One of the perks of my job is travelling the country and seeing with my own eyes some of the quite extraordinary manufacturing companies which operate across the UK. I’ve visited Bentley in Crewe, as well as Toyota in Derby and Vauxhall in Merseyside; and I’ve been to Tata Steel in the North East, and I plan to visit many more companies, large and small, over the coming months.
The UK remains the world’s sixth biggest manufacturer - a fact which still surprises people when they hear it. The sector generates £140bn a year for the economy, around 11% of total Gross Value Added, and it accounts for 55% of total UK exports (albeit of goods rather than services).
In common with other industrialised countries - including the US, Japan, France, and Germany - the share of manufacturing in the economy has fallen. In the UK, manufacturing as a percentage of the economy fell from just over 18% in 1990 to around 11% in 2009, compared to 19% for Germany in 2009. That said, we would expect manufacturing to shrink in relative importance in developed economies as consumers spend more of their discretionary income on services and less on basic necessities or simple consumer durables. Plus there has been a big shift in relative prices, thanks to international competition. Think Poundland: a cornucopia of cheap - mainly Chinese - manufactures. Think how much time we can buy for a pound from a taxi driver, a plumber, a music teacher, or a garage. A few minutes!
The combination of rising productivity and efficient process management, international competition and slow demand growth has been devastating for the UK’s manufacturing labour force. Since 1997, the fall in manufacturing employment has been dramatic - it fell by 39% between 1997 and 2009, compared to 23.2% between 1980 and 1990. There has been an even more dramatic decline in the balance of trade in manufacturing, from being a net exporter of manufacturers for the best part of two centuries, Britain first became a net importer in 1983 and the deficit ballooned to £53bn in 2009.
But the relative decline in manufacturing employment and perceived relative importance has had a major impact on our national psychology. How many people do we meet who repeat the silly and inaccurate observation that “we don’t make things any more”? This message has had a deeply corrosive effect in discouraging a younger generation from seeking a career in engineering or taking up industrial apprenticeships. It also helped encouraged the idea that young people should rather attempt to become a star footballer, an investment banker or a pop star - which can bring riches, but for a very small handful. The negativity about the perception of manufacturing has become a bigger problem than the reality.
There has to be a sense that manufacturing offers a good, attractive, career opportunity through skill training for school leavers and for graduates. Partly this is about capturing the imagination of what it will be like in the industries of the future. It is also about communicating that average salaries are comparable to those in the legal or financial services.
One idea we are working on with manufacturers across the UK is to organise a Manufacturing Open Day, or quite possibly a series of days, to give school children, students and anyone else who is interested the opportunity to see some of our brightest and best, modern manufacturers for themselves.
In recent years, manufacturing businesses, like other businesses, have been held back by barriers that stymie growth - such as over-complicated red tape and regulation; a complex tax system; and inadequate infrastructure. Two problems particularly stand out - access to finance, and the failure to invest in technological innovation. We know that some viable businesses - especially SMEs - are struggling to finance investment. So unblocking the flow of credit, and increasing the availability of debt and equity finance, is a priority. Our discussions with banks are designed to priorities this lending.
In the meantime, the Government is extending the Enterprise Finance Guarantee until 2015, unlocking up to £2bn of additional lending over the next four years. We are also increasing the Enterprise Capital Funds by £200m over the next four years, enabling more than £300m of venture capital investment. The Regional Growth Fund will also provide support to projects in this sector, and we are investing £50m from 2012 in the Manufacturing Advisory Service, which will become a nationally run but locally delivered service.
Manufacturing is also central to this Government’s focus on exports. I’ve just returned from my second visit to India, and I’ve also visited China, Russia and Brazil since becoming Secretary of State. New global markets; with rising incomes; means new sources of demand. Our technological prowess, particularly in terms of advanced manufacturing, healthcare and pharmaceutical, low carbon and aerospace offer big possibilities to British firms with ambition. With our emphasis on trade and opening up export markets, there are major possibilities.
A clear sign of the importance Government attaches to manufacturing is the Advanced Manufacturing Review that we are undertaking. Indeed, this Summit has a key role to play in identifying and shaping policy proposals and the report will be ready by the time of the Budget.
Today’s sessions will focus on several key issues. First, the commercialisation of technology and the future for Technology and Innovation Centres. I am personally strongly committed to rolling out a network of centres around the country - and these will be committed to world-class research in frontier technology. We will also look at skills, including higher level skills gaps and apprenticeships - building on the growth commitment to fund more apprenticeships even at a time of austerity. There will also be a focus on access to finance, which is crucial for SMEs. And low carbon technology is another area of focus, where the UK is doing pioneering work.