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Economy: Manufacturing

Volume 694: debated on Tuesday 24 July 2007

asked Her Majesty’s Government:

What assessment they have made of the prospects for the manufacturing industry in the United Kingdom.

My Lords, the manufacturing sector remains absolutely vital to the UK economy. The Government are taking action through the manufacturing strategy to develop high-value, high-technology manufacturing that can meet the challenges of globalisation and technological advance. The prospects for companies that can take advantage of the huge opportunities available in the global economy are excellent.

My Lords, I am grateful to my noble friend for that reply and for his assurance that manufacturing plays an important part in his working life here in Parliament, but does he accept that manufacturing is not only that but a major employer and that the failure to increase skills and productivity is the real problem before us? This is partly why our trade deficit is so high. My noble friend has agreed on previous occasions that productivity is the key and that the Government are directing their energies to improving productivity, not least in the skills sector. Will he inform the House what is actually being done in that regard?

My Lords, it is quite right that the key to manufacturing successfully in the 21st century, in which China wants your lunch and India wants your dinner, is that we ensure that the skills level goes up all the time so that value-added, innovative manufacturing happens. To give the House an idea, I point out that 125,000 people are employed in our UK aerospace industry. You cannot get more value-added and innovative than that. That, with dependants, is probably 500,000 people. The answer is to skill the people. The Government are working on that basis in many, many ways. As the House knows, I was the UK skills envoy in my former life. That was about getting low-skilled people up into intermediate skills. We also have the second most important and successful university sector in the world. That is adding value every day.

My Lords, under the new Minister’s guidance, will manufacturing prospects be improved by regulation?

My Lords, it is no coincidence that above the door of the new department are the words “Regulatory Reform”, not “Better Regulation” or “More Regulation”. The secret is to have some regulation, but reform what we have and make it work with the grain of wealth creation, not against it.

My Lords, does the Minister accept that the creative industries are the fastest growing areas of manufacture in the British economy and the one area where the UK’s competitive advantage remains? Will he assure the House that the Government will support this advantage by maintaining investment in the creative sector, beginning with an appropriate and sustained settlement in the forthcoming Comprehensive Spending Review?

My Lords, it is no coincidence that most of the growth of creative industries in this country is conducted by small and medium-sized enterprises. We have to ensure that the growth of start-ups is encouraged in many ways. It is also encouraging that in a world of Bollywood and Hollywood we have something like 18 per cent of the world’s GDP of creative industries in this country; that is, from designing the stadia to be shown off to the world in Beijing in the 2008 Olympics right down to last weekend’s fabular events with Harry Potter.

My Lords, it was not that many years ago that a consumer abroad would buy a product stamped “made in Britain” and immediately infer that it meant not only quality but also that it was one of the best products in the world. Declaring an interest, I know that in Britain we still manufacture products that are the best in the world. What plans does the Minister have to revive the respect and pride worldwide for “made in Britain”?

My Lords, I am not at all sure that we have to revive it. We have to build on it. We have to make sure that Brand Britain is the key to selling around the world. We make in the value-added sector of automotives, pharmaceuticals and, as I said, aerospace, some of the best manufactured goods in the world. But it is all about being innovative, taking ideas to market and getting a higher-skilled economy. Then it is about making sure we put the ball in the net around the world. My job as Minister of State is to ensure that Brand Britain is sold around the world and that our businesses come in behind it with manufactured goods in the value-added sector.

My Lords, is my noble friend not being a trifle optimistic? Manufacturing output in this country has been constant for the past decade, which in the difficult world circumstances we find ourselves is quite an achievement? Surely, the future of our economy does not depend on manufacturing. If it does, any economist would say that we have not got a hope in hell. The future of this economy depends on the rest of our economy. We have to accept the fact that in the world as it is developing, the emerging countries will dominate the manufacturing sector. We will produce some high-quality goods, but only some.

Additionally, given the weird behaviour of the Monetary Policy Committee these days, how we are expected to compete, with the value of sterling rising when what we really need is a competitive exchange rate, is also somewhat beyond me.

My Lords, perhaps I may correct my noble friend on one point on which he is slightly erroneous. Manufacturing output in this nation is about 14 to 15 per cent of GDP. That is a little more than America, about 1 per cent less than France and about the same as Germany. This is not a British issue; it is a developed world issue. The key is to ensure that the 3 million or so people employed in manufacturing have sustainable jobs going forward as we constantly move up the innovative chain. China and India will commoditise value-added about every five years. The idea is constantly to bring more ideas and value-added and skilled people in investment into making sure that that statistic stays the same. We might get fewer people working in it as we go forward, but more money will be made for the country and we will get more sustainable jobs throughout the United Kingdom.

My Lords, does the noble Lord agree that there has been a decline in manufacturing and that with it has come a fall in the number of apprenticeships, which is the key route to skills? Does he further agree that the prospects for manufacturing would be much brighter if we sought to revive and improve the apprentice system?

My Lords, apprenticeships are vital. I speak as someone who in a previous life served on the national apprenticeship task force. We have to stimulate employers to take them on—in the public as well as the private sector. To make apprenticeships work, we have to get younger people buying into the fact that manufacturing is a career that matters. Doomsayers in this House, in another place, in the media or anywhere will not help young people come into manufacturing. You will not get apprenticeships working just by saying that manufacturing is declining.

If manufacturing is declining, can anyone explain to me why in 1996 we exported half the cars we made? Today, we export three-quarters of the cars we make. The statistic—the number—has dropped by only 100,000. It is a success story. Do not do it down.