Manufacturing (East Midlands)

Michael Fallon Excerpts

Tuesday 12th February 2013 Westminster Hall

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

I repeat what hon. Members have said in welcoming you to the Chair, Mr Hollobone. I, too, congratulate my hon. Friend the Member for Sherwood (Mr Spencer) on securing this debate. As he said, the east midlands has a long, proud and—as we have learned—historical tradition of manufacturing, which is vital not just for UK manufacturing but for growth in the wider economy. Its location at the geographical heart of the UK, an abundance of natural resources, and a spirit of invention put the east midlands at the centre of the industrial revolution. As we have heard, inventions that have come out of the region include the jet engine, ibuprofen, DNA fingerprinting and the MRI scanner. My hon. Friend’s constituency has a long history of mining, and it has been home to Rolls-Royce since the 1940s. The food and drink industry is a major employer there, and it has a strong record of productivity.

Nobody in this debate has been under any illusions about the scale of the wider economic challenges we face as a country. The continuing sovereign debt crisis in the eurozone is affecting the real economy and depressing demand, which has caused uncertainty for British businesses and damaged some of our manufacturing output. That damage was already pronounced under the previous Government, which presided over the fastest ever decline in manufacturing as a share of the economy: manufacturing fell by nearly 10% as a share of gross domestic product, and almost 1.7 million jobs were lost in the sector. Under this Government, manufacturing’s share of GDP is growing again and our manufacturing capability is increasing in quality—nowhere more so than in the east midlands.

[Chris Williamson]

Will the Minister give way?

[Michael Fallon]

I will not.

I had the pleasure of visiting Toyota’s factory at Burnaston near Derby last week, and I saw for myself how a world-class work force in a cutting-edge facility can produce workmanship that is second to none. Earlier last week, I also met Rolls-Royce to hear its plans for the future. To kick-start the recovery, the first thing we had to do was to tackle the deficit, but we have not focused only on that. We have taken a wholly proactive approach to unlocking growth, reducing the red tape that holds back business and creating a competitive tax system so that businesses choose to locate and grow here.

In the autumn statement, the Chancellor of the Exchequer announced multiple measures to encourage greater investment in manufacturing. There will be a significant temporary increase in the annual investment allowance from £25,000 to £250,000. An additional £210 million will be added to the £2.4 billion regional growth fund until March 2015. There will also be an extra £120 million for the advanced manufacturing supply chain initiative. Let me reassure colleagues 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.

A greater proportion of the east midland’s economic output comes from manufacturing than in any other English region or part of the UK. Some 12.3% of the work force are employed in manufacturing, compared with 8% across the UK. The region has a positive balance of trade in manufactured goods, and the latest figures are expected to show that it achieved its highest annual level of exports in 2012, worth some £18 billion. The iconic names that are at the heart of the region’s manufacturing base—Rolls-Royce, Siemens, JCB and Toyota, to name just a few—employ thousands of people directly, and are at the centre of the network of hundreds of smaller businesses that make up their supply chains across the region. As we have heard, the region has a thriving sector of small and medium-sized enterprises working in the advanced manufacturing supply chain, and in the automotive and aerospace supply chains in particular.

Last week, I met the private sector chairs of the region’s local enterprise partnerships and some council leaders from the east midlands. I was impressed by the common sense of purpose across the public and private sectors, across political divides and even across traditional geographic rivalries. I saw for myself the determination to ensure a strong recovery for all parts of the east midlands and to tackle some of the barriers and bottlenecks that they have identified.

[Mr Spencer]

Will the Minister commit to coming to Sherwood to see some of those small and medium-sized enterprises, so that he can stand on the factory floors and hear the concerns at first hand?

[Michael Fallon]

I will certainly try to work that into my diary, and I look forward to such a visit.

Let me turn to a couple of points mentioned. The regional growth fund is distributed not by ministerial allocation, but by competition. It is a competitive fund, as indeed is the advanced manufacturing supply chain initiative. The fund is already helping to rebalance the economy, particularly by assisting areas that have been over-dependent on the public sector, and it is already unlocking private sector investment in the local economy.

The east midlands has had some strong successes under the fund. Derby city council’s £40 million business support scheme, which has been approved, will provide funds to support the growth of enterprises in Derby, creating nearly 1,000 direct jobs by 2015, to fund a global technology cluster and to enable redevelopment of the Derby railway technical centre. The Northamptonshire, Leicester, Leicestershire and D2N2 LEPs and Nottingham city council have all had conditional offers of support for programmes that will address local needs under the regional growth fund.

On the advanced manufacturing supply chain initiative, we need strong manufacturing supply chains if we are to have more major manufacturers investing in the east midlands. We have invested in that initiative to bolster supply chain capacity, and the scheme has attracted bids involving major companies from across the country, including the east midlands. There was high demand in rounds 1 and 2; there were more than 70 bids with a total funding ask in excess of £300 million. That is why we announced, in the autumn statement, additional funding of £120 million for a further two rounds of the initiative. That further investment in advanced manufacturing supply chains underscores our ongoing efforts to create the right conditions for UK suppliers to grow and remain competitive on the world stage. It will be based around a single national funding pot that will be open to supply chain companies from across manufacturing sectors, including in the east midlands.

The Government have announced other recent investments to support economic growth in the east midlands, including £500 million to electrify the midlands main line north of Bedford; £160 million to dual the A453 in Nottinghamshire and Leicestershire, a key route between Nottingham and the M1, which businesses told us could simply not cope as a single-track road; and £22 million towards the work, which is now well under way, to provide a new dual carriageway linking Kettering and Corby. We have increased the numbers of apprentices, which have grown from 21,000 in 2009-10 to 39,610 in the east midlands, a rise of almost 90%. Significantly, apprenticeship starts in the engineering and manufacturing sectors have grown by 156% over the same period.

In conclusion, the Government are working hard to encourage and support British manufacturers, and to create the environment in which they can thrive and compete in a global marketplace. We want manufacturers in the east midlands to be our partners in achieving that economic transformation and in fulfilling a strategy that places world-class manufacturing at the heart of a healthy and rebalanced economy across the United Kingdom.

[Mr Philip Hollobone (in the Chair)]

From Wotsits to widgets, we have just about covered it all.