Manufacturing and SMEs

Debate between Matt Hancock and Andrew Smith

Wednesday 4th September 2013 Westminster Hall

[The Parliamentary Under-Secretary of State for Skills (Matthew Hancock)]

As everyone has said, this has been a stimulating debate, and I will take away from it several specific points. I will address the points as well as I can in the time available, but I start by saying that I do so in the context of someone who began their career in a small business, albeit a software business rather than a manufacturing one. I understand the difficulty of engaging with the Government—they are a large organisation—and the importance of putting in place an improved environment in which small businesses can succeed in a way that is appropriate to their size and to the amount of time that the people running them have. My hon. Friend the Member for Warwick and Leamington (Chris White) asked whether the return of growth would mean that the Government would stop pushing on measures for growth, and all I will say is that he certainly will not get that from me, or my Department.

The context for the debate is, as my hon. Friend the Member for Weaver Vale (Graham Evans) set out, the sharp decline over many years of manufacturing in the UK, from about 23% to barely more than 10% of the economy, but it is on the rise again. Having the debate this week is good timing because we have the welcome news that data show the sharpest rise in manufacturing orders since 1994.

The current level of manufacturing output is of course below the level it was at before what the Governor of the Bank of England has called the great recession, of 2008-09, and there is a huge amount to do to recover that ground and go forward, but I think we can all agree that there is a new spirit and vision for the growth of high-tech, high-end manufacturing. Other countries, not least the United States, where energy costs have fallen sharply, partly due to new sources of unconventional gas, are bringing manufacturing back onshore, especially at the high-value end. That is a positive context for the debate.

The hon. Member for West Bromwich West (Mr Bailey) talked about the i54 development and the Jaguar Land Rover project, which I happened to drive past last week—there is a massive amount of building and earthwork going on. The Minister of State, Department for Business, Innovation and Skills, my right hon. Friend the Member for Sevenoaks (Michael Fallon), met Jaguar Land Rover only yesterday to discuss ensuring that we can keep the project moving forward. The links between the different local authorities have been an impressive part of its development.

In the context of the new growth we are seeing in manufacturing, I would be delighted to visit Gloucester and proselytise about manufacturing. I very much look forward to my visit.

My hon. Friend the Member for Carlisle (John Stevenson), who has rightly been congratulated on securing the debate, talked about the definitions involved in the Government approach’s to small businesses. It is important to ensure that we have as simple as is reasonable an approach across Government, and that each intervention is targeted at the right size and sector of business. Broadly defined, SMEs can run from a single-person business up to one employing 250 people. Those are hugely different types of business and we need to ensure that we segment properly.

The links between central and local government are important. Local enterprise partnerships play an increasingly vital role in bringing together local businesses and local authorities and providing a link to central Government, and we should push that forward further.

I want broadly to set out how we view the Government’s role, and to respond to some of the questions asked by the hon. Member for Hartlepool (Mr Wright). It is true that Britain fell down the league of competitiveness, not least on infrastructure, but now, finally, we have a national infrastructure plan, on which we are beginning to deliver. The earthwork along the M54 is not alone; across the country there is infrastructure development, not least for Crossrail, which is the largest construction project in the whole of Europe. It is vital that we turn the situation around and that is what we are doing.

The hon. Member for Hartlepool also mentioned finance. It is true that the funding for lending scheme, as the hon. Member for West Bromwich West said, has been helpful, and in April we announced that we were extending it to SME lending. I note that lending to small businesses rose by £262 million in July, which is positive news. On skills, the increase in engineering apprenticeships, which my hon. Friend the Member for Stafford (Jeremy Lefroy) mentioned, is vital and is something into which I personally have put huge effort. We have apprenticeship training agencies in the UK, but there is the potential for more because they can ensure that we draw together the needs of different companies to guarantee that training is co-ordinated and bureaucracy taken away from small businesses. We are also considering more radical changes to how we fund apprenticeships, to make them easier for small businesses to access, one option being to introduce funding through the tax system.

My hon. Friend the Member for Gosport (Caroline Dinenage) brought her own experience to the debate. The question of simplifying procurement bureaucracy is absolutely vital, and the hon. Member for Hartlepool made a point about procurement almost with the zeal of a convert. The target of awarding 25% of public contracts to SMEs is important and the fact that, according to his figures, only 10% of them go to SMEs at the moment just shows what work there is to do. I am glad that the Labour party is coming to the table on that.

[Mr Andrew Smith]

Will the Minister comment on the survey that I mentioned, which showed that, according to the perception of small businesses, things have got worse in the past three years rather than better?

[Matthew Hancock]

It is certainly taking time to turn the situation around, but there is no doubt that there is the enthusiasm to do so. Some Departments have already hit the 25% target, including the Ministry of Justice, so there is progress, and there appears to be cross-party support for it.

I will finish by saying that everyone who participated in the debate mentioned the scope and potential for the future of manufacturing in general and in small businesses, and we in the Government passionately support that. There is plenty more to do on tax and deregulation, the expansion of the R and D tax credit, the all-important funding and finance for growth and all the other issues we have talked about, but momentum is starting to build and we will not let up.