Manufacturing Strategy (Hansard, 16 May 2002)

§ Ms Hewitt

In our first term, our priority was to establish a platform of macro economic stability. That we have achieved. We now need to build upon this foundation to improve the productivity and competitiveness of our economy.

As part of this programme, I am publishing today a report setting out the Government's strategy for the manufacturing sector; a report by the Automotive Innovation and Growth Team; and a Value-Added Scoreboard. Copies of each publication are being placed in the Libraries of the House. I have also established a new Innovation and Growth Team, on the aerospace industry.

UK manufacturing matters. It creates a fifth of our national output, employs 4 million people and produces the majority of our exports. It supports well paid jobs in all regions. It can make a very substantial contribution to improvements in our economy's productivity. The success of United Kingdom manufacturing is crucial to our country's prosperity, now and in the future.

1 recognise that the sector has been facing difficult conditions. There is intense competition in every market, compounded within the euro zone by the persistent weakness of that currency. In recent times, manufacturers 781W around the world have all faced very difficult trading conditions, as a result of the global downturn in manufacturing.

Looking to the future, however, the potential of the sector is strong. The United Kingdom is part of the world's largest single market as well as being one of the world's most open trading nations. This brings extra competition, but also extra opportunity. Recent surveys of industrial confidence have been positive, and there is evidence of improved global conditions.

Manufacturing strategy

Many UK manufacturers are world leaders. We excel in sectors such as car manufacturing, aerospace, pharmaceuticals, the electronics industry and food production. But despite its many strengths, UK manufacturing also suffers from long-standing weaknesses—lower levels of skill, investment, R and D and innovation—that contribute to lower levels of productivity than in France, Germany and the US.

The document I am publishing sets out the Government's strategy for helping manufacturing companies fulfil their potential in the UK, moving up the value chain to high skilled, knowledge intensive operations. The strategy builds on the TUC/CBI work on productivity, the dialogue at the manufacturing summit I hosted last December, and a careful analysis of the evidence.

A first requirement is that Government must create a sound market-oriented, stable business environment. But this is not enough. We must also encourage companies to innovate, to invest, to improve skills and use best business practice. On this basis we identify seven manufacturing pillars for our strategy:

Macro-economic stability

Investment

Innovation

Best practice

Raising skills and education levels

Modern infrastructure

The right market framework.

Within each pillar, there are objectives and actions for Government and industry to develop. The strategy is neither a hard and fast prescription, nor a formula for instant initiatives. Instead, we offer it as the basis for continuing to develop a robust partnership with management, employees and their unions—a manufacturing partnership based on best practice that must be effective at the national, regional and sectoral level.

AIGT report

The Automotive Innovation and Growth Team report that I am also publishing today provides an excellent example of Government working in partnership with industry to produce a practical strategy which will bring real benefits to a critical manufacturing sector.

My right hon. Friend the Prime Minister is discussing the strategy later this afternoon with Sir Ian Gibson, Chairman of the AIGT, and other senior automotive leaders. I am delighted to accept the recommendations of the report and to confirm that the Government are committed to delivering on the report's conclusions in partnership with the automotive industry. Government funding of around £45 million will be invested over five 782W years to implement the recommendations to establish an Automotive Academy, Supply Chain Groups, and two automotive centres of excellence.

Value-Added Scoreboard

I am also publishing today the first ever company wealth creation league table—the Value-Added Scoreboard, which measures value added, that is sales less the cost of bought-in materials, components and services. It provides a unique tool which enables all companies, including those not currently in the Scoreboard, easily to calculate their value added from their annual report and benchmark themselves against UK and European companies in their sector that are in the Scoreboard.

The Scoreboard, put together by the DTI Innovation Group, contains real success stories of British manufacturing and other sectors and will help companies to learn from the record of Britain's and Europe's most successful businesses. There are five UK companies in the top 15 wealth creators in Europe—Shell, BP, HSBC, GlaxoSmithKline and BT—and 24 in the top 100, all highly successful companies that create high value added for the UK economy.

Next steps

The work of the Automotive Innovation and Growth Team, and our response to its report, underlines our commitment to effective action to support manufacturing.

Three other innovation and growth teams have already been established, in the chemicals, environmental equipment, and software sectors. In the textiles and clothing sector, we are implementing the recommendations of the Industry Strategy Group. The aerospace industry in the UK has been very successful, but it is facing increasing competition from other parts of the world. I am, therefore, delighted to be able to announce today the formation of an innovation and growth team for the sector, led by Sir Richard Evans of BAE Systems.

On the wider aspects of our manufacturing strategy:

We will work with industry to develop firmer benchmarks against which to measure and report on progress, in order to focus our activities more effectively,

We will publish competitiveness studies on a sectoral basis to provide a basis for further action to improve productivity and performance,

The English regional development agencies have been asked to reflect the importance of manufacturing in their regional economic strategies and plans.

Our aim is to deepen and broaden the consensus around the actions required to achieve manufacturing success in the UK. In partnership with industry and other stakeholders, we are determined to deliver results.