This snapshot taken on 26/07/2008, shows web content selected for preservation by The National Archives. External links, forms and search boxes may not work in archived websites.
Rt. Hon. Stephen Byers - Former Secretary of State for Trade and Industry (Dec 1998 - Jun 2001)Extending Manufacturing Excellence |
|
|
Today I want to look at manufacturing in the UK. At the challenges and opportunities we face. And to set out how the Government will drive forward an active industrial policy to extend manufacturing excellence in every part of the UK. I don't need to tell this audience how important manufacturing is. We all know that manufacturing matters. It matters not only to you, but to me and to this government. It is vital to our ability to compete in the future and a vital part of our wealth creation process. It accounts for about a fifth of our national income with almost £150 billion of output per year. Manufacturing employs around 4 million people directly. Millions more depend on manufacturing for their livelihood - including two and half million service sector jobs. A strong manufacturing sector is a vital and integral part of the economy. It includes some of our most innovative businesses investing heavily in research and development. Increasingly, manufacturing involves complex processes to make high value added products, which are a source of sustained competitive advantage Advances in manufacturing - whether new goods or new processes - can lead to productivity improvements across the whole economy. Just look at the way information and communications technology has revolutionised the entire economy. Just as the internal combustion engine revolutionised the economy in the last century. In the UK we have much to be proud of in our manufacturing industries. Too often people talk down our industry. At their best our manufacturing companies, big and small, are forward looking: investing in new technologies and equipment; providing world class skills and training to their workforce; and winning new markets and new opportunities. Just look at aerospace, where employment has increased by a fifth - nearly fourteen thousand extra jobs - between 1998 and 2000. Or take fibre optics, which underpins the Internet and is one of the world's fastest growing fields. DTI support for this sector, through programmes such as LINK which help to exploit new technologies developed in our universities, have helped to establish the UK as the European leader in this area. In the last year over 7,000 new R&D and manufacturing jobs have been announced in the UK fibre optic components and systems industry. And, contrary to some perceptions, we have a strong car industry. In 1999 UK car production output was the highest since 1972. Although end-2000 production figures are lower than in 1999, an upturn in 2001 is expected. Since 1997 some £3bn of new investment has been announced and over 10,000 new jobs created in car manufacturing in the UK. Earlier this month Toyota announced that they are switching production of the Corolla from Japan to Derbyshire. Increasing their UK production by nearly a third to 220,000 vehicles a year by the end of 2001. And creating up to 300 new jobs. Jaguar is investing £300m at Halewood to build the new X type model. Volkswagen is investing £500m over five years to increase Bentley production at the Crewe site from 1,500 cars a year to 9,000. The AEEU and its members have, of course, made an important contribution to this success - which reflects the flexibility and skills of our workforce and a big improvement in productivity. In the UK we have world class companies, plants and workers. We are world leaders in some sectors. But we do need to do better. To extend manufacturing excellence. To raise productivity, innovation, and skills in all sectors. And we all know that some industries are facing real pressures. Global markets and technological leaps mean that this is a period of major business change and restructuring. All sectors have to adapt to compete in the future. That has always been the case. But in the 21st century the changes affecting industry are happening at an ever increasing speed. Two years ago there were nearly 10 million mobile phone users in Britain. Six months ago there were 30 million. Today there are 40 million. Alongside these changes we've seen increasing globalisation. In two years the value of outward investment from the UK has grown from £250billion to £598 billion; inward investment has risen from £184 billion to £311 billion. This accelerating pace of globalisation can bring threats to jobs in traditional sectors. We've seen the impact of global restructuring by General Motors at Luton and in Germany and North America. But globalisation also brings enormous opportunities to UK business. We're seeing that with the super jumbo A380 Airbus project which is bringing more than 20,000 new jobs to the UK and safeguarding another 62,000 with the design and build of wings at Bristol and Broughton in North Wales. We need to recognise that the restructuring we are seeing in the UK is happening across the world. A trend common in all major industrial economies is that manufacturing employment has been declining over the last decade and more. Our experience matches most industrialised countries. According to US Department of Labour figures, between 1991 and 1999, the percentage of people employed in manufacturing in the UK fell from 21.7 per cent to 17.9 per cent. Over the same period, manufacturing employment in Germany fell from 31.5 per cent to 23.8 per cent, in Japan from 24.6 per cent to 21 per cent and in the United States from 17.5 per cent to fifteen per cent. This underlying decline is the result of rising standards of living, with people spending a higher proportion of their increasing incomes on services. The proportion of household consumption in the UK spent on services increased from around 40% in 1979 to nearly 47% in 1999. The underlying trend in manufacturing is also the result of increasing competition from newly industrialising countries, who can produce more basic manufactured goods cheaper than elsewhere. And it's the inevitable result of improvements in productivity It's the consequence of automation and new technology. But that doesn't lessen the importance of manufacturing. Nor does it mean that this Government will turn our backs on manufacturing. Change is inevitable - driven by technological advances and globalisation. We can not stop change. Because to do so would suffocate opportunity. But it is the role of Government to help manage this change; to equip people and companies for change and to create the conditions which enable them to meet the challenges. In this world of great complexity and rapid change, we need an active industrial policy. Based on knowledge and skills, on maximising the potential of all parts of Britain and on exploiting the talents of all our people. First and foremost industry needs economic stability. Just ten years ago this week, inflation was standing at eight and a half per cent with interest rates at 14 per cent. One million manufacturing jobs were lost in the early 1990s. This Government will not return to those days. Manufacturing industry told us they needed a climate in which to invest. That's why we took immediate and decisive action to provide a platform for economic stability with low inflation and open the way to steady growth. Inflation now remains around or below the target of two and half per cent. Long term interest rates are at their lowest level for thirty five years. For small and medium sized firms we have made 40% first year capital allowances permanent and delivered a new R&D tax credit. And for small firms we have introduced a 100 per cent first year allowance for investment in IT and communications technology. These are the bedrock for sustained investment in manufacturing. Investment which is the key to the productivity improvements we need. I fully recognise the concerns of some sectors of manufacturing about the sterling-euro exchange rate. Some have argued that joining the single currency would end all our difficulties. Our policy is clear. We are in favour of joining in principle. We can see the benefits which would flow from being part of a successful single currency - transparency of costs, enhanced trade and currency stability. However, the economic conditions have to be right. Joining must be good for jobs, for investment and for industry. We will assess whether the five economic tests have been met early in the next Parliament. If they have then we would join the single currency if that is what the Government, parliament and the people decide. This is a policy which is understood by business and those that need to take decisions about whether or not to invest in the UK. They want to know that the option of joining is being kept open. It is clear to me that a policy which ruled out joining for the lifetime of the next Parliament regardless of the economic conditions would be deeply damaging to British industry generally and in particular for manufacturing. In the meantime, the reality of the situation is that Government and business should make active preparations to give the UK the genuine option to join the euro in the next Parliament. We need to be prepared and ready for change, if it is in the national economic interest to do so and has the support of the British people. The economic stability we have achieved now gives us a once in a generation opportunity. To build for the future on firm foundations. To establish lasting economic success. Getting the economic conditions right is only the beginning. Because we have established stability and slashed public debt we are now able to invest in the measures we need to support dynamic manufacturing industry. We must recognise that the Knowledge Economy is here and now and affects all sectors of industry. People often talk about the "knowledge economy" as if it only applies to certain sectors of industry or is still some way in the future. That suggests that somehow manufacturing is not part of today's knowledge driven economy. This is 100% wrong. Knowledge in the end is almost always wrapped round or integrated within a product. The knowledge economy is an absolutely crucial part of what is happening within manufacturing industry. To be successful in this fast moving, dynamic economy, companies must innovate. Not just in products but processes, marketing and management. We can not try to compete on labour costs and raw materials alone. We succeed when we add value to our products. Employers and workers, together with their unions, need to work together to tackle these issues. But Government also has a key role to play. A role which this Government takes very seriously. That's why we will drive forward an active industrial policy. To extend manufacturing excellence - investing in skills, making the most of new technology, supporting industries of the future, raising innovation in every region. An industrial policy based on three clear steps. First, putting in place the building blocks for the future. We are boosting investment in UK science to ensure we remain at the cutting edge of research and that the science base is linked to industry. Over the next three years we are putting over £1 billion into science - on top of the £1.4 billion we have already invested. We are investing in skills and training to ensure that the skills of our workforce meet the future needs of industry. And we are investing £180 billion in the transport infrastructure industry needs to move goods quickly, efficiently and cleanly. Second, we are creating a modern regulatory framework that drives innovation and encourages growth and increased productivity. That means promoting competition, which provides a spur for firms to increase productivity. But it also means promoting partnership not conflict in the workplace. That's why our £5 million Partnership Fund is supporting projects which foster partnership in the workplace. And why I welcome the TUC's launch last week of its Partnership Institute. And third, we are improving support for business. Providing world class, forward-looking business support for manufacturers to expand at home and overseas. That's why my Department is working with a wide range of industry sectors to see how they can take advantage of the opportunities of e-commerce. To ensure that UK industry can reap the potential benefits of technological developments. Looking to the future is the only way of ensuring sustained growth and employment. But as a Government we also have to look at the present. As industries restructure and the economy changes, some industries face traumatic change. What we will do is to help established industries to modernise and compete in new markets. That's what we're doing in sectors like aerospace, oil and gas, metals and chemicals where we are supporting industry forum adaptation programmes, to enable industry to adopt best practice in production and supply chain management. Or in textiles, where we have introduced a package of measures, backed with over £10 million of Government funding, to enable the textiles industry to meet the challenges of the modern economy. And in each region we will establish a Manufacturing Centre of Excellence to respond to the needs of smaller manufacturing firms. I want to see a whole network of centres working with manufacturers, so that the strong can help the weak and our regions and manufacturing can be stronger as a result. Manufacturing is a regional issue. Its economic significance is greater in some regions than others. In the North East manufacturing makes up over 28 per cent of the region's GDP. It represents over 29 per cent of regional GDP in the West Midlands. And over 26 percent in the North West and Yorkshire and the Humber. It is these regions which have the highest concentration of established industries. Industries which are facing the greatest restructuring. Which have the greatest need of modernisation and help in adapting to change. In all these regions, the contribution of manufacturing to GDP is higher than the UK average of around 21 per cent. In contrast, manufacturing is less than 12% of GDP in London and around 16 per cent in the South East. That means that restructuring in manufacturing affects some regions more than others. We are giving our regions, through the Regional Development Agencies, the funding and flexibility they need to identify and tackle regional barriers to higher productivity. As a result of the spending review announced in July, we are providing the Regional Development Agencies with a very substantial increase in their resources. This will include with £54 million in the new financial year to support innovation and enterprise - almost three times this year's support. Today I am announcing how we will share that funding between our regions. Every region will receive an increase on this year's budget. But that increase will be based on the economic performance of each region. We are comparing each region with the best performing regions and concentrating our support particularly in those regions which have furthest to go on three indicators. First, Research and Development expenditure. In the modern knowledge economy, R&D is one of the ways in which manufacturing businesses can generate new ideas and products which help them to maintain their competitive position. Levels of R&D are a good indicator of whether regions are equipped to compete in the modern knowledge economy. Second, levels of unemployment, which provide a good indication of economic activity. And third, rates of GDP per head. This is a measure of output and an indicator of the competitive position of a region. The regions which need to do more will receive a higher level of funding. In other words, we are targeting extra resources on regions with the greatest needs to improve productivity, investment in knowledge, and jobs. These additional resources will not be used to subsidise or prop up failing companies. It must be used to support innovation, enterprise and skills. On this basis, the North East and Yorkshire and the Humber will receive the highest allocations because of their relative weakness on all indicators, especially on research and development. The North West and West Midlands also receive more than their population size might suggest, since they show some weaknesses on GDP per head and unemployment. Those regions most affected by industrial restructuring and most dependent on manufacturing industry will receive a larger share of the funding. This represents a fundamental shift in the way Government allocates money to the regions. These regions will receive additional funding to support innovation and the development of skills. To enable established industries to modernise, to adopt new processes and technologies. And to support the development of new industries, by strengthening links between universities and business. Our aim is not to hold back our more successful regions - but to expand the winners circle. That's why we are increasing funding for every region next year. Recognising that every region has areas of need. And that we need to raise the economic performance of all our regions against their international competitors. We won't try to stifle growth in regions like the South East. That was tried in the past. It didn't do the successful regions any favours. Nor did it help the weaker regions. A prosperous South East generates orders and creates jobs for companies in the North East. That is a win-win situation. We will help industry in every region to adapt to change. To encourage the new industries of the future. And to help established industries modernise and compete in new markets. Manufacturing matters to our country. Once the cradle of the industrial revolution, we can now be at the heart of the knowledge economy of the 21st century. Across manufacturing, I believe that government, industry and trade unions learning from each other can meet the great challenge of change. |
|
|
|
|
Other speeches by Rt. Hon. Stephen Byers - Former Secretary of State for Trade and Industry (Dec 1998 - Jun 2001)
(the following are available from the archive) |
|
