Manufacturing (Productivity and Competitiveness) (Hansard, 23 July 2002)

§ Ms Hewitt

I am delighted to report that my Department is today publishing a Command Paper in response to the report by the Trade and Industry Select Committee's report into the productivity and competitiveness of UK manufacturing.

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I warmly welcome the Committee's report, which has made a valuable contribution to the ongoing debate about the future of UK manufacturing. There is much in the Committee's excellent analysis with which the Government agrees, not least the importance of manufacturing to the UK economy.

Manufacturing matters hugely. It produces a fifth of our national income, directly employs almost four million people and millions more in dependent businesses; and it supports many good jobs in some of the poorer regions of Britain. Manufacturing accounts for 60 per cent. of our exports and 80 per cent. of commercial research and development, so it is a driver of innovation and technology uptake. It is a key to future prosperity, our economy and the society in which we live.

There are great opportunities for British manufacturers. The UK has real strengths to build on. We have many world-class companies. We have a stable macro-economic environment, a first class science base and membership of the EU giving access to the world's largest single market. But we recognise that we also have significant weaknesses; lower levels of skills, investment, R & D and innovation. Companies that rely mainly on labour intensive products and processes will find it ever more difficult to compete unless they evolve to meet the challenges. Companies must increase the value they add through innovative management, products and processes to succeed in the longer term.

In particular, if UK manufacturers could match the productivity performance of France, Germany and the US, all else remaining equal, we would be £70 billion better off. Returns on investments would be higher, jobs better paid and companies more competitive. That is why the Department of Trade and Industry has put manufacturing at the heart of its agenda—a fact reflected in the Command Paper—and we have set challenging targets on productivity and are taking significant action across a wide front to deliver on them in the longer term.

I welcome the Committee's call to give a greater focus across the DTI on the importance of the manufacturing industry and its needs, and to work with other Government departments in pushing forward the manufacturing agenda. Much progress has been made since the Committee began its inquiry and published its conclusions. A significant amount of what Government—and particularly DTI—does, supports manufacturing and has done for many years. But I have also instigated a step change by increasing both departmental and ministerial resources focused on manufacturing. The role of the Minister of State for Employment Relations, Industry and the Regions has been strengthened—effectively creating a Minister with responsibility for manufacturing. The Department also has a strengthened structure with a new Manufacturing Policy Team and a new Director General for Innovation, when appointed, will play an important role as Chief Adviser on Manufacturing, reinforcing the importance of innovation as a key driver of manufacturing productivity. These changes are already meeting the Committee's recommendation that DTI should have a stronger and more strategic focus, commensurate with the importance of manufacturing.

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The Government also published, on 16 May, its Manufacturing Strategy; the first comprehensive and cohesive framework for manufacturing set out by any UK Government for over 30 years.

A key role highlighted in the strategy will be to ensure that DTI champions more effectively the importance and needs of manufacturing and provides a vigorous lead on manufacturing issues. We are working to strengthen communication and co-operation between Whitehall departments and the regions to help UK manufacturers build on the opportunities of renewed world growth. Much progress is already being made here: at Ministerial level, a close working partnership with DTI, DfES, Department of Work and Pensions (DWP) and the Treasury has already been established on training and skills issues. This is already yielding benefits, including a better skills policy balance between the supply side—what schools and colleges provide—and the demand side—what employers need from their work forces. We have also seen a joined-up UK approach to strengthening demand side leadership by employers through the creation of new Sector Skills Councils and better co-ordination of regional delivery through initiatives such as the DTI Manufacturing Advisory Service already being delivered in most regions by their designated regional centres for manufacturing excellence (RCMEs).

I am confident that, as outlined in the Command Paper, the combination of a clear and coherent manufacturing strategy with enhanced and better focused Departmental resources in DTI provides a fresh basis for a stronger, better co-ordinated approach and more effective action to contribute to a successful UK manufacturing sector.