OF UK ENGINEERING, MANUFACTURING, DEFENCE EXPORTS AND LAND ROVER!
By Howard Wheeldon, Senior Strategist at BGC Partners
31 Aug 11. The announcement by Tata owned Land Rover that the company plans to launch an all new version of what since 1990 has been known as the Defender and yet to most industry diehards remains a modified version of the original Land Rover that was launched in 1948 should be perceived as a further sign of confidence that the Indian owned company is absolutely determined to become global leader in the specialist vehicle field.
Investment in new product such as that now outlined by Land Rover is not only crucial for the company and its parent Tata Motors but also for the role this will play in the future of the UK economy. Britain needs to not only balance its books but also to create a better balance between services and manufacturing industries. That is not to suggest that any emphasis should be taken away from supporting growth and recovery of banking, financial and other service based activities but it is to say that the government will need to put in a lot more than just rhetoric if we are to achieve the better balance between manufacturing and services that we desire.
Manufacturing currently accounts for just over 12% of UK GDP. Given that in the 1940’s it was closer to 50% the subsequent decline is easy to see. Clearly the current level of manufacturing activity in the UK is not enough and over the next 15 years my view is that we should have a target as part of a formal industrial strategy to double this figure to 25%. But while we must somehow attempt to manufacture more of what we actually consume in the UK we should not run away with the idea that we might yet again start manufacturing all those white and brown goods that we used to make before far-east based producers began killing-off our under invested and poorly managed high volume product industries. The same point can I believe also be made for component and general parts supply manufacturing although having said this it is equally clear that we have let our component supply manufacturing base slip too far down into the abyss.
These are issues that the government must address on a national interest basis within a formal industrial strategy along of course with education, training and how better our universities might play a part in furthering research and development. We must ensure that we encourage and create a sufficient wealth new ideas, that government and industry are encouraged to invest in research and development support and importantly that we ensure in future that we have available an adequate skills base to call on. The latter situation is of course made worse by the impending loss of skills base that may become increasingly apparent as more specialist armed forces personnel are released as part of SDSR related defence cuts and also by the ongoing product development and production delays that forces industry to reduce skilled labour.
Industry must play its part too of course and in my view there needs to be improved apprenticeship schemes such as those in long time operation at companies such as Rolls-Royce, BAE Systems, GKN and Airbus. Britain is still great at manufacturing and in specialist engineering export too. Industry is also in danger of failing to realise that in the process of reacting to shareholder concerns by de-risking it is now in danger of de-risking too far. For instance, defence companies must of inevitability take on a degree of risk in my view especially in terms of realising the potential of exports. The bottom line is that investment in product ideas should not be looked on with so much distrust by shareholders and that company managements should have a better balance in terms of risk policy adjustment.
Exports are hugely important to the UK economy and there is much more that the government can and should do to provide necessary support. ECGD cover is one issue but so too is provi