Queen’s Speech - Debate (3rd Day) (Continued)

Part of the debate – in the House of Lords at 6:15 pm on 26th June 2017.

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Photo of Lord Razzall Lord Razzall Liberal Democrat 6:15 pm, 26th June 2017

My Lords, I join other noble Lords in welcoming the noble Lord, Lord Callanan, to the Front Bench and in looking forward to the contributions of the noble Lords, Lord Mountevans and Lord Colgrain.

I would like to concentrate my remarks on the problems facing British manufacturing industry. There are clearly industries that are hugely successful, such as aerospace, biotech and motor vehicles, to name but three. The drop in the value of sterling against the euro and the dollar has given a short-term boost to our export sales, but there can be no doubt that our manufacturing sector faces significant problems.

The first serious issue, which has been with us for many years, is productivity. We remain way down at the bottom of the productivity tables in comparison with all our major competitors, and all economic commentators agree that the reason for our low productivity is the low rate of capital investment over decades. I am disappointed that the gracious Speech did not emphasise more the Government’s proposals to solve the productivity gap between us and our competitors, particularly in the context of Brexit.

It is impossible to look at the issues facing manufacturing industry without also looking at the impact that Brexit will have. First, it must seem obvious to noble Lords that, as 52% of the United Kingdom’s exports currently go to the European Union, access to the European Union for goods must be maintained, even if some continued financial contribution is required. The alternative—of accepting World Trade Organization rules in the event of no deal after two years—would be unsatisfactory, as it would mean an average tariff of 5.3% on exports to the European Union, with tariffs ranging from 4.6% on chemicals to 10% on cars.

Secondly, it is not just potential tariff barriers that are a serious concern. Non-tariff barriers are equally important. These barriers deal with, for example, regulatory issues, technical barriers, standards and measurements. Harmonisation of standards has worked well in recent years, but there is significant nervousness in the manufacturing community that, following our exit, Europe will revert to the bad old days of Germany setting rules that suit its manufacturers.

It is also essential that lengthy customs checks are not introduced, as that would be damaging, particularly in industries that involve a significant flow of components to and from the European Union. The Government seem to believe that we will be able to build component industries to get round those difficulties. However, if we take the motor car industry, most manufacturers do not believe that a UK supply will be sufficient. We can look at the risks. Other motor vehicle manufacturers are aware of the history of Ford. Thirty years ago, it was the UK’s largest vehicle producer. It now produces 2 million engines per year in the UK, but 90% of those engines are exported to mainland Europe. Although Ford is the number one car seller here, not one of its cars is made in the UK.

The final major concern for all manufacturing companies is that British manufacturing industry requires significant skilled immigration from Europe. I appreciate that that is anathema to the Tory right, but there are countless examples of a likely skills shortage. A typical example is the need of some engineering companies for analogue design engineers. Our universities now really teach only digital electrical engineering, so the analogue design engineers that many engineering companies need can be found only from the Czech Republic, Slovakia, Romania and Bulgaria. Such people must be given the right to work in the UK; otherwise, a disaster will occur. In industry, there is considerable scepticism about whether the skills shortage will be made up by UK employees once we have left the European Union. I suspect that David Davis would acknowledge that, and did so in a little-recorded speech in Estonia some time back.

When I see the problems faced by manufacturing industry, which I have just outlined, I ask: is it any wonder that the Tory party, in its election campaign, got the lowest level of support from industry that I can remember in my many years in active politics?