Manufacturing Industry — [Joan Walley in the Chair]

Part of the debate – in Westminster Hall at 3:29 pm on 2nd December 2009.

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Photo of John Thurso John Thurso Shadow Secretary of State for Business, Innovation and Skills, Liberal Democrat Spokesperson (Business, Innovation and Skills) 3:29 pm, 2nd December 2009

Ah, it is the festive season, when one knows there are invitations one must decline.

Mr. Watson made some important points about the relationships in modern industry, including the fact that unions have radically changed in the past 20 years and approach most of their dealings in a highly constructive manner. He would probably agree with me that management has also changed-it is a jolly good thing that it has-and is far less confrontational, understanding the importance of people, and the need to work in partnership.

To return to the remarks of my hon. Friend the Member for Southport, I thank him for raising this important debate. Those of us who are keen on manufacturing and think that it is important to this country are right to keep turning up at debates-it is often the same people who turn up-to make that argument. My hon. Friend spoke about the need for Government to act on a more strategic level, and I agree completely. To a certain extent, to be fair to the First Secretary of State, it is true that he has a strategy, which has seven drivers-I am sure that the Minister will talk more about that-but it seems to me that we should consider the fundamental role of Government and how it touches on all business, including manufacturing.

The need for regulation is obvious: we must have sensible regulation and a level playing field. We must have fair taxation, and the direction of travel must be set out clearly. The aspect of Government's role that is not often picked up, although several hon. Members did mention it today, is what I call the common infrastructure-the infrastructure of roads, rail, sewers and utilities. That can in some instances be provided by the private sector, but it is really down to Government to ensure that provision. I hugely regret the fact that, as the hon. Member for Ellesmere Port and Neston said, we have not used the opportunity to increase rail freight; we have neglected that aspect of infrastructure. I hope that all future Governments will consider rail and what can be done to move goods by rail.

I think that my hon. Friend was just a touch pessimistic, because I think that manufacturing is at heart a good-news story-or should be. It is a very British characteristic to talk about doom and gloom and to say that it is all mucky people in overalls and nothing gets done. Nothing could be further from the truth. We are the leaders in many areas of manufacturing industry and technology. In my part of the world we have world-leading companies in the civil nuclear field and marine and tidal energy. We have fantastic facilities for subsea-Aberdeen is the subsea capital of the world and just outside Wick, Subsea 7 has an important base. Believe it or not, we also have the leading European manufacturer of nail varnish in Invergordon, which, interestingly, has seen a great improvement in its trading conditions this year. All the supplies that were coming from China and took six weeks to deliver by sea have lost out, because that company can deliver in three days from Invergordon. In managing stock and cash flow, it is more important to be able to order in three days and know that there will be a delivery than have a six-week lead time. That is important and makes one think about some of the received wisdoms, which are not necessarily true.

This country has the sixth largest manufacturing industry in the world, accounting for just over £150 billion in 2008. Depending on whose figures we believe, manufacturing employs between 2.7 million and 3 million people. It is absolutely right to say that there has been growth in real terms, but in relative terms, there has been a decline, particularly in the number of people employed, down from more than 4 million a decade ago. Part of that is because industry has become more productive: there have been huge productivity gains throughout much of manufacturing industry. Part of it, I am sure, as the hon. Member for West Bromwich, East said, is because outsourcing and the definitions therefore becoming narrower. However, part of it is because there has been a decline-a decline that I would like to see reversed.

I would also like to see the world-leading industries that we have maximised. At the Society of Motor Manufacturers and Traders dinner last week, I sat next to a gentleman who started a company making electric trucks. I am sure that many other hon. Members will remember his name, but it escapes me at the moment. The interesting thing he told me was that he had developed the prototype in the UK but, having done all the work, he was going manufacture in the US, because that was where he had found a market and where he had been given the grants to go. That is where the Government should be looking-the reasons why that is happening and why great British innovation is not being captured here to become great British enterprise.

There are three drivers for the future: finance, innovation and skills. In the couple of minutes left to me, I shall touch briefly on each. First, the banking crisis has shown us clearly that we should not, and cannot, depend on financial services to be the bedrock of our industry. We need proper, mixed and sustainable industry, of which manufacturing will be a critical part. Secondly, we have learnt that capital is a scarce resource, and if it is being consumed in never-ending circle of speculation in the City, it is not available for investment. What we need is investment in commerce and industry. The third lesson that we have learnt is that the days of large debt for everything are over. We need more equity at every level. There is a whole debate on that subject, so I will leave it at that and move on.

On innovation, we have superb R and D in this country, whether it is on the work bench or in the universities, or the guy working down the bottom of the garden in his shed. What we do not do nearly so successfully is convert that innovation into small and medium-sized businesses. That is partly about finance, but partly about ensuring that the right skills are there. We need to support R and D and innovation, and we need to do more about moving companies from that early stage to the next one.

Yesterday, here in the House of Commons, I attended an event for the Engineering and Technology Board being renamed Engineering UK. The people there told me things that I think I already knew to a certain extent. They claimed that manufacturing is responsible for 55 per cent. of British exports-my hon. Friend the Member for Southport said it is 46 per cent., but whichever it is, it is still a very big number. What struck me, however, was their estimate that by 2017, we will need 587,000 more engineers-roughly 80,000 a year-whereas, on the other side of the equation, we are losing 30 per cent. of our further education lecturers, who are retiring and are not being replaced, and we have a 17 per cent. drop in the number of students. There are tremendous opportunities-for example, the green economy is estimated to be worth something like £3 trillion in the world as a whole. The UK is well placed to have a slice of that, but I believe that, unless we take proactive decisions-on financial support, for example-to encourage people into engineering and technology, we will simply not have the well trained people who will be the bedrock and raw material of our future progress. That is the single biggest challenge that we face.

I am, and always like to be, optimistic. We have great people and skills in this country. We also have, as I have briefly outlined, some great challenges. We need a secure manufacturing base, and, in my view, we need it more than we need a financial services industry. The sooner we get that, the better.