NEWS IN BRIEF
09 Sep 08. Like Gordon Brown’s decision to hold his first cabinet meeting after parliament’s summer break in Birmingham, the prime minister’s strategy to revive
British manufacturing is short on substance. The value of 64 pages of upbeat-sounding blurb from the Department for Business is questionable. Indeed, UK exporters will be more relieved by the steep fall in the pound and a correction in oil prices than the £150m the government has set aside to help their expansion. But what yesterday’s blueprint does show is that ministers are listening to their concerns. That is a useful first step. After a decade of restructuring and the loss of about 1m jobs, much of what is described as British manufacturing is no longer cars, traditional metal-bashing and mass production of low-margin, price sensitive components. High volume production has shifted to lower cost Asian centres. As a result, manufacturing’s share of overall economic output has fallen from 19 per cent in 1995 to 14 per cent today. Yet the survivors of the UK’s once broad industrial base are in strong shape. Sustained cost-cutting has increased productivity, making exporters more resilient to swings in demand. Strongly branded producers focused on technology and overseas markets are succeeding. More companies are involved in high value-added research and development, design and marketing. A product may say “Made in China” on the box, but the chances are its high-tech components have been made elsewhere. This shift has informed the government’s thinking. It plans a new technology centre in Coventry, 1,500 manufacturing apprenticeships, a supportive public procurement strategy and Whitehall offices to help companies cash in on probable investment in nuclear and renewable power. All this is welcome. A campaign to promote industry in schools should improve manufacturing’s image as a poor career choice. The main problem with the strategy is that it promises more than it can deliver. Mr Brown’s forecast of up to 1m new “green” jobs in 20 years overstates the impact of spending on low-carbon technology. His expectation that UK companies will play a big role in nuclear’s renaissance also invites scepticism. French firms – Electricité de France and Areva – have considerably more expertise and deeper pockets. One can question, too, the sense of pinning policy to statistical classifications. A profitable car designer provides a valued “service” if the car is made by someone else. Defining that as manufacturing may lead to the wrong set of policy conclusions. For all the UK’s excellence in financial services, the consumer and banking-led downturn is a reminder that it cannot thrive as a “post-industrial” society powered by services alone. If competitive goods exports are to spur a recovery from the effects of the credit crunch, it will be essential to foster manufacturing’s new-found resilience. A sustained fall in the exchange rate would help achieve that. So would a guarantee not to raise business tax rates. In the absence of the latter, Mr Brown is merely oiling the wheels. The SBAC welcomed the Government’s manufacturing strategy. In particular we welcome the focus on low carbon technologies, skills and the global market. Defence and aerospace has a turnover that tops £20mbn and brings in over £2bn net per year to the UK due to its success in exports as well as employing over a quarter of a million highly-skilled people. The UK industry will need more of such skilled people in the future to maintain its global position. The UK aerospace industry is also leading the way in delivering further reductions to aviation’s impact on the environment. The strategy’s focus chimes strongly with the priorities of the defence and aerospace industry.
Comment: At last the Government has woken up to the importance of industry to our national economy and exports. However, in the defence sector there are continued concerns as to the Prime Minister‘s adverse perceive