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Economy: Manufacturing

Volume 700: debated on Monday 31 March 2008

asked Her Majesty’s Government:

What is their assessment of the performance of the British manufacturing industry, domestically and internationally.

My Lords, we are the world’s sixth largest manufacturer. Manufacturing accounts for 13 per cent of national wealth, 50 per cent of exports and 75 per cent of business research and development. Recent assessments from the CBI and the Engineering Employers’ Federation show a positive outlook for the sector in the face of very challenging global economic conditions. The Government continue to support the sector through a range of measures including the Manufacturing Advisory Service, sector skills councils and the National Skills Academy, R&D tax credits and the science and technology programmes.

My Lords, I thank the Minister for her reply. I have no doubt that she is aware that one of our big manufacturing industries is about to be sold to an Indian company. Has protection been placed on the employees of the two companies involved? Given the problems that we face with our balance of payments, internationally we must go further to see how much exporting we can do to help the balance of payments.

My Lords, the Tata Group has not significantly changed any of the employees’ terms and conditions and, indeed, has approved the current management’s business plan and product plans. We are, of course, incredibly proud of the fact that we are the number one European choice of location for manufacturing inward investment. The noble Lord is quite right to point to export potential, particularly as emerging markets will add a billion new customers in the coming years. We are very well placed to do this because we have increased the productivity of manufacturing by 50 per cent since 1997 and manufacturing exports have risen by about 36 per cent in volume. So we are very well placed in relation to the important point made by the noble Lord.

My Lords, when looking at and assessing the state of British industry, will my noble friend take into account the figures of the SBAC, the Society of British Aerospace Companies, which show a 20 per cent increase in productivity and growth this year, due to the Government’s initiatives on skills and investment in those companies—British Aerospace, Rolls-Royce and others?

My Lords, I very much agree with my noble friend, but I should also point out that the recent contract placed for Airbus aircraft will provide a significant boost for British manufacturing and that it is, in fact, the biggest ever American contract to be placed in Europe.

My Lords, I join the House in commiserating with the noble Baroness for being described on the annunciator as Lord Digby-Jones when she rose to speak. That has now been corrected. I assume that the noble Lord is stuck in Terminal 5, like many others.

Bearing in mind the current exchange rate and the fact that manufacturing represents such an insignificant proportion of our industry, does the noble Baroness not agree, although possibly not many of your Lordships will agree, that now might be the time to look again at membership of the eurozone?

My Lords, it would not be fruitful to talk about entry into the eurozone. However, I should like to point out that it is not valid to say that manufacturing is just an insignificant part of this economy. It is the largest provider of productivity increases, with 75 per cent of the R&D gain. We have the best pharmaceuticals, aerospace and electronics industries and are now manufacturing twice as many cars as we were 25 years ago. Therefore, if I may say so, rumours of the death of manufacturing are somewhat premature.

My Lords, does my noble friend agree that the previous question is a classic example of how we undersell ourselves with regard to manufacturing? That is the case not just with aviation but also with car manufacturing, where we are ahead of most of Europe, and sub-sea platforms in the North Sea, where we are world leaders, having led previously on oil rigs. Eighteen per cent of our GDP relates to manufacturing and it is the highest paid sector in British industry. If my noble friend agrees with me, would it not be a good idea to start getting this message out so that we do not get other questions suggesting that we are underperforming when in fact we are doing exceptionally well?

My Lords, I totally agree with my noble friend and I am pleased to say that in the review of the manufacturing strategy, which will be published in late summer, we will be doing exactly that.

My Lords, we all know that the cost to business of extra regulations introduced by the Government over the past 10 years is £65 billion and rising. Will the Minister, who brings to the House a fresh eye and a powerful intellect, tell me what is the effect of these regulations on UK manufacturing?

My Lords, we have discussed regulation at length and I look forward to the noble Baroness’s support tonight during our debates on the Regulatory Enforcement and Sanctions Bill in the interests of improving regulation for manufacturing. We believe that manufacturing has increased productivity by 50 per cent but I fail to see how it would be able to do that in the face of an overwhelming burden of regulation from this Government. Of course, this Government have produced a manufacturing strategy, which a previous Government might have done more to do. If they had, we might not have inherited a manufacturing industry that needed revival.

My Lords, will my noble friend note that, following the sale of Rolls-Royce and Bentley Motors to BMW and Volkswagen in the former county of Cheshire, they have gone from strength to strength? Indeed, Bentley Motors has a productivity rate of 3,000 per cent.

My Lords, I am delighted to hear those figures, and I will ensure that they are put in our review of the manufacturing strategy.