§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bryan.]
§ 10.0 p.m.
§ Mr. Maurice Edelman (Coventry, North)
The Prime Minister, in the course of his speech, made reference to the possibility that during his visit to Moscow he might make arrangements to expand trade between this country and the Soviet Union. I hope that, if he does so, he will bear in mind the interest of the machine tool industry which for long has had very close associations with the Soviet Union. Indeed, before the war it was the principal beneficiary of the credit of £10 million, and for a long time it has sought to expand its trade with the Soviet Union. It has not been able to do so because of certain embargoes that existed, although now many of them have been lifted.
I certainly hope that the Prime Minister will bear the interest of the machine tool industry very much in mind, because in raising this matter tonight I am referring to one of our principal industries— principal in importance though not necessarily in size—which has recently been suffering very greatly.
677 The machine tool industry is a barometer of the country's industrial wealth. In increasing redundancy and in shrinkage of orders it has seen certain storm signals to which we would do well to pay close attention. I am raising this matter not only because it closely affects my own constituency, where two of the country's biggest machine tool companies are situated, but also because the industry is one of great national importance. The prosperity of Britain marches hand in hand with the industry's properity.
The machine tool industry has been the first casualty of a policy of restriction, a casualty which such an industry always becomes. Although my major charge against the Government is that their restrictionist policy has led to the decline of the machine tool industry, it is, fortunately, the case that a simple adjustment towards a policy of expansion could rehabilitate the present declining fortunes of the industry.
I do not want to give the Minister of State, Board of Trade, large numbers of statistics, because I am sure that he has them all at his finger tips, but I venture to offer him a few as an indication of the decline in the industry recently. At the end of August, 1957, 121,000 men were employed on the manufacture of machine tools and engineers' small tools. By August, 1958, the number had fallen to 114,000, while the number of unemployed had risen by over 1,000.
Since that time, it is quite certain that the number of unemployed has been steadily rising. I know that it has risen in my constituency, where one of the oldest and most eminent firms of machine tool manufacturers, which has never had a redundancy before, has lately had to sack a considerable number of men. Only two days ago a mother came to see me to complain that her son, an apprentice, was being stood off for two days a week —and it is upon apprentices that the whole future of the industry depends.
There is another statistic which illustrates the decline in the industry. The industry's order books show that the value of orders in hand has fallen between July, 1947, and October, 1958, by £30 million.
These are serious figures which show a most unhappy state of affairs for an industry which has had a long and proud history since the nineteenth century when,
678 by its emergence and development, it led Britain into the forefront of the industrial countries of the world. Today the industry, taken as a whole, has preserved something of its nineteenth century structure. Although in one sense that is of great value, because it means that its traditions have been preserved— those traditions which were so notable in the nineteenth and early twentieth century—it is, as is acknowledged, old-fashioned. About half the output of the 350 firms which constitute its major part is in the hands of 20 firms, and the remaining output is divided between the remaining 330 firms.
Whilst it is true that at the time of the Korean war the industry was capable of, and in fact achieved, a rapid and considerable expansion, this was achieved in what I have described as traditional terms. In other words, the industry was engaged in producing the types of machines it had been producing for many years. Unfortunately, although this produced a boom in the industry, it did not produce a boom of such a nature that Great Britain has been able to keep up in the van of the machine tool producing countries.
We were in competition with the Germans, and the Germans had a considerable advantage in that after the war, as a result of the policy of dismantling, a large part of their old machinery, equipment and machine tools were swept away. So in 1946 and 1947 the Germans more or less started from scratch. They had kept their teams of designers together and the result was that towards the end of the 'forties and in the early 'fifties they were making perhaps the most up-to-date machine tools in the world.
I find it a melancholy experience when sometimes I walk round Coventry factories to see the large number of extremely up-to-date German machines that have been imported into the City of Coventry, which today has unemployment in its own machine tool industry. I am sure the Minister of State would say, and I agree, that this is an international industry and that there has been a great deal of specialisation, with the result that in order to take a balanced view of the industry one has to see it in its international ramifications, and no single firm is capable of producing the 679 whole range of designs that may be required by producers.
Nevertheless, having said that, I draw the attention of the House to the major concern which I had in raising this matter on the Adjournment, apart from the question of redundancy and of continuing unemployment in the industry. This is what I regard as the most obnoxious practice on the part of certain machine tool manufacturers of acting as agents for foreign firms and themselves, in a sense, importing unemployment into this country by importing machines from abroad which could very well and quite as easily be made in this country. I understand that in the machine tool trade this practice is a conventional one. It is taken for granted that manufacturers should act as agents for foreign firms in importing machines.
If one were to translate that into terms of, say, the motor industry. I ask the Minister what he would say if, in Coventry, for instance, the Standard Motor Company were to start acting as agents for Volkswagen and was to import German motor cars at a time when workers at the Standard Motor Company were being stood off. One only has to express it in those terms to see the contradiction which exists between the patriotic function of a firm in acting as producer or, in times of stress like these through which we are passing, in acting merely as agents.
It is clear that in times of difficulty a firm may well prefer to act as agents and take whatever commission there is— 10 per cent. or 15 per cent.—when profit margins are small, rather than to manufacture and go to the trouble of designing and producing and having the responsibility of its own labour force.
I submit to the hon. Gentleman, and perhaps he will deal with this point, that this is a pernicious practice, and that its spread will not only enlarge the area of unemployment, but, in addition to that, it will strike a blow at the function of the machine tool industry in acting as a pilot for British industry as a whole. I wish to quote from a journal of the machine tool industry, The Machinery Market of 15th January this year, which said:It must rile every patriot to have to import a foreign machine in order to make a profit, whilst being aware that the order could well be filled by a British firm who is at this time standing off workmen.680 I want to raise one or two other matters connected with what I personally regard as the present recession in the machine tool industry, and one is the fact that many of the designers in the aircraft industry are being dispersed, and our research resources, which are already extremely limited in comparison with those of the United States and Germany, and certainly of Russia, are being still further constricted. There can be no doubt that there are no adequate facilities for research. It is true that there are Government grants to engineering research associations, amounting, I understand, to £200,000, but this is really derisively small, as compared with the Soviet Union, where, I am told, the Experimental and Scientific Research Institute for the machine tool industry alone has over 2,500 staff, and with the United States where the Massachusetts Institute of Technology has substantial Government subsidies running into many millions of dollars.
The hon. Gentleman will, of course, refer to the work of the machine tools productivity team, which declared that it was desirable—to reduce considerably the number of independent manufacturing companies in the industry by absorption. amalgamation or any such means that will allow of greater standardisation and concentration.I believe that the real reason why the team reported in this way was that research and design, in particular, have been too widely distributed, and that the smaller firms have not got the resources with which to engage in the kind of research which is necessary in the competitive machine tool world, and, consequently, not only would rationalisation produce greater standardisation, but it would concentrate the resources for research.
I want to allow the hon. Gentleman as much time as possible in which to reply, but I want to suggest that there are three problems facing the machine tool industry. There are some which the industry can solve of its own resources by carrying out the internal rationalisation that was recommended in the report which I have quoted, but there are others which lie outside the industry, but. which do lie within the province of the Government.
It is a fact that no firm will lay down new plant in a period of great 681 restriction. No firm will lay down new plant if it believes that the Government's policy is deflation. The Government have, in fact, embarked upon a policy of deflation, and it is true of them, if I may quote a Russian proverb—to be topical—that it is easier to embrace a bear than to get rid of it. That is the situation of the Government today. I do not believe that anything less than a total change in Government policy from restriction to expansion can solve the problems of the machine tool industry and restore full employment.
I have raised this matter tonight in order to declare my dissatisfaction with the Government's policy, to place the blame for the industry's decline where that blame lies, and to point the way to a restoration of its fortunes by whomsoever that restoration may be achieved. I know that many of the matters I have mentioned lie beyond the scope of the Minister of State's responsibility, but I hope that he will deal with the specific problems which I have raised and which can be met at any rate with a palliative in the difficult situation which the machine tool industry faces today.
§ 10.15 p.m.
§ The Minister of State, Board of Trade (Mr. J. K. Vaughan-Morgan)
There were a few remarks made by the hon. Member for Coventry, North (Mr. Edelman) with which he will not expect me to agree, but I congratulate him on having raised this matter and on having treated it from the point of view of an industry of great national importance and not as a constituency matter which, to him, it must primarily be.
I have noted all that he said tonight. I hope that he will forgive me if I think about one or two of his remarks and perhaps reply to them in due course. He quoted a few statistics and I shall quote a few, and I hope that between us we can survey all the many aspects of the industry. I accept the spirit in which he raised the matter generally, and I hope that we can discuss the revelant issues. I have not only listened to what he said tonight, but I have read with great interest the various matters he has raised in Questions, and that has given me an indication of the line he would take in the debate.
682 I think that I can summarise the hon. Member correctly by saying that there are three aspects of the industry with which he is concerned. He feels, first, that it occupies so important a position in the economy, that any deterioration in the industry calls for special remedial action by the Government. Secondly, he feels that the level of imports is so high that it depresses employment and domestic production. Lastly, he is not satisfied with the industry's work on research and development.
The hon. Member described the industry as old-fashioned, but I do not know that I agree with that. It is a very specialised industry, and I think that he was a little unfair when he said that when he went round factories he saw machines of German make. If he goes round German factories, or American factories, he will see machines of British make. It is not quite fair to denigrate so important a domestic industry in that way. He is not satisfied with the industry's work on research and development, and I will try to deal later with that point.
First, on the question of the worsening in the prospects and performance of the industry, I have had some very interesting research done into this question of statistics, and I give the hon. Member full credit for having drawn my attention to this matter. I have statistics only for the first eleven months of 1958. There has been a fall in the volume of new orders amounting to 17.9 per cent. below the level of new orders for the comparable period in 1957. Similarly, there has been a fall in deliveries amounting to 13.6 per cent. and a fall in outstanding orders of 28.2 per cent. between the first eleven months of 1958 and the first eleven months of 1957.
I agree that that is a serious decline and the most significant figure is the decline in new orders. That is because machine tools are usually made to order and not, as with many other industries, for stock. But we have to consider the particular products of the industry. It is an industry with many diverse products and one cannot generalise about it, because it is so specialised. Each firm has its range of specialities.
The decline in the demand for machine tools has been uneven as between the different sections of the industry. For example, the manufacturers of the 683 heavier or special purpose machine tools still have substantial orders and, in the main, are employing the same number of workers as they were in 1956 and 1957.
As it happens, the difficulties are concentrated around the makers of the more standard or general purpose machines. Firms in that sector are suffering very much from short-time working, and the redundancies are still increasing. But it must be remembered that the demand for machine tools is what we might call a "derived" demand. It depends essentially on the demand for the types of consumer and capital goods which require machine tools in their production. In that sense, machine tools are comparable with primary products. I accept that the best method of stimulating demand is to ensure that the overall level of demand for the end products with which they are concerned is maintained at as high a level as possible.
I now turn to the hon. Member's fear that the level of imports is affecting domestic production and employment. This is an international industry. The United Kingdom is, by very long tradition, a major importer as well as producer and exporter of machine tools. So, incidentally, are the United States of America and Western Germany. The machine tool manufacturers in the United Kingdom have publicly stated that overall efficiency in production is best served by giving British industries access to the machine tools which suit the users' products, or their tastes, irrespective of the country of origin of the machines, and that is to our interest as an exporting nation.
This does not mean that imports are particularly favoured at the expense of domestic production. Between 1950 and 1957—the last year for which complete figures are available—the industry achieved a "real" increase in production of about 50 per cent. In 1958, imports of machine tools fell proportionately more than the deliveries of British manufacturers to the home market. In the period from January to November, 1958; imports were 17 per cent. less than in the comparable eleven months of the previous year. In the same period, the deliveries of British manufacturers to the home market fell by 12.4 per cent. Those are very important figures.
684 The hon. Member claimed that imports are inflated because certain leading United Kingdom manufacturers act as import agents for foreign machine tool manufacturers. They want to do this so as to be able to offer a complete line to their customers. I am sure there is no evidence that this practice is increasing or that, on balance, it tends to improve the competitive position of imports. Manufacturers are not, in fact, the major channel of imports.
The hon. Member went on to ask me what I would have thought of a motor car manufacturer who imported foreign models. I was not sure that that was a very happy analogy for a Member representing a Coventry division, because this country's best overseas market for cars is now the United States of America, and Fords, of America, import English models from Fords in this country. We hope that they will continue to do so. I do not think that the hon. Member's approach is the right one.
The hon. Member will be well aware that the British machine tool industry exports a considerable part of its output. During the last three years exports have accounted for 25 per cent. or more of its total output. Even though exports, in 1958, fell by £3.9 million below the 1957 level, they were, nevertheless, the second highest on record. The fall in our exports compared with 1957 was mainly to North America, the U.S.S.R. and some continental markets. In the United States of America the machine tool industry has suffered a far more serious recession than our own, and that accounts for the fact that our exports to that market in 1958 were less than half what they were in 1957.
The hon. Member also mentioned Russia. Our exports to that country fell from more than £1 million in 1957 to a negligible amount in 1958. Soviet demand is notoriously volatile. The absence of a trade agreement does not prevent the Soviet authorities from purchasing in the United Kingdom any machine tools they may wish to import from the West. I share with the hon. Member the hope that the Prime Minister's visit may produce more orders from the Soviet Union.
Of course, much is blamed on the existing strategic controls. These have been substantially reduced and that 685 list is kept under constant review. The changes last August removed an important range of machine tools from export control and, incidentally, that reduction in the control included very many items of particular interest in Coventry such as thread grinders, capstan and turret lathes, multi-spindle automatics, and other things. There is no reason why, if the Soviet Union wishes, she should not place very much larger orders in this country.
If time allowed, I should like to say a word or two about the work of the Export Credits Guarantee Department. That is very important to this country. I do not think that time will allow me to say much, but we have made certain proposals which, I hope, will help the industry. In Spain, for example, we have met the terms of German exporters who lengthened their credit terms, and I think that that will be of great help to the industry. I understand that the Machine Tool Trade Association has recently sent a delegation to Spain to follow up this action and I very much hope that increased business will result from that visit.
Wherever the British machine tool manufacturers can provide firm evidence that competitors are giving longer credit terms than have hitherto been judged appropriate the E.C.G.D. will always give very sympathetic consideration to giving our exporters similar terms subject only to the five-year maximum which we will continue to observe as long as it is observed by credit insurers in other countries.
I turn to the question of research and development. I have left myself very little time to deal with all the points raised by the hon. Member. I think that he was a little unfair and I am not sure that he was really comparing like with like. The industry is quite confident that the amount of development work it is doing will stand comparison with that of any other country. The M.T.T.A. took a 686 leading part in the formation of the Production Engineering Research Association, which conducts research into problems common to production engineering, the field in which this industry operates. It is to be congratulated on the scheme it has recently announced for the financing of scholarships.
The Government play their part. The D.S.I.R. maintains the Mechanical Engineering Research Laboratory, which conducts basic research into engineering problems. The Department also makes a grant to the Production Engineering Research Association. I have not left myself as much time as I should like to deal with these details, but I hope I have said enough to show the House that the Government are very much concerned about deterioration in this industry and are doing what they can to help.
I should mention, in passing, that the Parliamentary Secretary announced, on 10th February, that the Ministry of Supply has withdrawn from the sales planned for this month and next certain machine tools which might otherwise have formed part of the surplus disposals programme. We shall always consult with the industry at any time to minimise any difficulties which might otherwise cause them embarrassment. We shall do all that lies in our power to assist this industry to maintain its remarkable export performance. I certainly do not think that it would be wise, right or expedient to impose any restrictions on imports.
I have every confidence in the future of the industry, tied as it is to the future of British industry generally. I do not share the pessimism of the hon. Member. I am quite certain that as the level of economic activity increases—and it will—the machine tool industry will surmount successfully its present difficulties.
§ Question put and agreed to.
§ Adjourned accordingly at half-past Ten o'clock.