Manufacturing (Hansard, 12 January 1994)

§ 5. Mr. Eric Clarke
To ask the President of the Board of Trade what plans he has to meet the Engineering Employers Federation to discuss proposals to increase the level of capital investment in manufacturing industry; and if he will make a statement.

§ Mr. Heseltine
My Department has regular contact with the Engineering Employers Federation about many issues, including investment. The best incentive to increased investment is low inflation, low interest rates and a growing economy.

§ Mr. Clarke
The President should be aware that the engineering employers asked the Chancellor to provide capital allowances to improve investment in manufacturing. The Chancellor did not listen to the employers. Did the right hon. Gentleman take up the case on behalf of the engineering employers in the Budget?

§ Mr. Heseltine
The hon. Gentleman will know that my right hon. and learned Friend the Chancellor and I have wide discussions on all matters that are of concern to the manufacturing and service industries. I agree with my right hon. and learned Friend that the single most important thing that he can do to help the manufacturing economy is to preserve the climate in which inflation and interest rates are low and productivity is rising. In that, my right hon. and learned Friend is doing an exemplary job.

§ Mr. Butcher
Does my right hon. Friend agree that one of the differences between industrial manufacturing 165 managers in the United States and those in the United Kingdom is the comparative reluctance of British managers in big manufacturing companies to leave and help start-ups and buy-outs in the small and medium-sized firm sector? There is a capital shortage in the small and medium-sized engineering sector. Will the reforms in the Budget, successor to the business expansion scheme, allow British manufacturing company managers to leave and take an interest as directors in those companies in which they are now being encouraged to invest?

§ Mr. Heseltine
My hon. Friend will know that the new scheme that my right hon. and learned Friend announced made it clear that it would be possible, under the new successor arrangements for the BES, for investors to be directors and to draw an income from the company in which they were investing. Before we make too easy a judgment about the shortage of capital in small companies, it is important to realise that throughout the 1980s that sector increased to the extent that there are now 1 million more small companies than there were in 1979. The world recession slightly stilled the pace at which the expansion was taking place. There is no ground for believing that Britain will not see a resurgence in the growth of small businesses as we come out of that recession.

§ Mr. Wigley
Does the President of the Board of Trade accept responsibility for intervening to maintain manufac-turing industry investment where that is threatened? Would he regard as appropriate an intervention in the circumstances of the announced closure today of BP at Baglan, with the loss of 600 jobs? If so, is that a responsibility of his Department or of the Welsh Office?

§ Mr. Heseltine
No, I would not regard it as appropriate to intervene. I have looked at the details of the announcement by British Petroleum and, as the hon. Gentleman will know, it is closing older capacity because its new investment is coming on stream. As far as I know, there will be no adverse effect on the British balance of payments.

§ Mr. Garnier
Will my right hon. Friend point the EEF towards Harborough, where he will find, both in the district of Harborough and in the borough of Oadby and Wigston, profitable engineering and small engineering businesses which have made over the years, and continue to make, capital investment in their own businesses and, as a result, are not only successfully improving their customer base in this country but are looking to find new markets both here and abroad?

§ Mr. Heseltine
I am grateful to my hon. Friend for raising that point. By common experience—my hon. Friend the Minister for Trade constantly reminds of this —there is now a whole range of excellent small and medium-sized engineering companies not just operating as part of the supplier chain to the inward investment but pioneering export markets in an encouraging way.

§ Mr. Robin Cook
Why will not the President admit that the Government have an abject record on industrial investment? Does he not know that the current level of industrial investment is well below that of 1979, by 10 per cent. in absolute figures and by 40 per cent. as a proportion of GDP? If he is confident that the figures will get better, would he like to predict in what year under the Conservatives manufacturing investment will get back to 166 the level that it was when they entered office—or does he privately suspect that long before they can do that an increasingly impatient electorate will have thrown them out of office?

§ Mr. Heseltine
The hon. Gentleman knows that the manufacturing sectors of most advanced economies have been declining for many years. It is important to ensure that we create a climate in which the wealth-creating process is encouraged. He will be delighted to know that manufacturing investment is 23 per cent. up from where it was at the bottom of the recession in 1981. That is a remarkable recovery.