Manufacturing Investment

HC Deb 31 January 1991 vol 184 cc1092-3

5. Mr. Martyn Jones

To ask the Chancellor of the Exchequer what proportion of gross domestic product manufacturing investment, including leased assets, represented in 1979; and what it represented in 1989.

The Minister of State, Treasury (Mrs. Gillian Shephard)

The figures are 3.6 per cent. in 1979 and 2.8 per cent. in 1989, but this has to be seen against the background of the absolute level of manufacturing investment reaching an all-time high in real terms in the first quarter of 1990.

Mr. Jones

Will the Minister acknowledge that this is a worrying trend, despite the rider to her answer? Does she suggest that British industry will be able to cope when we come out of this appalling recession? If it is unable to cope, what is the balance of payments likely to be?

Mrs. Shephard

It is misleading to concentrate on just one sector, such as manufacturing. In advanced industrial economies all sectors of business are interdependent. The point is that the quality of investment is much better now than it was in the 1970s, when investment decisions were distorted by negative real interest rates and public sector subsidies. That improvement is demonstrated by the fact that profitability is now much higher than it was in the 1970s.

Mrs. Peacock

Is my hon. Friend aware that many businesses in Yorkshire are anxiously looking for a reduction in interest rates? Is she also aware, however, that many manufacturing industries are so confident about the future that they are investing millions of pounds in new factories to prevent more imports from being sucked into this country?

Mrs. Shephard

I am delighted to hear that good news about Yorkshire. My hon. Friend well understands that the real threat to manufacturing is inflation and the important point is that interest rates are on course to reduce inflation.

Mr. John Smith

Is not it appalling that, as the economy plunges deeper into recession, the Confederation of British Industry predicts a 16 per cent. fall in investment by manufacturing companies? Why is it that Britain is the only country in the European Community that is suffering from such a disastrous fall in investment in its manufacturing sector? What do the Government intend to do about it?

Mrs. Shephard

The CBI forecast predicts a much sharper fall than do most other forecasts. A number of firms expect investment to drop markedly in 1991. That is to be expected after the record investment levels that were reached in early 1990. However, the right hon. and learned Gentleman will also have noticed from the 3i survey that 80 per cent. of the largest United Kingdom businesses think that business now is much better able to cope.

Mr. Roger King

Is my hon. Friend aware that when the Labour Government went out in 1979 so did Red Robbo, the Cowley mole and ancient and obsolete trade union practices? During the past 10 years there has been massive investment in the British motor industry by Nissan, Toyota and Honda, among others, leading to new factories, new plant and massive investment—a long-lasting testament to this Government's performance.

Mrs. Shephard

My hon. Friend is always an excellent advocate for the car industry. I am glad to be able to draw the attention of the House to the fact that in the fourth quarter of 1990 the volume of car exports increased by 37 per cent. compared with the previous year. The figures strikingly illustrate the strong improvement in the performance of the British car industry.