Manufacturing (West Midlands)

Michael Fallon Excerpts

Tuesday 15th January 2013 Westminster Hall

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

I, too, congratulate my hon. Friend the Member for South Staffordshire (Gavin Williamson) on securing such a good debate on such an important subject. I thank all those who spoke and attended. Some 11 Government Members from the region have attended, as against four or five Opposition Members, although I do not want to make a point of that. I also thank colleagues for the spirit in which they made their points. We have had some interesting discussions on the precise history of the industrial revolution. We might have had some interesting discussions on the actual cause of the turnaround of the British automotive industry, which I believe is founded on the dramatic changes in labour relations undertaken by the Thatcher Government and the inward investment that Margaret Thatcher and Norman Tebbit brought in when they brought Nissan to the north-east of England, but I do not want to pursue that point too far.

I thank all those who have spoken, especially those who have been free with invitations to visit their constituencies, all of which I will consider. I have not been left much time to reply to the individual points, but I am happy to write to all colleagues. Some good points have been made about Lord Heseltine’s review, the role of the local enterprise partnerships, wave two of the city deals, the importance of supply chains and what we are doing to improve skills. Some specific points have been made about black cab manufacturing and so on, and I am happy to reassure the hon. Member for Hartlepool (Mr Wright) that we are dealing with that issue.

The west midlands is vital not only to UK manufacturing, but to economic growth in the wider economy. It sits at the very heart of British industry. Last Thursday, I visited the Birmingham area to see for myself some of the great things—we have heard about many others—that are being achieved by manufacturers across the west midlands, such as Aero Engine Controls, a leading aerospace and defence manufacturing company and a key part of the supply chain of the aerospace industry, or Quality Plated Products, which will be using funding from our advanced manufacturing supply chain initiative to increase capacity, create more jobs and start a new apprenticeship scheme. I also visited what is now called Mondelez International, which owns the Cadbury brand, to launch its primary authority partnership with Birmingham city council. That deal will cut red tape, reduce duplication and ensure high safety standards while reducing costs. That is one of hundreds of companies that have taken the opportunity to work closely with their local authorities to reduce the burden of regulation.

The constituency of my hon. Friend the Member for South Staffordshire is home to the high-tech i54 business park, where two global companies, Moog and Eurofins, are thriving. Jaguar Land Rover has become the third major international company that has chosen to move to the site, investing £355 million in a new advanced engine manufacturing facility, bringing with it 750 jobs and thousands more via supply chain opportunities.

No one is under any illusions, however, about the scale of the wider challenges we face. The eurozone’s continuing sovereign debt crisis is affecting our economy and depressing demand, causing uncertainty for business, and I recognise that the west midlands manufacturing centre has not been immune to such pressures, which were pronounced under the Labour Government. I think the hon. Member for Dudley North (Ian Austin) was honest enough to admit that. They presided over the fastest ever decline in manufacturing as a share of the economy. Its share of GDP fell by nearly 10%, and almost 1.7 million jobs were lost in the sector. Under the present Government, its share of GDP is growing again and our manufacturing capability is increasing in quality—no more so than in the west midlands—and represents a crucial platform on which to build economic growth and recovery.

To kick-start recovery, the Government had to tackle the deficit and take tough decisions, but we have also taken a wholly different approach to unlocking growth. We are reducing the red tape that holds business back and creating a competitive tax system so that businesses choose to locate and grow in this country and, in the last autumn statement, we provided more measures to encourage greater investment in manufacturing, such as a significant temporary increase in the annual investment allowance from £25,000 to £250,000. That is a tenfold increase. An additional £210 million will be added to the regional growth fund until March 2015 which, with the £100 million allocated from previous rounds, means that a new total of more than £310 million will be available. There will also be an extra £120 million for the advanced manufacturing supply chain initiative. I assure you, Mr Williams, that the Government have never been clearer in our commitment to manufacturing, which we see as an essential building block of a more resilient, innovative economy.

The west midlands accounted for more than 7% of the United Kingdom’s gross value added in 2010. It is important for us all, wherever our constituencies are, that the west midlands is successful and prosperous. It has long been at the heart of British manufacturing. In recent times, we have had much welcome news of private sector investment, including by BMW at Hams Hall, by Jaguar Land Rover, as I have mentioned, near Wolverhampton, and by JCB, which is investing more than £31 million to develop new engine technology. The region also has a thriving small and medium-sized enterprises sector working in the advanced manufacturing supply chain, in particular in the automotive and aerospace sectors. A significant part of the Rolls-Royce supply chain is in the west midlands. Employment in the region has increased by nearly 60,000 since the general election. Jaguar Land Rover’s announcement of record global sales last year is excellent news.

The regional growth fund is helping to rebalance the economy, especially those areas that were over-dependent on the public sector. The fund is working and is unlocking private sector investment. The west midlands was awarded the largest regional allocation of the fund in round three. Some £194 million was provisionally allocated to programmes and projects with a strong focus on high-value manufacturing growth.

I was asked a couple of specific questions about the fund. My hon. Friend the Member for South Staffordshire asked about smaller companies. They can and will benefit through the programme bids that have been awarded under the fund, rather than through the big project bids for individual companies and plants. The right hon. Member for Wolverhampton South East (Mr McFadden) made a fair point about getting the money out of the door. We have set new triggers to ensure that final offers are agreed under round three within three months. That timetable expires this week. The grants must then finally be awarded within three months, by 17 April. We will set similar and probably faster triggers under round four, which we expect to announce later this week. I am determined to ensure that money physically gets out of the door and to the companies that need it as quickly as possible, subject to the proper due diligence that the Public Accounts Committee and our taxpayers expect to see carried out.

In conclusion, the Government are working hard to encourage and support British manufacturers and to create an environment in which they are free to thrive and compete in a global marketplace. The importance of the west midlands as a manufacturing region is one of the reasons why it makes such an excellent location to hold our third manufacturing summit, which is taking place at the Heritage Motor Centre in Gaydon on 28 February. Those annual summits are an important part of our approach to having increased engagement with the sector and will bring together key stakeholders, including senior leaders from Government and from national and local businesses. There will also be an exhibition at that summit to showcase local manufacturing excellence. We want manufacturers in the west midlands to be our partners in achieving economic transformation and recovery—a strategy that places world-class manufacturing at the heart of a healthy and rebalanced economy in the United Kingdom.