Ian Pearson - High Value Manufacturing

Good morning, I'd like to begin by thanking Iain Gray and the rest of the Technology Strategy Board for organising and hosting today's conference.

As many of you know, DIUS has made a clear commitment to publish a Science and Innovation strategy in Spring 2008. This will set out our direction and reach out for new ideas. I am determined that we address the needs of our manufacturing industries in this strategy and the discussions you will have today will be a key input to it.

I don't need to tell anyone in this room that Manufacturing is the lifeblood of our economy, providing around 3 million good quality jobs and comprising over half of all exports.

The UK is the world's 6th largest manufacturer and the manufacturing industries combined (including construction, oil and gas) make up more than a quarter (27%) of our entire GDP.

We set the gold standard in areas such as: aerospace, pharmaceuticals, food processing, high performance cars, and nano materials. We have many prestigious design-led construction projects under our belt and are famed for our iconic design, just to mention some of the areas where we are truly world class.

Despite all this success, I know that people who work in manufacturing often feel undervalued and underappreciated. The truth is that you are absolutely crucial to our success as a nation and our way of life. It's not just because I come from the Black Country - the home of the industrial revolution - and manufacturing is coded into my DNA, that I say this. It's based on a hard-headed analysis of the facts. Your contribution to our economy.

Renishaw

Of course, manufacturing is changing. When you look at how particular companies have evolved over the years, you start to build up a picture of how the industry as a whole has evolved. Take Renishaw, who I visited at the EMO Machine Tool Exhibition in Hannover, two years ago. Based in the Gloucestershire, they produce measuring tools.

Their continued success comes from combining high quality manufacturing, and local customer support in markets around the globe. The company's first product, a touch-trigger probe, solved a specific inspection requirement for engines used on Concorde. Thirty years on Renishaw is leading another measurement revolution with scanning systems on co-ordinate measuring machines. This expertise in precision manufacturing has already influenced the dental market and the way tooth restorations are carried out. Their heavy investment in R&D has paid off and allowed them to become a global leader in metrology.

Renishaw's experience is not unusual. For example, in areas such as the design and development of lasers, or in the new sector of plastic electronics, UK businesses hold much of the critical know-how and intellectual property. In the case of the latter, we have an exceptionally strong academic base and home-grown businesses such as Plastic Logic and Xaar have leading positions in developing and marketing early products. We need to make sure that the UK can exploit this world-leading knowledge and generate wealth from it.

The Technology Strategy Board's manufacturing strategy will help companies make the most of their potential to become high value - added manufacturer. I understand the strategy will focus on four main aspects: value chain innovation, production processes, services and the products themselves.

Globalisation and the Green Economy

As a country, we are constantly adapting to our changing circumstances. And the need to respond to globalisation presents a number of new and exciting opportunities, as does the emerging green economy. And as the Commission for Environmental Markets and Economic Performance (CEMEP) recognised that the transition to low-carbon, resource-efficient economy - which is needed to meet the global challenges of climate change and sustainable development - brings considerable opportunities for those countries and businesses with the foresight to seize them.

Last month's EEF and Deloitte Report on achieving a low-carbon economy talks about a '...consumer demand that will necessitate a massive transformation - a 21st century industrial revolution'.

The report emphasises that we are well-placed to succeed in the green economy. For example, the UK has the best wind and marine energy resources in Europe, while clean-coal technologies such as carbon capture and storage will be strong markets in future, given that 40 per cent of the world's electricity is coal generated.

Innovation in manufacturing to reduce the carbon footprint of the transport sector is a big growth area. And it needs to be. The UK makes almost twice as many cars as we did 25 years ago. And we have the second largest aerospace industry in the world and are experts in wing design, engineering and production. We have made solid progress so far but we have to go further and faster.

We continue to support our areas of strength through the Technology Strategy Board, which has, amongst its objectives, the goal of ensuring that our leading sectors and businesses maintain their position in the face of global competition. This is why I am pleased to see initiatives such as the Low Carbon Vehicles Innovation Platform, which seeks to position the UK's automotive sector to benefit from growing public and private sector demand for lower carbon vehicles. Similarly, I also look forward to seeing the benefits of investments it is making through the Environmentally Friendly Engine Programme.

Moving beyond transport, we have over 17,000 UK companies that are focused on the environmental industries. Services - support, sales and marketing - will be vital to their and others' success, particularly given that we are trying to bring about cultural change and encourage people to buy greener products.

However, I recognise that in order to realise this potential, Government must set the right conditions for business to flourish in these markets - something that we continue to concentrate on. At the same time, manufacturing must be creative in identifying opportunities associated with the low-carbon economy.

DIUS

My predecessor Lord Sainsbury, in his recent review, talked of 'A race to the top'. Certainly, we need to show how manufacturing is changing and the bright prospect it offers if we are going to attract the best young engineers, scientists and inventors into the industry.

We're also going to have to ensure that the people already working in manufacturing can continue to develop the skills they need to succeed. My department - DIUS - was created to ensure that people in this country have the right skills to compete in the world economy. That this country is able to produce top-class research and apply both those skills and that research to create innovative products and companies.

Skills for the manufacturing industry

Skills and innovation will be key elements of the review of the Government's manufacturing strategy, which my colleague John Hutton, the Secretary of State for Business, Enterprise and Regulatory Reform announced back in November. The review will aim to ensure that the Government is providing the right framework of support for manufacturers, to maximise their contribution to the UK economy.

As part of that review, it will be important to look at how we can ensure that the skills system becomes more responsive to the needs of both individuals and employers. We need to meet your skills needs now and in the future.

Sector Skills Councils covering the manufacturing sector, such as SEMTA and COGENT, play a key role in this agenda. They are responsible for articulating the future skills needs of their sector, ensuring that the supply of skills and qualifications is driven by employer needs, and raising employer ambition and investment in skills.

And I hope that you will get the most out of our Train to Gain service and the Apprenticeships programme. So far, almost 70,000 employers have already engaged with Train to Gain, and around 130,000 employers in all parts of the country have signed up to Apprenticeships. The National Engineering Apprenticeships programme is one of the largest, with 17,000 young people currently enrolled on level 3 courses.

It's vital that we consider the skills needs of the whole manufacturing sector in this review. Particularly as evidence suggests that skills gaps in a number of key areas of the manufacturing sector are more acute than in the UK economy as a whole.

The National Employer Skills Survey has highlighted some of these challenges - employers report particular gaps in terms of people with technical competencies and experience. Skills deficiencies in staff trained to work as process, plant and machine operatives are also areas of concern and we must work with employers to address them.

In addition to the support we already provide, the new National Skills Academy for Manufacturing should help to improve this situation. It will provide industry-specific development programmes for trainers and assessors, which will be accredited against new national standards. Employers and managers working together with training providers will lift the skills of the entire manufacturing workforce.

We will shortly be publishing a Higher Level Skills Strategy, which will invite views on our plans for Higher Education to respond to the needs of employers to develop their workforce. We need high level skills for an innovative and competitive economy and our universities have a major contribution to make, not only in supplying graduates with those skills but also in supporting employers to skill up their existing staff.

The Manufacturing Advisory Service can also help companies develop their workforce and procure more business.

Near my constituency in Dudley, for example, A & T Enclosures Ltd (ATE), who employ about 40 people, manufacture electrical enclosures for the low voltage switchgear trade. They recognised that their potential business gains were being held back by a lack of capacity to test a new product to required industry standards. The West Midlands Manufacturing Advisory Service - West Midlands were able to step in and help ATE test their product. For an initial investment of £11,000 which was match funded by the Manufacturing Advisory Service, ATE will now be able to access the European market with potential for £400,000 worth of new business.

I want to explore how the Manufacturing Advisory Service and Business Links can act as innovation talent scouts recommending to the TSB companies to work with.

Knowledge transfer is another crucial aspect of high value manufacturing. We will be hearing from a KTP example between the Queen's University Belfast and Perfecseal Ltd. Other manufacturing companies stay competitive by moving from a traditional sector to a niche high value area. Hope Technologies Ltd, a company based in the Yorkshire Dales which some of you may have seen on the BBC last week, originally started out in aerospace but moved into producing cycling parts, with great success. Their design team use cutting edge software to optimise design and concentrate on aspects such as reducing the mass of their cycle parts - very important when making lightweight bikes.

Hope Technologies, like many other manufacturing companies, are optimistic about the future but recognise that their success depends upon an ability to continue to innovate.

Science and Innovation Strategy

It's become something of a truism that in this day and age, we're running merely to stand still. Innovation is absolutely imperative to success.

That's why DIUS is currently developing a Science and Innovation strategy. The document will stress that innovation that matters comes from many sources.

Science and technology, clearly, is vital in creating widely applicable technologies that can open up new markets. But being innovative doesn't just mean coming up with space-age technologies. Innovation can just as easily come from the reapplication of old ideas - the classic example is that steam engines were used in mines for 60 years before being applied to transport.

Innovation is about more than invention: sometimes it's just about using existing technologies or simply applying common sense to day to day problems.

Success in innovation cannot be measured in patents or profits alone. And it's not the sole preserve of manufacturing. We need an innovative service sector and an innovative public sector too. So the scope of our Science and Innovation Strategy will be wide ranging.

We will also be looking at business innovation and the UK intellectual property framework. And we'll include an update on progress implementing the David Sainsbury recommendations on how to succeed in a globalised era.

Technology Innovation

So what is the Technology Strategy Board's role in all this? Clearly, high value manufacturing is a key area of focus for the organisation. We are all working together towards a vision of the UK a global leader in innovation, one where new technology is applied rapidly to create sustainable economic growth.

By connecting business and researchers, by aligning partners, by investing in research and development, and by supporting the exploitation of innovation, the Technology Strategy Board has an essential part to play. It will spend £1 billion over the next three years. Its high value manufacturing strategy is now being developed - but I will leave it to Chief Executive Iain Gray, who is speaking this afternoon, to tell you more. And I know he will be inviting your views.

Conclusion

There is a real buzz developing around manufacturing in the UK at the moment and we need to capitalise on that by moving forward in all the areas I have described this morning.

We must work together to establish a common front and - I welcome the fact that the Technology Strategy Board is taking a leading role in making that future a reality. Thanks.