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Rt. Hon. Margaret Beckett - Former Secretary of State for Trade and Industry (May 1997 - Jul 1998)CBI Launch of the National Manufacturing Council Report |
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I am delighted to be here tonight, and to have the chance to give an immediate reaction to this important report. As always, it is also an honour to speak directly to so many major players in the manufacturing industry. As Alec Daly has just said, there is a very simple message that emerges from the report - the transfer and adoption of best practice can transform not only individual companies, but also the whole manufacturing sector, and thereby the economy itself. There is no doubt that this is not only a simple, but a powerful message. I hope that my message will be equally simple, and in its own way equally powerful. I have already made clear that in my view the way ahead for all parts of industry is through partnership. I am pleased to see this message reflected in the report when it says that "there is considerable scope for further improvement which will be achieved through partnership between Government and business". I could not agree more. There can be no partnership, though, unless both parties understand each others needs and pressures. The previous government imposed unnecessary pressures on the manufacturing sector by seeming to neglect it in favour of the service sector and by much of their rhetoric going in this direction. I can assure you that this government will not make the same mistake. The last twenty years have seen a steady decline in manufacturing's share of GDP. We have not been alone in this experience - other developed countries have seen the same pattern. As people get richer they tend to spend more on services than on goods. But that doesn't mean that we should simply accept that this trend is irreversible or that the competitiveness of manufacturing is not as important as the competitiveness of the service sector. Manufacturing is important: it employs 4 million people directly and its output amounts to one fifth of GDP. And it generates useful new technologies which perform a vital role in enhancing the performance of other parts of the economy. For example, the top 5 R&D performing industries in the UK are in manufacturing while 3 out of 5 of the industries most dependent on R&D embodied in purchased equipment are in the service sector. Manufacturing is equally vital to trade. Manufacturing production is about 10 times as likely to be traded across international boundaries as services. And this is not just important to the balance of payments - it also means that firms in the manufacturing sector are much more likely to feel the full brunt of international competition. This can serve to strengthen those firms and is one reason why productivity in manufacturing over the last twenty years has risen faster than that of the economy as a whole. This is good news not just for those in the sector who enjoy higher incomes as a result, but also a much wider constituency who benefit through improved public services. Furthermore, as the National Manufacturing Council recognises, manufacturing and services are not independent, they are interrelated and interdependent. We must move away from what your report terms the "pointless and sterile" debate about their relative merits and seek instead to drive improvements forward together. There are everyday examples - the dominant computer manufacturer in the UK employs over half of its staff in software development. Car sales now frequently include insurance and servicing purchases. All this shows how important it is that the improvement, and adoption of best practice are applied across the economy. The foreword of your report rightly acknowledges the massive impact that this approach can have on the Competitiveness of the UK as a whole. That is why this Government will be supportive of manufacturing industry rather than talking it down in comparison to the service sector. But there is also no doubt that while the manufacturing sector does have a thriving future ahead of it, it can only realise its potential if it is forward looking, and if it embraces change. And it is in this context that we return to the dominant theme of partnership between Government and business. The overarching task for Government is to provide a supportive and business-friendly environment in which firms can grow and prosper. There are many and varied elements included, which is why it is a job for the whole government. The NMC report rightly states that "we have not had the economic stability to perform consistently year on year". I would say that too often economic instability has hindered growth. Providing stability is therefore a key task for Government, contributing to competitiveness by reducing uncertainty and so encouraging longer-term thinking. Gordon Brown acted within weeks of the Election to bring this about by granting the Bank of England operational independence for setting short-term interest rates. This has put monetary policy on a credible, long-term footing to ensure price stability. We do recognise the problems that a high level of sterling can create in the short term, although I note that the CBI manufacturing trends survey sees some evidence that exporters have weathered the storm. It is, though, long term stability that we are seeking to bring about, which will lead to long term benefits. There is no advantage to be gained by returning to boom bust economic management. Within this macroeconomic framework there are other areas that Government needs to address. I believe that investment is crucial for future growth, and so does the NMC. Undoubtedly there is good news in this area, and the report recognises that "a key factor in the UK's improvement in recent years has been the contribution made by inward investment". Outward investment too is strong. But there is another side to the story. The UK's ratio of investment to GDP is not high by historical or international standards, and business investment in the current recovery does not compare favourably to the previous recovery. Furthermore manufacturing investment in recent years has fallen to its lowest level in relation to GDP since records began in 1955. As the report notes "we need to have a period during which we invest more than comparable countries and at current rates clearly we are not". The Government has therefore taken steps to encourage more long-term investment by cutting corporation tax and by removing the bias in the corporation tax system which encouraged dividends and penalised retentions. We hope that both these changes will help to encourage long-term investment in manufacturing industry. Another key driver for economic success is the workforce. A sound education system is essential to provide business with the well-educated, adaptable workforce it needs. Skills lie at the heart of productivity, of innovation and of quality. The Skills Audit showed that we have a skills deficit with our major competitors right across the board. Surveys show that British companies, both small and large, are consistently more concerned about skill shortages than those on the Continent. David Blunkett has already begun the process of raising the standard of British education to the level of the best. The White Paper on Education, Excellence in Schools, describes how we will tackle this. But learning does not stop when you enter the workplace. And we will not raise skills levels fast enough - in less than a generation - if we rely solely on formal education. That is why we will shall publish our White Paper on Lifelong Learning this Autumn, including a strategy for the launch of the new University for Industry. We also understand the importance to modern competitive businesses of an adaptable, flexible and skilled workforce. We have no intention of importing the excessive social security and labour market restrictions that apply in some other parts of Europe. On the contrary, we are confident that signing up to the Social Chapter and establishing a minimum wage, set at a realistic level, will have positive effects for the UK economy itself as well as for those people most directly involved. And, of course, in this increasingly competitive world you constantly need new markets to sell your goods into. But too often exporters encounter unjustified barriers in overseas markets, preventing them from competing on a fair basis. My Department is committed to promoting open markets overseas, and tackling trade barriers wherever they exist through our bilateral efforts, through the Community and the World Trade Organisation. The World Trade Organisation, is at the heart of our efforts to further liberalise trade and remove global trade barriers. We want to build on recent successes on cutting tariffs on IT products and liberalising trade in telecoms services, which should benefit manufacturing industries along with others. I said earlier and have said repeatedly that the whole Government had a role to play, and that, of course, includes me and my department. I am the voice of business in Government. My specific aim at the Department of Trade and Industry is to ensure that all Government activity is informed by a clear understanding of the needs and priorities of business. I also said earlier that Government and business had to act in partnership if we are to maximise the potential gains that are there to be won, and this means that business, too, must play its part. I am pleased to see that the NMC report recognises that "it is business itself which has to accept the principal responsibility for raising performance levels." It is down to individual companies to get the best input from their employees through inclusive and consultative management. It is down to individual companies to embrace both the challenges and the opportunities offered by the fast moving developments in information technology, and the increasingly global market place in which they operate. It is down to individual companies to improve their performance through innovation; and by this I mean innovation not just in terms of products, but processes, strategies and management. And it is down to individual companies to take the concept of partnership on board at all levels of their corporate operations. But this does not mean that companies will receive no practical help from the Government. Measures such as the Employment Rights Dispute Resolution Bill, which will streamline procedures and offer alternative means of settling disputes, the management best practice initiatives and the Technology Foresight programme are all tools to be utilised and exploited, although I acknowledge the report's comment that the best practice programme's penetration is still much too low. It has also been made clear to me in discussions with business to date that you need a clear and stable regulatory framework so that you can plan for the future. There is no doubt that there are benefits for business from an effective competition regime, which encourages competition and leads to enhanced competitiveness at home and abroad. That too is what we aim to provide. It is not only business that needs to be innovative. Government, too, can look for ways to change and improve, particularly in terms of how it interrelates with business. It is vital that Government programmes and support are properly targeted at what business really wants and what can make a contribution. To achieve this we need to enter into effective dialogue. For this reason I have set about a systematic effort to find out what business is thinking, and to use the experience and expertise of Britain's business as efficiently as I can. Again, this initiative is being built on partnership. Part of this process of an audit, of working groups and a White Paper will be the Advisory Group that I announced on 23 July, and which will meet for the first time later on this evening. The next step will be to establish a series of business-led Working Parties to discuss a number of key issues in partnership with Government, and to contribute to the Competitiveness White Paper which I will publish next year. The aim is to look for practical solutions to the problems that businesses actually face. While I would not wish to anticipate what precisely the working groups will address I am sure that we will be covering many of the issues and concerns that have been raised both in the NMC report and in wider discussion you will be having here tonight. Alec Daly has expressed an ambition that more British companies should be as good as Britain's best. I cannot think that anyone would disagree with this. At our best we are world beaters. BOC, one of the top three global suppliers of industrial gases. Rolls Royce, in my own constituency, has long been a byword for global excellence and is now breaking new ground with the Trent engine. JCB, the construction equipment manufacturer who invented the backhoe loader, exports over 60 per cent of its production overseas. These are only a tiny number of examples. There are still, though, many sectors and industries in which we could do better. Following on from my initial competitiveness statement, I will be publishing a fuller document in a few weeks time. It is no coincidence that that document will itself be about "Benchmarking British Business" as a whole. Benchmarking is a powerful management tool for identifying business areas in need of improvement. It is only by assessing themselves against the best, both at home and abroad, that companies will really improve. Only by seeing the benefits that can accrue from being truly competitive will companies seek to attain the same standards. There is no greater spur to improving performance than seeing the opportunities that are being missed. The Government will work in partnership with those businesses that are prepared to submit themselves to the necessary self-examination. I know and have long welcomed that the CBI has already begun work in this area through the PROBE benchmarking initiative, aimed at larger manufacturing sites. For smaller businesses, my Department has the United Kingdom Benchmarking Index, which enables top managers to compare their company with others in over 80 aspects of the business by sector, company size and geographical region. I am delighted to say that we are already receiving feedback from those who have benefited. If there is one general message it is that even strong performers can learn from others in some aspects of their business. Equally important is to stress that improving competitiveness is not solely the preserve of top management. Leadership and vision are critical to success, but, as I have already mentioned, real business benefits are realised only when everyone is committed to the same vision, and this can only come through communication, teamwork and the development of all members of the organisation. It is with this in mind that my Department has set up the 'Partnerships through People' study, involving a number of key organisations including the CBI. The consistent message emerging from this study, is that sustained success is earned by organisations sharing goals, sharing learning, sharing effort, sharing information and sharing culture. I started on a simple note - the transfer of best practice can transform the economy and raise standards, not just standards of companies but standards of living. The CBI National Manufacturing Council believes this, and so does the Government. I have asked my officials to discuss with Alec Daly how we take these ideas forward together, involving the many other parties in industry and government with an interest. I look forward to seeing the results in the near future. I am determined to forge a lasting partnership with industry to bring this about. We will do the best that we can in areas where only Government can act - such as by providing a stable economic framework - in order to allow you to do the best where only business can act. I believe that together we can do it, and I will support you, both within Government and outside Government, in your efforts to improve your companies, and through them the economy and our country. |
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Other speeches by Rt. Hon. Margaret Beckett - Former Secretary of State for Trade and Industry (May 1997 - Jul 1998)
(the following are available from the archive) |
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