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Private Sector Partners NW Ltd.

Terry Cook, Chairman of Private Sector Partners NW Ltd. discusses UK Manufacturing

QUESTION: “UK manufacturing is doomed in the long term due to the threat of low cost, cheap labour based economies in the Far East and Eastern Europe.” I think this depends on how manufacturing is defined. If it is defined as just the making of the product then that MAY be the case, but there is so much more to manufacturing and the skills involved. Manufacturing covers a wide variety of career areas including engineering, design, transport, logistics, distribution, research and development, scientific work, administration and management. R&D, design and marketing all have higher added value and are essential skills needed to make and sell successful products in a competitive market. According to the DTI manufacturing accounts for two-thirds of the value of the UK’s exports, about 20 per cent of gross domestic product (GDP) and employs just under 4 million people, around 14% of everyone working in UK. This compares with the service industries where over 20 million are employed. However, 2.4 million jobs in the service sector depend on manufacturing (CBI figures) and these jobs are more susceptible to UK economic fluctuations. There will always be manufacturing in the UK, the question is how important will that manufacturing be to UK plc.

QUESTION: “There is little the British government can do to help UK manufacturers who will always be at the mercy of powerful global competitive forces.” Economic factors have a direct impact on the success or otherwise of manufacturing and the sector’s stability. The strong pound has made British exports more expensive than other international goods, but the pound is now becoming weaker which should help exports. Cheaper labour and operating costs abroad, and the cost of dealing with new environmental and other legislation from the EU have also had an effect. All of which the government can and should influence directly. I’m not advocating embargoes similar to those about to hit our shores for clothing. The textile industry lead other sectors into ‘off-shoring’, reducing textile manufacturing in the UK. Here, the EU issued a consultative document in June and embargoed in July when orders were placed by most retailers in January for Autumn stocks. There is little those retailers can now do to recoup their losses and the consumer will pay more as a result. It shows a complete lack of understanding by governments and demonstrates how regulation fails badly. We need to lead from the front, consumers should want our products rather than them being presented with the only choice available. The government could do much more to promote R&D and design in particular, especially that taking place in smaller companies. Where is the Design Council on this? Too much UK R&D is carried out by too few large companies and the Government can and should encourage these activities more amongst smaller companies.

QUESTION: “The UK economy can still flourish with only a small – and shrinking – manufacturing economy due to its global strength in high value service sectors such as banking, insurance etc.” Yes. But we shouldn’t become too dependant on these service sectors. We need to become more productive in some of the sub-sectors and this too, will depend on the availability of a highly skilled workforce. Government needs to believe that modern manufacturing is central to our future as a leading knowledge driven economy, playing an important role both in the economy and in the everyday lives of people. The industry still requires graduates from different disciplines and it is crucial that we compete in knowledge, skills and creativity, even if we can’t match the lower production costs of other countries. We cannot continue to turn out school leavers who are disaffected, reluctant to learn and can barely read or write when India and the Far East are investing heavily in their ‘knowledge base’; their young people. At the same time we seem very keen to criticise many students who are successful in supposedly easier GCSEs and A levels like design. Yet these very subjects offer the key to the UK’s manufacturing future.

QUESTION: “Historically, UK manufacturers have failed to spend enough on R & D, instead focusing on short term profits – hence their current predicament.” Yes, sadly the short-term culture of much of the UK’s investment community hasn’t caught up with the long term low interest rate, low inflation nature of the new UK economy. We are still not investing enough in the future. Financial pressures lead to too much ‘short-termism’ in industry and less progress in innovation as a result. In addition, we need to highlight successes in design and innovation and where industry meets the IT sector, two sectors not often seen side by side. Initiatives such as those from Habitat with their VIP collection – very important products – and more recent successes like Dyson need bringing to the fore. I’m concerned about the messages that the proposed closure of the guinea pig farm sends out to the world. We do not want to be seen as a place that makes R&D difficult.

QUESTION: “The UK manufacturing environment lacks the management and leadership skills to realise the productivity gains required to be a real international force.” Yes. The Institute of Chartered Accountants England & Wales in its submission to the Northwest Regional Development Agency for their regional economic strategy recommended that all receivers of publicly-funded business support must develop their leadership skills as a condition of that support. The Institute of Directors has their Chartered Director qualification involving training for the very top and we have many other excellent business training initiatives but when budgets are squeezed and there is little incentive to take the initiative, training and management development are the last priority and the first to be to cut. Within manufacturing, the top four industries in the UK measured by production value are food and drink, chemicals, motor vehicles and machinery, areas where we lead the world and in high technology industries such as pharmaceuticals and aerospace. Industry has come a long way from their image of ‘dark satanic mills’ to the organisations of today but more can be done to develop the leaders of tomorrow across all sectors of manufacturing and within SMEs as well as multi-nationals.

QUESTION: “The future of UK manufacturing depends on raising investment, and applying science and innovation, best practice and skills to create even better products.” Yes, yes, yes! The number of manufacturing jobs in the UK has been falling since the 60’s and these have tended to be lower waged work. They have not been the ‘value added’ manufacturing skills such as innovation, design and marketing. We need to retain those skills and train to meet the needs of this new economy. UK manufacturing adds significant value to GNP and the NW Region is the leading UK region for adding value in this sector. The same is NOT true of the service sector which, although a very broad sector, suffers from poor value added in the NW. Anyone who doesn’t believe that ought to think about their last few experiences in the shops on the high street – how many readers would say that during all their recent high street shopping they had received really good service. Manufacturing can survive in the long term. Britain has a leading role to play in innovation, and in sectors like pharmaceuticals and aerospace. If we need an initiative on affordable housing we certainly need one for industrial excellence, and for that excellence we need knowledge and skills here in the NW.

 

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