Rt. Hon. Peter Mandelson - Former Secretary of State for Trade and Industry (Jul 1998 - Dec 1998)

North West Chamber of Commerce Dinner

Thank you for those kind words of welcome. I am very pleased to be here in Liverpool, at the end of a very pleasant, informative and - I'll admit - somewhat exhausting day in the North West.

I saw some very encouraging signs of local economic strength on my visits today, which took me to both large and small local firms - from British Aerospace (which has won some excellent and well deserved orders) on the one hand, to a small chocolate producer called Classic Couverture.

I particularly enjoyed my trip to Classic Couverture. I'll let you into a secret. You know what they say about hard exteriors and soft centres. Despite my fearsome reputation, I have something of sweet tooth.

Anyway, I know that the firms that I saw today were not exceptions. The North West has strong performers across a range of sectors - from chemicals to engineering, banking and finance to creative industries.

It is also blessed with a large number of further and higher education institutions. These have a critical role to play in our future economic success because this region needs more people, with more skills to match the demand for emerging products and technologies. And, or course, the North West has some excellent transport infrastructure, with world class ports and airports, and a well developed road network.

Before too long, Richard Branson and Railtrack may even sort out the West Coast Main Line!

You need these strengths. This is the time to build on them.

With one quarter of the world, including Japan, now in recession, no country is immune from the effects of the current instability in the world economy.

The Government's job, amidst this instability, is to continue to ensure stability at home to withstand the worst effects of the world downturn and to create the conditions for sustained and steady growth in the future.

But I am very aware of the tough circumstances that some sectors and individual firms are suffering as a result of the global dip.

And while I am not prepared to pander to the doom and gloom merchants - because the UK's economy is still growing, manufacturing output is up this year, there is net job creation and our economic fundamentals are still sound despite what the pundits would have us believe - nonetheless I am determined to do everything within my power to help business overcome these short term difficulties and to deliver help to individuals and localities in need. And we will.

But this evening I want to lift our sights a little. I want to talk about the future and what we are doing to prepare Britain for it, at home and in Europe.

Since I arrived at the DTI in July, I have been focused on one clear objective: to put the future on Britain's side, to equip our country and its economy for the new industrial revolution that is underway.

Our future competitive success depends on the exploitation of knowledge for commercially profitable ends. Exploiting the new information, electronic and bioscience technologies. Harnessing the Internet to usher in the era of electronic commerce so as to cut business costs and help create new markets and new products.

These developments will lead to a great step change in levels of competition and in the speed at which business is transacted and product markets evolve. During my visit to Silicon Valley last week, I was told that some products are now out of date within 12 months from conception.

Only the truly enterprising and innovative can hope to take advantage of such rapid and constant change, which is why I have put encouraging enterprise and the knowledge economy at the forefront of my agenda since arriving at the DTI.

This message - that we must all be more innovative, more enterprising and quicker to embrace technological change - is one I want to drive home to all sectors of the economy, to new firms and old, to the universities, and, of course, throughout Government.

It is also a vital message for the regions.

For too long, we have simply thrown away the full productive potential of the English regions. Our goal is to lift Britain's economic growth rate. We can only do so by employing to the full the human resources and infrastructure of the North of the country as well as the South, otherwise we shall be held back by the overheating of the South.

The whole economy in other words needs the highest performance of each region to balance that of every other.

This country now has a modernising Government, committed to modernising our education system, our Health Service, our Constitution, our relations with Europe and the wider world.

We have to be just as committed to modernising and evening out the performance of the economy across the UK.

That's why we cannot ignore the need for effective regional policy.

We are creating the Regional Development Agencies in the English regions from April next year. Not as a new tier of bureaucracy and local government, but to provide crucial focus and economic leadership at the regional level.

We need the RDAs to drive up the competitiveness and performance of all the regions. To do so, they will need to be allowed to concentrate on how to help away the barriers to enterprise and sustainable growth that still exist in each region - skill barriers, planning barriers, funding barriers, transport barriers, yes and self-confidence and ambition barriers.

Your RDA - under the able chairmanship of Lord Thomas - will have a clear mandate to develop a coherent and ambitious strategy to improve the North West's economic performance.

RDAs are business led. They must also be business like.

Working together with other local business partners, they will develop a strategy which addresses the region's priorities, enhancing the strength and performance of local business in the region, helping to create new jobs.

RDAs must also build strong links between universities and research centres and the wider business community - ensuring greater economic spin offs from academia.

Inward investment continues to be important in creating jobs, introducing new ideas and techniques, and supporting local supply chains, and the RDA will take the lead in this.

But my message to you tonight is that inward investment cannot be our only or indeed our main source of new jobs. It must be matched by the creation of indigenous, home grown companies and jobs. A new enterprise sector of the British and regional economy.

We must once again return Britain to its proud traditions of manufacturing success. Not to recreate the industries of the past, of course not. But to see British know how and British skills building products and delivering services that target emerging new markets and which match the best in the world.

I want to see British manufacturing taking greater advantage of the huge new market we have created on our doorsteps - Europe's single market of 370 million consumers.

This market needs to be exploited fully. But not, of course, at the expense of other world markets open to British goods and certainly not to the detriment of the key North American markets.

I visited the United States the other week and saw for myself a land of opportunity for British manufacturers, exporters and investors. I am shortly to announce a new export push to target this key market.

But for some in Britain today, however, the appeal of America is so strong they argue that we can secure a bright economic future for ourselves by actually withdrawing from Europe and applying to join a transatlantic free trade area instead.

This is an absurd myth yet it is one which is being seriously contemplated, or so I gather, by the Opposition at a senior level.

It is a barmy idea, a red herring if ever there was one. I am certainly not against extending free trade across the Atlantic, but to imagine that Britain can pull up anchor and set sail to become the 51st American State is dangerous naiveté.

Britain's economic interests are clear. We need to recognise that our economic future is inextricably tied up with the rest of Europe whilst arguing that we in Europe must replicate those features of enterprise and entrepreneurialism that have created the United States' economic success. In other words, we need to be pro-Europe, but pro-change and pro-reform in Europe, too.

What is this so important?

The coming of the single currency will be a major step towards the creation of a genuine European single market. It will have a dramatic and galvanising effect.

Across the whole Euro area - by far Britain's most important trading partner - prices will be quoted in the same currency. There will be no hiding place for high charges and consumer rip-offs. There will be a massive encouragement to shop around for the best value deal. And any business knows what that will mean - a massive stimulus to competition.

For manufacturers what will matter are the relative costs of production; nearness to markets; and relative costs of transport: not the mere accident of national borders.

And most important of all, Europe's capital markets will in time become increasingly integrated. Savings will be more efficiently allocated across borders and the cost of capital to business large and small will fall.

For all these reasons the single currency, as long as it works, will be a tremendous stimulus to enterprise and it is in all our interests that it is successful. And alongside its creation there are a number of parallel trends within Europe pulling in the same direction.

First, the great supply side liberalisations of the 1990s are now producing dividends. In telecommunications, in energy, and, albeit more patchily, in transport. By far the most important is in telecommunications. But telecom prices remain a far higher barrier to enterprise in Europe than in the United States and need to head down.

Second, we have the coming of the Information Age. If there is any type of economic activity that is no respecter of national borders it is electronic commerce. And that is why within a unified single market, it could be a tremendous dynamic force in Europe.

Third, Europe will enlarge to bring in the emerging economies of Central and Eastern Europe, creating huge, but often overlooked, new economic opportunities.

So Europe is on the verge of creating the largest integrated economic area in the world.

Of course, the creation of the single currency is a great adventure, and there are risks which must not be ignored. Never before have eleven mature economies been brought together in this way.

But if we play our cards right, Europe will gain two things that have been of great advantage to the United States. A market so big that any growing business with a good product and a good idea will find a niche; and a vibrant capital market that will create and nourish the dynamic small businesses of the future which will be our main source of new jobs.

Let me give you some figures to show you the potential. The United States has 5,400 companies quoted on its new type electronic stock exchange, NASDAQ, with a market capitalisation of around $42 trillion. Those companies employ directly no fewer than 9 million people, many in the information industries.

There are no direct comparisons to NASDAQ in Europe but the three risk capital markets - EASDAQ, Euro NM and AIM - list barely 400 companies.

Further, three times as much venture capital is invested in the US than in the EU and seven times as much in start-ups. This is particularly significant since it is successful new ventures that will produce the bulk of tomorrow's new jobs.

This is what we need to change and I am confident that with the right vision for Europe, and the collective determination to travel in the right direction, it will happen.

Of course Britain will not be part of the single currency in the first wave. There are very good economic reasons why it was impossible for Britain to participate and we should only join if and when it is in our national economic interest to do so.

But no one should doubt our policy. We support the principle. We will work to ensure the Euro's success.

To achieve this we must make sure the UK remains a powerful voice arguing that Europe keeps its direction and sticks to the path of economic reform. Because taking advantage of the single market and making a success of the single currency depends on greater labour market flexibility, greater product market competition and continuing capital market liberalisation.

Of course we must take action to promote jobs and growth. But we must do so in a sensible way and without sacrificing the benefits that Europe has secured from prudent finances and stable levels of low inflation.

Nor can we solve our problems by propping up companies whose time has come or imagining that there are magical short-term macroeconomic fixes. Our long-term prosperity depends on governments throughout Europe recognising that structural reforms matter.

And we should not believe that we can build social cohesion simply by piling more and more social costs and demands on employers. Of course we must have minimum standards at the workplace. They are the hallmark of a decent society. But Europe's social agenda must be a sensible and affordable one.

So, yes Britain must be part of Europe for this simple reason, because by being for Europe and for reform in Europe we can help ensure that Europe does not get left behind in the global race for competitive advantage.

And that means matching in Europe the risk-taking and innovative spirit that has underpinned the economic success of the United States, while not entertaining the illusion that we can somehow make ourselves part of the United States.

If we can pull this off the rewards will be great indeed.

In just over a month's time, the Government will be publishing a White Paper which will set out how we can be more enterprising, how we can give stronger backing to entrepreneurs, and how, in the process, we can boost Britain's competitiveness.

And as I said at the outset, the North West is well placed to play its part in that success.

Your region was in the forefront of the first Industrial revolution. You will be part of the next.

As we emerge from the financial turbulence the world is inflicting on us presently and embrace the change and opportunities brought by the Internet and the advent of the new information and communication technologies, I am confident that the North West will once again be in a leading position in the economic revolution that is set to dominate the new Millennium.

Other speeches by Rt. Hon. Peter Mandelson - Former Secretary of State for Trade and Industry (Jul 1998 - Dec 1998)

(the following are available from the archive)
• The CBI London Region Annual Dinner (10/12/98)
• Annual Dinner of the British / Israel Chamber of Commerce (07/12/98)
• British Venture Capital Association Annual Dinner (30/11/98)
• Foresight / IBB R&D Seminar (25/11/98)
• CBI Annual Conference (02/11/98)
• The Sheffield Star "Made In Sheffield" Annual Dinner (28/10/98)
• British-Argentine Business Conference (28/10/98)
• The SMMT Industry Forum (21/10/98)
• The British American Chamber of Commerce (13/10/98)
• The Business Link Annual Conference (07/10/98)
• The TUC (17/09/98)
• 5th Annual CEO Summit on Converging Technologies (09/09/98)