| Good morning. Firstly, I would like
to thank David Totney for inviting me to speak to you this morning. David
has asked me to share my thoughts with you on the impact of globalisation
on the Midlands and the changes we can expect to see in our economy.
Globalisation affects us all. As you all know,
Midlands businesses have been active in world markets for many, many
years. We have been exporting manufactured goods to a huge range of
countries for centuries. The industrial revolution began here in the
Midlands: with Abraham Darby at Coalbrookdale, Richard Arkwright at
Cromford in Derbyshire. But it was Birmingham and its neighbours that
became the powerhouse for industrial development, with men such as Watt,
Boulton, Murdoch and later Lucas, Austen and Cadbury. The West Midlands
became the country’s main centre for machine tools, for engineering, for
metal founding and casting. And a major centre for many other
manufacturing activities: food processing and, not least, brewing up at
Burton on Trent. Not for nothing was Birmingham known as the city of a
thousand trades, the workshop of the world. But times change, businesses
continually evolve, and if you are using those phrases today you are
mostly talking about Shanghai and the Pearl River Delta.
But manufacturing across the developed world has
had a tough time in recent years and we in the West Midlands have had our
share of the pain. The liberalisation of world trade, the freeing of
capital markets, the spread of market economics to the new democracies of
eastern Europe and their admission to the EU, the arrival of the internet,
the industrialisation of many countries in the developing world and the
rapid progress being made by China and India have all combined to bring
about an intensity of competition that we have never previously
experienced.
Firms that have not been able to adapt to the new
economic conditions have struggled and some high profile businesses have
closed. There are some markets where the cost structures in the advanced
economies now make it seem all but impossible for plants in the West to
compete with those in the Far East. These pressures have contributed to
the development of some of the economic challenges we face in the region
today. The decline of the ceramics industry in the Potteries has much to
with the intensity of competition from lower cost economies such as the
Far East. Worldwide over-capacity in the automotive sector was a factor in
the recent developments at MG Rover and rationalisation at Peugeot and
Jaguar.
But globalisation brings good news too. Many firms
have successfully adapted to the new conditions by modernising their
production methods; by developing products that beat the competition on
design, sophistication, functionality and quality. Two very good examples
are the winners of the Accelerate Awards last week for small and large
SMEs. Winner of the ‘Small SME’ award was Valve Train Components of
Lichfield which employs 29 and has invested over half a million pounds in
heat treatment and CNC machinery and has cornered 43% of the European
market with additional orders from China and Asia. Walsall-based Stokes
Forgings won the ‘Large SME’ award and employs nearly 200. It has made a
strong commitment to investment and to development of its relationships
with the supply chain. That commitment has seen the company enter new
markets across Europe and even win back work from a Chinese competitor.
Other firms have recognised that some components
can be more efficiently made in lower cost economies and have concentrated
on what they do best by successfully developing a niche or specialism in
which they have a technical lead; by exploiting the opportunities offered
by the internet both to market their products but also to find potential
new suppliers and business partners; and by upping their game in terms of
management and workforce skills. By doing these things they have developed
a competitive edge and, more importantly, have learned what they need to
do to keep that advantage.
Globalisation has also brought inward investment.
We have around 2000 overseas companies in the West Midlands, employing
225,000 people. The region is one of the top locations in England for FDI
with many investments from the ‘big 4’ USA, Germany, France and Japan.
These 4 markets alone have produced 241 investments in the last 5 years,
creating 14,500 new jobs and safeguarding over 40,000 others. But the
region has also seen investments from elsewhere, for instance 15
investments from Australia in the last 3 years. Investments are also now
coming from ‘new’ countries such as Hong Kong, Mexico, New Zealand, Qatar,
Iran, Malaysia and particularly India.
And investors continue to arrive. Last year saw 67
inward investments that created or safeguarded over 6000 jobs. AWM, the
Regional Development Agency, reports that it has a sound pipeline of
enquiries that is set to deliver more investors in the current and future
years.
Returning to manufacturing, it is a sector that
remains vitally important to the West Midlands. The latest figures show
that manufacturing still contributes more than 20% of the region’s Gross
Value Added and that around 450,000 people work in the region’s
manufacturing businesses. That is almost one in five of all of the
region’s jobs and on top of that, of course, many in jobs in the region’s
other sectors depend crucially on manufacturing industry: jobs in
transport, retail, financial services, accountancy and a whole host of
other service sector activities.
But manufacturing is changing over the last few
years, as the pace of globalisation has gathered. We have seen the loss of
what had become uncompetitive capacity in some traditional sectors and
increased efficiency in the better performing businesses. The challenges
for manufacturing are very real. More businesses need to be alive to
alternative methods of trade other than traditional ‘exporting’ such as
Manufacturing Under Licence, Partnering and Joint Ventures. UK Trade and
Investment has been instrumental in setting up the region’s IntaTrade
service to help and advise the regions companies with these
non-traditional routes to market. Manufacturers also need to sell their
knowledge and expertise whilst exploiting and protecting their
Intellectual Property Rights as we develop a more knowledge based economy.
Companies need to grasp these opportunities and prepare and skill
themselves accordingly to compete in the world market. We can and are
rising to the challenge and our West Midlands manufacturing base is far
more competitive today than it was a decade ago. And we can and we must do
even better.
But this region isn’t only about manufacturing. We
have seen rapid employment growth in the service sectors. More people in
the region now have jobs than ever before; almost 2.4 million. That is
50,000 more than 4 years ago. We have seen significant levels of
employment growth in sectors such as ICT, financial & business services
and transport & communications, while public investment has contributed to
an expansion of the health and education sectors. The West Midlands today
is seeing new levels of entrepreneurship that has brought an increase in
the rate of business start-ups, so that the region now has more businesses
in than ever before. And the proportion of employment provided by
businesses in what we might term the high knowledge intensity sectors –
those sectors in which 40% or more of staff are educated to at least first
degree level – is growing.
A range of factors have played their part in
bringing this about: I just want to highlight the stimulus given by
globalisation – freer markets, new markets, the opportunities for greater
specialisation, lower barriers to entry for SMEs.
But we still have some way to go to match the
south east of England. That is one of the reasons that the Government has
launched the Local Enterprise Growth Initiative (LEGI) which targets those
areas where economic and entrepreneurial activity is weakest.
So what else can the region do to improve its
competitive position? Here in the Midlands we have a Regional Economic
Strategy that contains delivery mechanisms of High Tech Corridors,
Business Clusters and Regeneration Zones that aim to help the region to
rise to the challenges of globalisation: to make the region’s businesses
more competitive, to promote technological advance and innovation, to
raise skills levels, to increase graduate retention, to widen
participation in the economy and to help the Midlands prosper. I believe
it can make a difference.
Globalisation is a fact of modern business life.
It offers great opportunities to those businesses that rise to its
challenges and great threats to those who try to ignore it. In government,
we are committed to supporting businesses that want to strengthen their
competitiveness; by developing the skills of their people; by innovating
in their business processes or design of their products and services; and
by embracing new technologies to communicate and trade with their
customers and suppliers.
A local businessman said to me the other day - Ian
I’ve heard it all before. In the 70’s and 80’s it was the threat of the
Japanese. They didn’t beat me. Then it was Taiwan and Korea. They didn’t
beat me. Now it’s China, India and the global economy. They wont beat me
either. I just keep on investing in improving my business and staying
ahead of the game.
That’s the challenge for all of us. I’m confident
that here in the West Midlands we are up to it.
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