Improving the UK's industrial future

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Vince Cable's keynote speech at the CBI's ‘Raising the bar of the UK’s industrial future’ breakfast.

Can I thank you for what you said. This is a really great positive occasion. Something we can celebrate. There aren’t many occasions when government and business is entirely on the same page and in agreement and indeed across the business sector. And it’s even more unusual when you get political parties agreeing. We just had several weeks of tribal warfare at our party conferences but actually this is something we agree about and when I launched this at the beginning of the government it was with the support of my Conservative colleagues. So we have a broad support for an approach, which we haven’t had in this country for many years – decades.

I think there are 2 really very simple ideas at the heart of this.

One is that there are major areas of policy where government and business have to work together and of course, in many respects, business does its own thing and the best role for government is to get out of the way. But there are some respects in which we have to work together. One is skill development. Another is science and innovation. Another is on government procurement – making sure that it is strategic in the way that it operates and as we continue to be with the legacy of the banking crisis, there is common interest in making sure that we get flows of finance, particularly to the SME sector. So there are areas where we have to work on a partnership basis.

And the other big idea is long term thinking. I have now been in Parliament for quite a long time, but I still haven’t quite got over my shock when I came out of a big company in the oil and gas sector - where we did 20 year planning - and entering the political world - where of course we regard 5 years as heroically long term. Of course it isn’t just the politicians you know – asset managers, the media think in terms of hours let alone years so there are enormous pressures to think short term. But for many of the companies represented in this room we have to think long term. Long beyond the political cycle and the purpose of an Industrial Strategy is to do that. It’s to get business and government working together and to do within the long term time frame.

One of the innovative elements in the approach we have adopted is to think in terms of sectors – initially there was a lot of tut tutting about this – do we really have to pick winners and so on. But actually it became perfectly natural to concentrate attention on certain sectors of the economy that were organised in that way. We had the Automotive Council, we had already collaborative relations in aerospace and we have extended that approach to the energy supply chains and to others. And this is predominantly about manufacturing but it’s not only. Some of the most successful bits of the Industrial Strategy relate for example to the creative industries or to professional services or to education – particularly higher education seen as an export industry. And others have grown up spontaneously. It became obvious to the people who were operating in the railway sector that a lot was happening – a lot of investment was taking place and for goodness sake let’s try and deal with this in a more strategic way and so the railway income sector as come together in very much an industrial strategy manner. And the same thing has happened in chemicals that were hitherto rather fragmented and if the foundation industries that Katja described feel somewhat beleaguered as they are because of cost pressures then it would be absolutely right and sensible that we work with them in a similar way.

So that’s the basic philosophy. I think as a result of it, we have some good concrete results. Real collaborations happening – they are not just words. If you take the most obvious and advanced of them, the aerospace sector has produced this £2 billion joint 50:50 government/private sector collaboration to develop the next generation of R and D in the industry. We shouldn’t underestimate this. I came into government and sat down with the industry shortly afterwards and they said look you know your R and D in the aerospace sector is steadily declining. There is no way that the UK is going to retain its position as the number 2 aerospace country in the world – you’re sliding down the scale, you’ve got to do something about it. And it’s got to involve a long term commitment. So we now have a 10 year commitment, joint by both sectors, in order to strengthen our position in engines and wings in the longer term.

The same thing has happened in the automobile industry – there are people in this room like me who are long enough to remember when the car industry was a joke, something we were embarrassed about. It’s now one of our most successful industries – an enormous amount of capital is now being invested not just by the OEMs but further through the supply chain. I think £6 to £8 billion in the last few years and again there are the big high profile projects which we all know about like at Land Rover, the big investment in Ford (I’m going to Dagenham later this morning with the Prime Minister with a big new engine project). The smaller things which are not on the radar – I’ve just come back from India where I met an Indian car company – high quality car compenents company – AMTEC which is investing in Kidderminster to create 500 new jobs in a foundry supporting the new Wolverhampton engine plant. So these are real things and lying behind it is a joint project between government and the industry – the Advanced Propulsion Project, which is creating the next generation power train based on low carbon technology. And there are similar things happening in bioscience, in the energy supply chains - for example, the Siemens project for turbine development on Humberside is very much linked into this strategic approach that I’ve described to you.

Let me just briefly review some of the ways in which we are trying to take forward – what I call - public private partnership writ large. First of all we recognise that training skills is an absolutely massive issue. Wherever I go now I am told by companies that skill shortage is probably the most important single break on their expansion and it does involve a multi-faceted approach. It involves fairly toxic issues like immigration on which I think Katja has said the right things. But what we are trying to do is to help business to develop through expansion of the apprenticeship programme. I think one of the first big decisions I took in government when we had to make big cuts right from the beginning – we’ve cut our department by 25% - but despite that to invest more in apprenticeship training.

We’ve now got 2 million who will have gone through schemes under this government and we’re now trying to focus it much more on advanced higher apprenticeships where the real skill bottlenecks are and to make it much more ‘employer led’ and we have – what we call – an Employer Ownership scheme and I’m able to announce a package of funding for 6 companies in the car supply chain. I’ve got the names of the companies here – Benteler, Brose, Getrag, Gestamp, Nifco and Unipres – there are the sort of tier 2 companies which are in danger of losing their skilled workers because of being cannibalised within the industry but this will help to reinforce their skill development.

So skills is one area which we are trying to deal with through a big expansion of apprenticeships, through the focus on STEM – which Katja referred to. I absolutely endorse what she said about the importance of getting women into engineering both through apprenticeships and graduate level. It’s a fact that we shouldn’t be proud of as a country - that of all the 28 countries in the European Union we are the worst in terms of women in engineering and we’ve really got to combat that. So skill training is one area. The second is helping supply chain development. There is a lot of funding issues around some of the smaller tier 2 companies still can’t get credit from the banks and we’ve launched a substantial programme – I think £245 million so far – helping to finance supply chain capital. We think in the process we may have saved or generated something in the order of 15,000 jobs and that’s an on-going programme.

Thirdly, and again both Mark and Katja referred to it is Britain’s performance in innovation and R and D. We are in danger of slipping down the international leagues table and we have tried to arrest that by making this very strong commitment to the science budget, which has been ring-fenced. And also by setting up the chain of Catapult Centres, which I think has been a great success - loosely based on the German Franhoffer model but adapted very much to British conditions - in which advanced manufacturing did a lot of the pioneering work. That has been expanded and later this year we will have 2 more centres rolled out – we’ve now got 7, the next will be on energy storage and stratified or crystallised medicine.

I think fourthly finance. The British Business Bank, which you don’t see on the high street but is basically a sort of virtual bank which is putting funding into new sources of business finance, peer to peer lending, crowd funding platforms, supporting some of the new banks that are coming through the system and which are absolutely crucial to the smaller companies, which cannot raise either loan or equity financing by conventional means.

Fifth, recognising the particular issues around energy intensive industries. We do realise a lot of those industries – the foundation industries – are under the cosh because they are competing on price. Energy is relatively expensive. We have been trying to address through a compensation mechanism, which we have now developed – cash is being paid out but no doubt we will be told that a great deal more should be done.

So we have a whole series of policy initiatives in those areas. I’d just like to conclude by acknowledging the point which Katja made in her introduction. Which is how do we try to create for the business community as much certainty and policy stability as possible because, you know, there is risk out there. Many of you are struggling with exchange rate issues – the pound is in danger of getting overvalued again. Not a great deal that government can or should do about that. We can’t manipulate exchange rates but it’s a risk that business is running if you’re in international trade. There is issues around the Eurozone growth where there are some rather pessimistic predictions coming out. Now those are business risks which you’ve got to live with in in any event but what we need to try to ensure is that gratuitous risk creation isn’t being generated by government. We’ve just narrowly avoided difficulty in relation to Scotland. A good outcome but it created a period of hiatus for a lot of companies. We’ve now got similar risk which we really must minimise about doubts created over our membership of the European Single Market and there are perfectly good challenges, which you put to us about lack of clarity or consistency in relation to infrastructure projects. We do recognise we need to do better on that front.

But can I thank you all for coming. Thanks to CBI and GE and I look forward to getting feedback and questions from you.