Business: International Competitiveness

Lord Paul Excerpts

Thursday 16th January 2014 Grand Committee

[Lord Paul (Non-Afl)]

My Lords, I, too, thank the noble Baroness, Lady Neville-Rolfe, for initiating this very timely debate. I declare an interest as the chairman of the Caparo group, an industrial manufacturing company.

We are seeing a recovery in the economy—in particular, in UK manufacturing. This is very heartening, and confidence is important in achieving any recovery. However, I am concerned that growth will continue to struggle without the necessary environment of efficient regulation and support that only government can provide.

As someone who is involved with manufacturing industry, I am keenly aware of the fragility of this current upturn. In the automotive sector, for example, we have seen recent international success for the UK plants of Jaguar Land Rover and Nissan, yet for most other car plants, market conditions remain challenging. The fourth, fifth and sixth biggest car manufacturers are producing 30% fewer cars than before the financial crisis, and although we are now buying as many cars as we did before the recession, only one in every seven cars sold in Britain is made here. Even for those that can sell their products in this sector, skilled engineers are hard to find, and working capital to fund growth remains difficult to secure.

Behind the big car-producing household names lies a supply chain of component manufacturers and service providers upon which the car makers rely and which provide the majority of jobs and income on which our manufacturing regions depend. Most of these businesses have been unable or unwilling to risk investing in new productive capacity in the past few years. They are now feeling more confident to invest, but how are they going to find the capital and skilled labour to allow them to do this?

Despite the Government’s efforts, the commercial banking sector in the UK has continued to shrink its loan books, and what is available remains difficult to access. I welcome the initiative of the Government in setting up the British Business Bank, and wish the recently appointed chairman every success in investing the £1.25 billion that the Government have set aside, but this may be too little, too late. Germany’s KfW, on which I believe the British Business Bank is based, invested more than €17 billion in Germany’s Mittelstand companies in the first nine months of 2013 alone. If we are to compete in international markets, the Government and financial sector need to work together now to provide easily accessible funding solutions to support investment in our economy. Tax incentives for lease finance providers, coupled with enhanced investment allowances for manufacturers, could and should be considered.

We must also support our manufacturers in the training, development and availability of skilled labour at all levels, from shop-floor technicians through qualified engineers to senior managers. This must be a true partnership between government, academia and manufacturers. We need to ensure that a significant part of our higher education system is providing relevant skill training that serves the needs of commerce, and that involves local communities.

The Government must make key decisions for the country’s longer term future, such as proper plans for future power generation, airport capacity, transport infrastructure development and cutting procedural red tape, which stops us getting things done.

As yet, we do not know the outcome of the EU vote, nor are we likely to until at least 2017. Of course, at home we have the Scottish devolution vote. Any investor in UK commerce, whether domestic or from overseas, wants certainty on what it is committing to, and those unresolved issues hinder and frustrate even those who have the money and the labour. I urge the Government to start making decisions now, before it is too late.

The time may have come when the Government might think about the experience of our colleague, the noble Lord, Lord Green, and put him in charge of British industry’s development.