My Lords, the gracious Speech made it clear that the economy is the overriding priority for the Government. I declare an interest as a professor of manufacturing, a vital area of the economy. Hence, I shall concentrate entirely on manufacturing and in our ability to compete both during and after the crisis. In the early 1970s, manufacturing represented 32 per cent of the British economy. Today, it is around 13 per cent. We are all familiar with the life support culture, inefficiency, lack of investment, industrial strife, poor management and product starvation that plagued British manufacturing in the 1970s and 1980s. After those scarring experiences in the 1980s and 1990s, policy was to allow the market to run its course; that is, do nothing. As a result, we now have a smaller but leaner and more productive manufacturing sector. Obviously, this has been helped by a spectacular growth in inward investment. Today, the manufacturing sector employs 3 million people across the UK and a quarter of British exports are in the high-technology sector, a higher proportion than France, Germany and the USA. A company like Land Rover, not so far away from my university, invests nearly £400 million a year in research and development in Britain, totally different from what it was in the 1970s, 80s and 90s, and until recently this was highly profitable. In sector after sector, British manufacturing has transformed itself from being an economic burden to becoming a calling card to the world. It is vital that manufacturing continues to prosper. Our Government have recognised that. The recent Manufacturing Strategy Review led by my noble friend Lady Vadera has been very welcome.
Today, manufacturing faces severe challenges as a result of the financial crisis. We must act swiftly so that the cost of failed speculation is not a loss of vital innovation. My noble friend Lord Mandelson has recognised that many sectors need short-term help because of the global downturn. I agree that that will need some industrial activism. We need the best brains to carry out research so that we can ease the process of attracting qualified people to the UK from all over the world. Crucially, we need to invest in engineering and technology research and skills. A co-ordinated approach to research has worked extremely well in the life sciences and the biotechnology sectors. Public investment and charitable funding of more than £2 billion a year has worked wonders for our pharmaceutical industry, which now employs 70,000 people and has a turnover of more than £50 billion. That should be applauded.
However, we know that engineering and technology research funding is only one quarter of that sum. Engineering and technology, which is a much larger sector of the economy, needs the same approach in funding and skills as life sciences. This will require co-ordination between bodies such as the EPSRC, the Technology Strategy Board and the RDAs. These agencies must have a symbiotic relationship with industry to ensure a critical mass of innovation. Advantage West Midlands is actively pursuing this. Only businesses which fund innovation will have new products to offer when consumer confidence returns, and good products and good margins decide the fate of companies.
Britain is a relatively small country. In a globally competitive environment, we must export and we must ensure that we always have a world-class product base. The Government have set out the areas in which we as a nation need to innovate. These priorities are where we should work with businesses to achieve practical applications of engineering and technology. We must enact an integrated innovation strategy. By 2011, we will spend almost £4 billion a year on scientific research. We must focus some of those resources on what President-elect Obama called "building the ecology of innovation". The President-elect is concerned about the future of the product base in America. We should be just as concerned in the UK.
The Technology Strategy Board supports applied research, but its total budget is less than one-tenth of that of the research councils. Today, funding still has an overwhelming bias to pure science, a phrase that suggests a false divide between research and application. We must develop applied research plans for sectors such as energy, environment, computer security and so forth. We should reach out to businesses and not always expect them to take the lead in applied research in difficult economic times. We must try to reduce the bureaucracy in government departments, which stifles innovation with too long a response time. The tradition of scientific research in the UK is brilliant. It is also long-term and blue sky. But the recent calls from the biotech sector for immediate financial support shows that the supposed conflict between short-term support and long-term investment in R&D is a fallacy. We need both to succeed.
In the past 20 years, we have built efficient, flexible and innovative manufacturing businesses in sectors as varied as aerospace, pharmaceuticals and automotives. These companies have "fixed their roofs", so to speak. Now it is not the roof but the foundation of future growth that has been shaken by the recent crisis. Today, the problems of the financial sector mean that a short-term rebalancing of the economy is inevitable. I am sure that the Government will take action to fix that. But we need to pay attention to the drivers of long-term growth, as well as short-term life support. Successful businesses need our help to make Britain fit for the future. It is vital that we support them in that endeavour.