Manufacturing in the UK

Michael Fallon Excerpts

Tuesday 14th January 2014 Westminster Hall

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

I join in welcoming you to the Chair this evening, Mr Streeter. I also congratulate the hon. Member for Inverclyde (Mr McKenzie) on securing this important debate and on the participation and audience that he has attracted from among both Opposition and Government Members.

A strong manufacturing sector remains crucial to the UK economy, now and in the future. It contributes disproportionately to our overall productivity growth. It drives innovation and business research and development; it accounts for 72% of all our business R and D. Manufacturing accounts for more than half of all our exports, and it provides skilled and well-paid jobs and employment opportunities for people of all educational attainment levels throughout our country, and particularly in the less affluent regions. The recent Foresight report, “The Future of Manufacturing”, pointed out that it is also one of the keys to resilience. It is one of only two sectors able to drive growth right across the economy through cross-sectoral supply chain linkages.

Of course, some manufacturers have not had an easy time during and after the recent financial crisis, but there has been some encouraging news of late. We know from the Office for National Statistics that manufacturing output rose by 0.6% in the three months to November, and industrial production rose by 0.3%. Two weeks ago, an executive survey by the Engineering Employers Federation and Aldermore told us that 2014 looks set to be better for the UK and for manufacturing than each of the past two years. Projected manufacturing expansion of 2.7% will put us top of the European Union growth league. The Deloitte chief financial officer survey, published on 6 January, reported that business optimism was at a three-and-a-half-year high. It is true that macro uncertainty and capital constraints, two of the biggest blocks to business activity, have begun to recede.

[Mr McKenzie]

We welcome the statistics that the Minister is rehearsing. Will he advise us of the spread of manufacturing across the length and breadth of the UK?

[Michael Fallon]

I do not have a figure on that immediately to hand, but perhaps the hon. Gentleman will allow me to write to him to fill in the picture across the regions. We have some statistical knowledge of that through the regional growth fund and our other funding instruments.

We have significant strengths in key manufacturing sectors, including automotive manufacturing, aerospace and pharmaceuticals. We need to make more of those competitive advantages and to sustain them. That is why we have a long-term plan in the shape of our industrial strategy, enabling Government and industry to work together to support the long-term direction that is needed to create more opportunities and jobs and to make this country more competitive. One of the most encouraging things about the industrial strategy has been the consensus that has built up around it, not simply among all parties in this House and in the all-party group on manufacturing, but between the CBI, the TUC, Lord Heseltine and others.

The strategy has five main strands: the sectors themselves, procurement, skills, technologies and access to finance. Through those strands, we are planning 10, 20 or even 30 years ahead. For example, with industry we are jointly funding the Aerospace Technology Institute to enable us to meet the challenges ahead and respond to the demand for up to 27,000 new civil aircraft between now and 2030.

[Mr McKenzie]

The Minister referred to the all-party group on manufacturing. What are his thoughts on that group’s call for a hotline to Government and a go-to man for manufacturing needs?

[Michael Fallon]

I was rather hoping that I was the go-to man and the contact figure within Government. Not only have I had the pleasure of addressing the group in this place, but the group has been to see me at the Department for Business, Innovation and Skills, and although titles vary, if there is a Minister for Manufacturing, I suggest that it is probably me. I am certainly happy to add to that a specific hotline, or an official with whom the group can have contact.

I have already mentioned the Aerospace Technology Institute. Through the construction strategy, we are trying to make the UK the global leader in sustainable construction by 2025, in a market that will grow by 70%. As part of the automotive strategy, we are investing around £1 billion over 10 years in a new advanced propulsion centre to develop, commercialise and manufacture advanced propulsion technologies in the UK. That strategy, too, looks 20 or 30 years ahead.

Hon. Members have referred to the renaissance of our motor manufacturing industry. There is the success of Jaguar Land Rover and Nissan, and also of the MINI plant at Cowley, which I have visited.

[Mr Sheerman]

Very briefly on that point, the big companies such as Rolls-Royce and the companies that the Minister mentioned are wonderful, but does he agree that our real future lies in growing small and medium-sized enterprises into larger companies, as most people who will work in manufacturing will work in SMEs in the future?

[Michael Fallon]

I certainly accept that, but I do not draw a sharp distinction between large and small. Companies need each other, and if I am given the time, I will come on to talk a little about the supply chains. The hon. Gentleman’s point on employment is well made.

On procurement, we have recently published procurement pipelines worth nearly £80 billion, covering a range of sectors. On skills, we are responding to the engineering skills shortage identified by Members by enhancing young people’s engagement through initiatives such as See Inside Manufacturing and Tomorrow’s Engineers. We are also supporting the technologies of the future through the “eight great technologies” strategy, focusing on advanced materials, big data, satellites, robotics, synthetic biology and so on.

I was asked three very specific questions. The first was on supply chains. They are absolutely essential to creating strong, sustainable and balanced growth, but they have weakened or hollowed out in recent years. Our broad objectives there are, first of all, to work with industry to map current supplier capabilities and quantify the opportunity to source more UK content. In each sector—aerospace, automotive manufacturing, marine industry, nuclear and the like—where that mapping finds gaps in supply chain capabilities, the sector will encourage domestic suppliers to expand to fill them, with the support of the manufacturing advisory service.

We are also working to strengthen existing supply chains by encouraging some of the prime producers to adopt a more collaborative and long-term approach to their suppliers. That is part of the answer to the point raised by the hon. Member for Huddersfield (Mr Sheerman). For example, the Rolls-Royce apprentice academy will enable the company to train additional apprentices to work not just for Rolls-Royce, but for other companies in the Rolls-Royce supply chain, as well as other manufacturing firms in the east midlands. We are helping domestic suppliers to build the strength and capabilities that they need to access new opportunities. We underpin that through the advanced manufacturing supply chain initiative, which helps with funding for capital investment for skills and innovation.

Secondly, the hon. Member for Inverclyde quite rightly drew attention to the continuing need for innovation. He was right that it was innovation that drove the first and subsequent industrial revolutions in this country, and when it comes to innovation, the Government have a legitimate and necessary role in ensuring that our future is prosperous. Despite financial pressures, my Department has sought to protect vital investment in future innovation. We have launched seven catapult innovation and technology centres, one of which is focused on high-value manufacturing.

The recent autumn statement pledged a further £600 million of support for the eight great technologies that I referred to, including advanced materials; the Government seek to support investment in innovative materials development and process technologies in manufacturing. For example, this year, the Technology Strategy Board will invest some £7 million in collaborative research and development to help British companies to improve and to enhance manufacturing process through innovation.

Thirdly and finally, the hon. Gentleman mentioned design, but before I come to that, perhaps I should touch on finance, to which several hon. Members referred. Of course it has been difficult for companies large and small in certain sectors, including manufacturing sectors, to access the finance that they need through mainstream lending. Through the business bank and other sources, we are determined to help enhance some of the alternative methods of financing. Again, the hon. Member for Huddersfield made the important point that we do not want to over-regulate the alternative funding streams as they emerge.

On design, which was the hon. Member for Inverclyde’s final point, he is absolutely right to say that it is driving buyers. Last week, it drove buyers to the London boat show to buy high-quality boats and yachts. He referred specifically to the quality of design, and we see time and again that the reason British brands are and will be sought out is the high quality of design.

In conclusion, I think it has been recognised throughout the debate that manufacturing is no longer in decline. I am not over-claiming for its renaissance, but it is no longer in decline. On the contrary, it is recovering hand over foot, and we have seen significant recovery, particularly in sectors such as aerospace, automotives and pharmaceuticals. The Government’s active encouragement is needed on skills, the supply chain and access to finance, and I assure all those who have spoken, including the hon. Member for Inverclyde, that the Government are absolutely committed to ensure that manufacturing continues to recover.

Question put and agreed to.