Train

Manufacturing lacks government backing

Mark Venables casts a personal eye over government support for the nation's industrial backbone.

The death of the domestic manufacturing sector has been greatly exaggerated in the UK, much as it has across the Atlantic in the US. Commentators would have us believe that industrial production is in terminal decline, but the facts don't bear that out. But even if UK manufacturing is healthy, the same cannot be said for the support from a government that said that it wanted to make 'made in Britain' a watchword.

For those who have been taken in by the general media gloom that shrouds manufacturing, a quick glance at one of the industry's most compelling metrics – the Index of Manufacturing – will correct any misapprehensions. The Index, produced by the Office for National Statistics, charts the value of industrial production, inflation-adjusted, over the years. Despite wobbles around recessions, the general trend is still upwards.

It is 160 years since the Great Exhibition of 1851, 100 years since the Empire Exhibition of 1911 and 60 years since the Festival of Britain in 1951, all of which celebrated the nation's achievements as the workshop of the world.

This country can't live without manufacturing, even if it can't afford to compete with China. Fortunately we have not attempted to do either of these things. Britain is still a manufacturing powerhouse.

Modern manufacturing accounts for up to 15 per cent of our economy – almost twice the size of the financial services industry. UK manufacturing productivity has doubled in the last 10 years; four million people work in the sector; half of our exports are manufactured goods – taking in whisky and tweed, as well as computer chips and software, pharmaceuticals, chemicals and jet engines.

We are not suffering from a decline in manufacturing. What we do have is a decline in manufacturing employment and manufacturing as a percentage of the economy, but that's because the services part of the economy is growing faster than manufacturing. As we become more productive, the sector inevitably employs fewer people.

If any further validation is needed then up pops the BBC, with a three-part series 'Made In Britain' – broadcast in early July – that shoots down the same sentiment and charts why Britain is still a world powerhouse when it comes to high-tech manufacturing.

But things could be so much better if the government backed its rhetoric with positive actions – most notably when awarding manufacturing contracts. It's all well and good seeking to maximise value for the country, but when it comes to major contracts that is the time to make 'Made in Britain' more than just a slogan.

An obvious example comes from the award of a £1.5bn order to German manufacturer Siemens to provide trains for the new Thameslink rail service, against strong competition from Derby-based Bombardier. At present the plant is working flat out to make rolling stock for London Underground as well as the impressive new units for the Stansted Express line. But, these contracts will be running down by the end of the year, forcing Bombardier to announce the likely loss of over 1,400 jobs. There is the danger that the British plant's capacity to bid for future business will be compromised.

So far from reinforcing UK manufacturing excellence, David Cameron and his coalition have snubbed the UK workforce to save a few farthings. When the Thameslink trains finally roll through London, there will be no 'Made in Britain' celebration.

This is not the first time that UK industry has questioned the government. Last year a contract for new InterCity trains went to Japanese manufacturer Hitachi. Could you imagine this sort of decision being made in one of the other European countries?

Germany recently awarded a huge rail order to Siemens, while France is developing new TGVs with French manufacturer Alstom. Of course, there are stringent regulations regarding contracts inside the European community and the days of nationalism are supposed to be in the past, but it appears that where there is a will there is a way – except in the UK.

On this latest award the government said that the Treasury had not been asked to assess the potential damage to the economy of the East Midlands. They were making a decision on this huge contract in the dark.

Without a doubt there will be a huge knock-on impact in Derby's local economy because it will lead to an increase in unemployment and reduced spending power.

The government argues other parts of the country will benefit from new depot construction, component and maintenance jobs. However, those jobs would have been created as a bonus on top of the jobs that could have been saved in Derby.

It is worth making some comparisons. The UK automotive industry produces the country's most valuable manufactured exports, with £27bn worth of vehicles and parts going overseas in 2010. The difference between the automotive and rail sectors is that car-making is governed by free-market decisions. Factories are located where the car-makers want them, and individuals purchase the cars, unlike the train sector, which is largely beholden to the government.

BMW and Nissan have recently made announcements about boosting UK production, but they are not alone. Jaguar Land Rover plans a new engine factory and more research and development here, and General Motors is mulling whether the UK might be the best place to produce its petrol-electric Opel and Vauxhall Ampera models.

In a stark contrast to the rail industry, where Bombardier is making barbed hints about withdrawing from the UK, carmakers insist they are impressed by the government's support for the manufacturing sector.

BMW, which has already invested £1bn in the UK since 2000, exports BMW engines as well as Rolls-Royce and Mini cars to the tune of £2.4bn a year and thus accounts for about 1 per cent of all goods exported by UK companies. The automotive sector employs 300,000 people in manufacturing. Let's hope that it can absorb the jobs lost in the rail industry.

But the real moral of this tale is that 'Made in Britain' is important, far too important to be used as a throwaway slogan. Where it is possible, government and consumers should look to support local manufacturing and fly the flag with pride.

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