Lord Mandelson's speech to CBI Manufacturing dinner in full

Last week Lord Mandelson gave a speech at the CBI Manufacturing dinner celebrating British manufacturing and pledging the government's commitment to UK industry 'through thick and thin'... Read the entire speech here

Here in the West Midlands, 17,000 manufacturing firms and their third of a million workers generate a full 10 per cent of the UK's manufacturing output. It's not just the historical heart of industrial Britain - it's the beating modern equivalent.

In my time as European Trade Commissioner I came across a surprising number of people who seemed to have the impression that Britain saw itself as a post-industrial country.

The kind of place that made its global living setting up special investment vehicles and selling derivatives to the rest of the world.

Well, maybe that's how the world looks from some over-priced bits of real estate in certain parts of London. It's not the view from the West Midlands. There is nothing post-industrial about Britain.

Our manufacturing record over the last decade in the UK is impressive - more than impressive. Our prospects are also better than good. We drove the first industrial revolution. And we will drive the next one.

If we continue to invest in our strengths, our 21st century comparative advantages will be in areas like low carbon, precision engineering, biotech, automotive, aviation, electronics and semiconductors. And we will probably sell the odd derivative too, and that's fine.

If the mood tonight is more sober than celebratory, it's because we all know how tough this year is going to be. We just experienced the largest three-month fall in manufacturing output in the UK for almost three decades. A global crisis of credit, and a global crisis of demand.

Manufacturing is bearing the brunt of the global downturn precisely because it is deeply integrated in global supply chains and supplies global markets. We sell more than three-quarters of the cars we make outside of the UK.

This means that when global growth stalls, manufacturing feels it more than most. But it also means that UK manufacturing has huge potential to grow as the global economy grows again, as the IMF projected last week that it will.

We're doing everything we can to address the credit problem - we've recapitalised the banks, we've agreed to underwrite £20bn worth of credit lines and lending and tailored a package of bank measures that will start to get bad assets out into the daylight and help lending flow again. We are working intensively here and in Brussels to ensure that these schemes are transparent and fully operational as a matter of urgency.

I know there is a lot of anger in the real economy at the claim of the banks on state assistance and the scale of the hole the taxpayer has been required to mend in the banking system. But the reality is that without the machinery of credit, there would be no functioning economy at all. Unless we fix the banks, we will not properly fix anything else.

We're doing everything we can to retain and bring forward public investment. We've extended Train to Gain to help you keep training staff through the downturn.

And of course, last week we committed to guarantees and loans that should help the UK's vital automotive sector draw down more than £2bn in investment from the EIB and elsewhere in its vital transition to low carbon vehicles.

That is effectively the same as underwriting the entire vehicle sector's research and development and capital expenditure for a year.

We are working to find ways to help the finance arms of the car sector keep providing the credit that keeps the industry moving. Lord Davies has already met the banks and industry on this. I am also looking at other countries' experience with scrappage schemes.

The Enterprise Finance Guarantee scheme has already unlocked millions of pounds in lending, and the banks participating in it say that demand has been five times higher than for the previous small firms loan guarantee scheme.

Since April last year, nearly 6000 manufacturing companies have been helped by the Manufacturing Advisory Service to achieve cost savings and increased sales worth £183m.

More than 20,000 UK businesses have had a free health check through BusinessLink. More than 30,000 businesses have deferred or restructured tax obligations through the HMRC Business Payment Support Service, which has kept half a billion pounds in business pockets when they need it most.

But there are still thousands of small businesses out there who have not yet taken advantage of this help. It's vital that they know it's there, and that they use it if they need it.

Politics too often demands quick fixes. Government, though, deals in complex reality. The government has done, and will continue to do, everything it can. But its role and its resources are not limitless. Our task is to look after people, and that is not always the same as preserving every individual job.

We are in for a long haul. Our economy, like the global economy, is an intricately geared machine that does not go from stop to go, or down to up, overnight.

A recession is a psychological event for a country as well as an economic one. I think this is what Richard Lambert meant when he warned against the "gloomsters" in an article last week.

What and when we spend and invest is usually a reflection of how we see the future. So confidence is important, along with a sense of self-belief and of Britain's capacity to renew itself.

And that brings me to the final set of things I want to say, which are about the future.

We all recognise that the UK that emerges from this downturn will not be the same as the one that went into it.

Some rebalancing is required, and the next decade will be about strengthening manufacturing's place at the heart of Britain's economy alongside and rooted in a strong services sector. Strengthening its capacity to compete with the best in the world, in a growing global economy that is set to double in size, in an entire suite of new technologies, building new business growth.

I don't just see this as a matter for the market. Commercial incentives and customer demands will of course fundamentally shape what we make and do.

But if we want UK companies to develop the capacity to compete in new technologies with the best manufacturers in the world, they will rely on not only the best skilled people and the best infrastructure but also the best and clearest and most stable regulatory and business environment in the world.

We need an industrial activism in government that pursues these things as a core national objective.

That does everything necessary to equip the UK to be the country of choice for low carbon vehicle production or green manufacturing.

Or civil nuclear supply chain work. Or the next generation of aviation technologies. Or world-beating biotech. Because these things are among the crucial bridges to our economic future.

We don't do that by protecting our markets or trying to rig them in our favour. We do it by making sure that workers have the strategic skills and productivity that they and their companies need to compete - including in construction engineering in oil refining, for example.

Just as an example, last year, Arrowsmith Engineering in Coventry spent more than a million pounds upgrading and expanding their precision engineering capacity. Through the Manufacturing Advisory Service West Midlands they got funding to train their staff to handle the new processes.

Watson's Glass in Wolverhampton did the same - putting 30 staff through NVQs with Train to Gain to help keep the company competitive in the latest commercial glass techniques.

These, and hundreds of examples like them, are snapshots of government that supports manufacturing development and competitiveness by supporting the people that make manufacturing thrive.

Alongside these skilled people, we need a much more strategic approach as a country to innovation, research and development and the transport and communications infrastructure that competitive businesses depend on.

As we set out in the Manufacturing Strategy last September, the TSB in January called for proposals for projects to be funded by an additional £24m specifically targeted for advanced manufacturing.

And I want to strongly endorse the Science Minister Paul Drayson's call last night for a greater focus in our public science spending on the commercialisation of research and the kinds of innovation that drives our economic growth.

Here in the West Midlands, Advantage West Midlands and the EMDA are on track to deliver a purpose-built Manufacturing Technology Centre by 2010, providing industrial scale demonstration facilities down the road in Coventry.

We used the Digital Britain report last week to set out how we intend to use a strategic approach from government to ensure that virtually every home and business in the UK has access to high speed broadband within just a few years.

Soon we will start to set out an equally ambitious step-change to the way we prepare the UK for the low carbon industrial revolution, which is already a strong sector in the UK and could account for more than a million jobs in the next few years if we can create the right conditions for growth.

I can also confirm tonight that we're on track with the RDAs and the EEF to set up Manufacturing Insight this year. This will be an office dedicated entirely to changing public perceptions of manufacturing in the UK.

But we still need your help to make Manufacturing Insight a success, so I encourage you to get involved.

The next few months are going to test more than just our confidence. In a recession there is always a temptation to retreat into economic protectionism or economic nationalism. A temptation to turn an entirely understandable and legitimate anxiety about jobs and livelihoods in the downturn into an argument against openness to trade or labour mobility. These things drive our economy in the good times; they need to be preserved in the tough times.

We have to address the public's anxiety and frustration, and defend the law. But the solution is not to pull the door shut. I welcome the decision to return to work at Lindsey, and it is important to be clear that the resolution does not put in doubt our openness to the EU or EU workers in the UK. Or the opportunities for the tens of thousands of British workers on contract elsewhere in Europe.

British Manufacturing is a global industry with everything to lose from a rise in global protectionism. Its own globalisation strategy over the last decade has been to be more innovative, more skilled and more productive than the competition. In government and industry, that must remain our mission statement.

What the manufacturing sector in Britain knows very well is that we are becoming, not a post-industrial economy, but a knowledge economy. Over the last decade UK manufacturing has reinvented itself in that mould.

The government has worked hard to put in place the support and conditions that helped make that possible. It is doing everything it can to preserve it through the downturn. And it will be a constant partner for British manufacturing as it renews itself to succeed in this century.

Whatever else I do or don't do in politics, I want to personify that partnership. Just as I began in government, ten years ago, by championing Britain's knowledge based economy. It was important then: it's important now. It is the rock on which we will build our economy's future success.

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