Oral statement to Parliament

CBI Manufacturing Dinner

Introduction It is a real pleasure to be here this evening. Let me start by making it clear that this Government not only believes manufacturing…

Introduction

It is a real pleasure to be here this evening.

Let me start by making it clear that this Government not only believes manufacturing matters, but is committed to helping you grow.

Already the UK is the world’s sixth largest manufacturer. Industry generates £140bn a year to the economy, around 11% of total Gross Value Added. And it accounts for 53% of Britain’s total UK exports.

So much for the myth that manufacturing is dead in this country; that Britain is no longer a nation which makes things.

But in recent years, there has not been the long-term planning and thinking across Government that’s needed, if we are to support UK manufacturers, as you compete in the global marketplace.

All too often politics has been too short-term. Indeed, that is one of the reasons we are legislating to introduce fixed-term Parliaments. By removing the ability of the Prime Minister to cut and run, this Coalition Government is committing to provide greater stability and long-term decision making in Whitehall.

It is good for industry, good for the economy, and good for the country.

Growth Review

And the work starts now. Earlier today, we announced a root-and-branch review of everything the Government is doing - and needs to do in future - to encourage balanced, sustainable economic growth.

The Growth Review, will examine the barriers to business growth right across Whitehall, and identify the structural reforms needed to boost economic performance.

The review is underpinned by four commitments:

  • First, to provide the stability business needs to plan and invest.
  • Second, to inject dynamism into our markets by removing barriers to growth wherever we can.
  • Third, to ensure we focus our own activities on providing the conditions for private sector growth and investment.
  • And fourth, to ensure that strong growth is fairly shared and sustainable in the long term.

These undertakings will inform our entire programme for Government in this Parliament.

The initial phase of the review will focus on immediate priorities for business: improving the competition regime; increasing exports; reforming the planning system; and cutting red tape and regulation - building on the work we are already doing.

We are also going to examine different sectors of the economy to identify the specific barriers and challenges they face. I am delighted to confirm that Advanced Manufacturing is one of the six sectors in the first wave.

The Manufacturing Framework

The Growth Review will complement and reinforce the policies that we will set out shortly, when we publish our new Manufacturing Framework.

You will understand that I can’t discuss the details this evening - but I can set out some of the objectives the Framework is designed to achieve.

Above all, we want to create the right conditions for a sustained resurgence in UK manufacturing. Because the opportunities are there.

  • New markets with rising incomes and new demand for manufactured products.
  • New industrial technologies and materials boosting the efficiency and quality of products and processes.
  • New business models - combining manufacturing and associated services - to maximise revenue.

So, to grasp these opportunities, we are laying the foundations for a new collaboration with manufacturers over the next ten years.

Productivity

One of the crucial tests for manufacturing firms will be whether they can boost productivity in the years ahead.

That’s why in our first few months, we have already started to tackle the tax system and regulations which can impair productivity.

We are reforming the tax system so businesses will benefit from a simpler, more predictable and stable tax system, saving you time and compliance costs.

We are cutting the main rate of corporation tax from 28% to 24% over four years, so by 2014 this country will have one of the lowest rates of any major Western economy. We are also reducing the small firms’ rate to 20% - instead of increasing it to 22%, as planned by the previous administration.

Now, you will be aware that we have had to reduce capital allowances, to help fund the corporation tax cuts.

But it’s important to remember that, by 2014/15, the benefits to manufacturing, from the corporation tax cuts, will outweigh the changes to capital allowances.

Overall, manufacturing will benefit by £250m a year. And even after these reforms take effect, 95% of businesses will still have all their qualifying investment costs covered by the Annual Investment Allowance.

On regulation, we are taking a comprehensive approach to capping the costs of new regulation through the ‘one in, one out’ system. Before a Minister can introduce a new regulation, he or she must first examine the costs to business and identify a corresponding cut to existing regulations. It is forcing Whitehall to understand the cumulative burden of regulation.

The system is intended to make regulation far more difficult for Whitehall. Indeed, by forcing Ministers to first consider alternatives and making regulation problematic and difficult, we intend to change the culture of over-regulation. Indeed, we intend to make regulation the last resort for Government. And that will save industry production time and money.

But in addition to clearing away the barriers, to growth, we also want to offer industry a helping hand.

Now, I know there has been some uncertainty over the future of the Manufacturing Advisory Service in recent months. So let me put an end to that uncertainty this evening.

The practical, outcome-based advice MAS provides is hugely valued by UK manufacturers, so I can confirm that the service will continue. The details of its funding and future remit will be set out in the Manufacturing Framework, but let me be clear, the long-term future of MAS is secure.

For the time being, the Regional Development Agencies will continue to deliver the service, after which MAS will be a national service delivered at local level.

It will help SMEs to increase their productivity and address new opportunities in a number of areas - including supply chain development, the low carbon economy and lean manufacturing.

Innovation

Of course, one of the most powerful drivers of productivity is innovation.

That’s why in the recent Comprehensive Spending Review we pledged to invest £200 million in a network of elite Technology and Innovation Centres, along the lines outlined by Hermann Hauser.

These centres will foster growth in burgeoning high-tech industries where the UK has clear comparative advantages, by supporting firms in developing and commercialising new technologies. They will focus on manufacturing sectors and industries offering large global market opportunities.

The network will be a mix of existing research centres which have demonstrated their excellence, together with a number of new ones. No decisions have been taken about specialisms yet, but Hauser’s report suggested plastic electronics; stem cells and regenerative medicine; satellite communications; and fuel cells as likely candidates.

They will be overseen by the Technology Strategy Board, but each centre will have a high degree of autonomy so they have the flexibility to respond to business needs and market opportunities.

The Technology Strategy Board will now work with industry and Government to identify the priority areas, the scale of investment required, and governance structure for the elite network of Technology and Innovation Centres by April 2011.

But let me be clear that the centres are intended to reinforce, rather than replace, private sector Research and Development. We want to make sure UK firms maintain their strong track record of ground-breaking research.

So we are looking again at the arrangements for R&D tax credits, and the taxation of intellectual property, to ensure they promote private sector innovation and investment.

Indeed, the Treasury has just this afternoon published a Corporate Tax Road Map for the next five years. The Road Map launches a series of consultations, one of which is focusing on the taxation of innovation and intellectual property. So I would urge you all to consider responding to it in the weeks ahead.

Exports

Finally, I would like to talk briefly about exports and overseas trading opportunities.

Globalisation is creating tremendous new opportunities for UK manufacturers, as markets expand and international value chains grow. Easier market access and technological change have made it easier - even for small firms - to enter them.

If they do, there is a big prize at stake - tens of millions of new customers. If emerging economies continue to grow at the pace that they have in recent times, hundreds of millions of new middle-class consumers will be created, providing an expanding market for high value goods and services.

But to capitalise on these new opportunities, Government needs to take a more holistic approach to trade and exports. So in future, trade promotion and export opportunities will benefit from strong leadership across the whole of Government, involving Ministers from the Prime Minister downwards.

Creating new commercial opportunities will be at the centre of British diplomacy, at the heart of bilateral relations with our international partners.

UK Trade and Investment is being given an expanded role to reflect this increased emphasis on exports - and in recognition of its strong record.

Much of the credit for that must go UKTI’s chief executive, Sir Andrew Cahn. Andrew announced his intention to retire last week, so I would like to take this opportunity to wish him well for the future, and express my thanks for his sterling work at the helm. He will leave UKTI a much stronger organisation.

Conclusion

Now, I can see the waiters hovering so I shall draw my remarks to a close. But before I do, I would like to say how tremendously impressed and inspired I am by the achievements of UK manufacturers.

You are a huge British success story and it’s important we celebrate your achievements, because you don’t get the recognition you deserve.

So Ladies and Gentlemen, I believe we have very firm foundations on which to build Britain’s future manufacturing success. A future based on innovation, know-how and creativity.

We can’t shield ourselves from the profound transformations reshaping the global economy. But we can prepare ourselves to take advantage of them.

This Government intends to be an effective partner for UK manufacturing, as, together, we rise to this challenge in the months and years ahead.

Thank you.

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