem at the moment is that the banks just are not investing in research and development?

[Richard Harrington]

I very much agree with my hon. Friend’s intervention, but that issue has been covered in other hon. Members’ speeches, and in the remaining time I am trying not to mention it for that reason—valid though it is.

The reality is that for bright young people, manufacturing is not, by and large, something for them to go into. For some reason it is different in the United States. Very bright graduates—the brightest that Harvard and other places have—could always join firms such as Ford, General Motors and IBM. At those companies, they could expect to make as much money—if it is, indeed, money they are interested in—as the people who joined Goldman Sachs or such firms in Wall street or the City. We have not had that here so, in my experience—and that of the hon. Member for Huddersfield at Magdalen college and of the Minister at Christ Church college—people who were interested in making a lot of money from our generation did not go into manufacturing.

I have mentioned capital and management. The third issue is labour. I am not falling into the ridiculous trap of saying, “It’s the fault of the unions and the workers that we don’t have manufacturing.” Nevertheless, the issue of labour is a contributory factor. In Watford, where we have a few very good manufacturing companies, notwithstanding that there are 3,000 people on jobseeker’s allowance in the constituency, manufacturers have a problem getting unskilled labour because they cannot get people who will do night shifts and consistently do the kind of work that is expected. It is not dangerous work, but it is fairly mundane. Consequently, they have to import labour from Poland.

It is not right in the remaining nanosecond I have left to go into detail about the benefit culture, but we have to accept that if manufacturing is going to return, we must have people who believe it is a perfectly respectable and proper occupation to work in a factory. We want them to, and they should be properly rewarded for doing so. However, we cannot have a situation in which people feel it is not the right thing to do.

Manufacturing has been the victim of imperfections in capital and in management, its status in society and the attitude of labour towards it. Such a situation needs to be corrected, but that should be done on the true basis of entrepreneurship, which relates to people who may be called greedy by some. They want to make money, but they will pay their taxes and employ people as a by-product. It is a great thing to employ people but, for somebody going into business, it is a by-product rather than the reason they are doing it. When manufacturing becomes easier than property development, easier than the City, easier than management consultancy, easier than the law or, indeed, politics, it will come back—but only then.