Economy: Manufacturing

Viscount Montgomery of Alamein Excerpts

Tuesday 30th November 2010 Grand Committee

Asked by

[Viscount Montgomery of Alamein]

To ask Her Majesty’s Government what is their assessment of the value of manufacturing to the United Kingdom economy.

[Viscount Montgomery of Alamein]

My Lords, there is a general perception in the press and the public mind that we no longer manufacture things but depend almost exclusively on financial services for our well-being. No one disputes that financial services, as exemplified by the City of London, are a very valuable and significant part of our economy, but so also is manufacturing—perhaps even more so.

In introducing this short debate, I am indebted to the Institution of Engineering and Technology and the Food and Drink Federation, which have sent me briefs, and most particularly to the Institute for Manufacturing, part of the engineering faculty at Cambridge University. Here I must declare a purely honorary interest in that I am a past president of the Cambridge University Engineers’ Association and, some 60 years ago, was a graduate of the engineering department.

Let us now consider what we mean by manufacturing today. Of course, we no longer have the old smokestack industries; we have a much wider concept of engineering and manufacturing. This comprises the full cycle from understanding markets and technology, through product and process design to operations, construction, contracting and on to distribution and related services. Of course, the food and drink industries play a very important part in that. When you view manufacturing in this light, you begin to realise how vast is its output and how valuable it is to the economy, particularly in its huge contribution to employment and exports.

A further factor is the speed of change. For example, the first iPod was designed and built in less than one year. Shelf life is short, and new models emerge with ever-increasing speed. Traditionally, manufacturing has been associated with manual skills, and these certainly remain important and need to be fostered through apprenticeships. Increasingly, however, the value chain is enhanced by transforming ideas and opportunities into products and services. In other words, engineering and manufacturing are part of the knowledge economy, where brains matter.

My amateurish analysis of the information that I have received indicates that we are talking about an area of economic activity that contributes around £500 billion to GDP, generating more than 50 per cent of exports and employing huge numbers of people. I should be interested to know what the Government make of this figure and what their figure is.

The Government can help further by taking note of the areas of difficulty identified by the organisations which provided briefs. An obvious area is the need for simplification of the tax structure, with reference particularly to research and development and the creation of a favourable climate for small and medium enterprises, where much of what we are discussing takes place. I noticed that this was mentioned in the previous debate in connection with public procurement.

I have tried to set the scene. As I have no right of reply, I express my thanks in advance to the Minister who will answer this debate. I thank most profusely the very knowledgeable Peers who are joining in. I very much look forward to hearing what they and the Minister will say.