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Manufacturing Sector

Volume 455: debated on Thursday 18 January 2007

2. What recent assessment he has made of prospects for the manufacturing sector; and if he will make a statement. (116320)

Manufacturing output experienced a welcome revival in 2006 as the sector began to transform in response to the challenges from globalisation and technological change. The Office for National Statistics data show that manufacturing output grew by 2 per cent. between the end of 2005 and November 2006.

I thank my hon. Friend for those remarks, but I put it to him that one of the problems for manufacturing in this country is that it has been shrinking in relative terms. That may be perfectly natural, but the sector feels that its voice is not heard as strongly as it ought to be heard. In particular, is he satisfied that when it comes to issues such as the setting of interest rates, the voice of manufacturing is properly taken into consideration by the Bank of England?

Of course, that is a matter for the Bank of England committee, and it will have heard what my hon. Friend has said on the subject. We take the manufacturing industry very seriously, and we are all aware of the restructuring that has taken place and the challenge of globalisation. Indeed, my right hon. Friends the Secretary of State for Trade and Industry and the Chancellor have just returned from a trip to India to explore some of those issues. The industry is now about value-added manufacturing. It remains important, as it accounts for some 14 per cent. of gross domestic product—the figure is rather higher, I think, in my hon. Friend’s region of England. Through a range of measures such as financial aid, skills, science and research and development, we are supporting manufacturing industry.

What assessment has the Minister made of the rising price of energy and its impact on manufacturing? Does he agree that the illiberal energy markets inside Europe will have an impact on the costs of energy and on manufacturing?

On the second issue, the UK, not least during our recent presidency of the European Union, has led the charge on liberalisation in the EU. We are very pleased with the way in which Commissioners now produce strong reports. There have been dawn raids on some of the offices of the major bodies in the energy sector, and the hon. Gentleman will have noted the recent statements from the European Commission. The battle is not over, but we are moving in the right direction. Of course, we are concerned about the recent increases—by “recent”, I mean those affecting us over the past year or so—and their impact on businesses. We are in constant discussion with industry, and the Secretary of State and the director general of the Confederation of British Industry chair a committee to explore those issues. However, the hon. Gentleman will have noted that in recent months energy prices have been coming down, and it is the task of Ofgem to keep a careful eye on that to make sure that those decreases are reflected in future prices. I am sure that Ofgem will do its duty.

While manufacturing certainly faces substantial challenges, does my hon. Friend agree that it is important that we play to our strengths in areas such as performance engineering and environmental technologies? Places such as the former MG Rover site in Longbridge offer great potential for those activities. Will he encourage Advantage West Midlands and all other partners to do everything that they can to bring those projects to fruition?

The short answer is yes. Two things are true of manufacturing. First, as I have noted, for reasons that we all understand, the manufacturing sector has declined not just in the UK but in all advanced societies. Secondly, we remain very good at aspects of manufacturing. We are still producing 1.6 million vehicles in this country, which is close to the peak of the early 1970s. Our aerospace industry is important and we are well placed in emerging environmental and energy technologies. It is about adding value, as well as what we are good at. In my judgment, we are good at many things.

The Minister may be aware—I know that the Secretary of State is—of the recently announced loss of 650 manufacturing jobs at NCR in Dundee, West. He may be aware, too, of the loss of 100 jobs in the Michelin tyre factory in my constituency and 50 more proposed losses at the Wood group. In addition, there are non-manufacturing job losses in distribution and food processing, so will the Minister share with us his early reflections on the prospects for rebuilding manufacturing in Dundee, and give the House and the people of the city and, indeed, the wider Tayside area an assurance that the Department will do everything possible to turn that dire situation around?

Of course we regret the loss of those jobs. Much of that, as the hon. Gentleman will know, is for the Scottish Executive, but the Government and the Department will work closely with them. As for finding future work for those people, the Jobcentre Plus network is extremely important. We regret the job losses, but I emphasise that overall the Government are doing a great deal to support the manufacturing sector, with a great deal of success.

The manufacturing sector in the west midlands will be disappointed by yesterday’s defence training review announcement—[Hon. Members: “Yes.”] Will my hon. Friend reassure us that there will be investment in the proposed national skills academy for manufacturing in the west midlands, which is particularly important for RAF Cosford and Telford?

My impression is that some colleagues were pleased by yesterday’s news and some were disappointed. I understand my hon. Friend’s disappointment, but we must see things against the background of a successful United Kingdom economy in which skills have increased and employment is at a record level. My colleagues would be happy to pursue the opportunity to discuss those matters with him.

With more than 1 million jobs lost, including NCR jobs in Dundee, all hon. Members are naturally concerned about the prospects for manufacturing. The key is increased investment. To be fair, the Chancellor has been positively frenetic in this area, as every year he introduces a raft of new initiatives, and every year he and other Ministers spend hundreds of millions of pounds. Can the Minister of State explain why, instead of rising, investment in manufacturing has fallen by 28 per cent.? Where does he think the Chancellor has gone wrong?

The Chancellor has gone right in so many areas, which, for all sorts of reasons, Mr. Speaker, I would like to discuss at length, but your disapproval is the main reason why that is inappropriate. I said that there was a revival in manufacturing in 2006, and we are spending a great deal in selective grants. The skills agenda and science and innovation, for which I am responsible, are crucial. The hon. Gentleman will understand that global factors affect the structure of the economy, but of course I share his concern about job losses. As I told the hon. Member for Dundee, East (Stewart Hosie), job losses are not good news, but there was even poorer news in 1981, when 673,000 jobs were lost in the manufacturing industry.