Picture Lord Adonis
Lord Adonis, a Labour Peer, set out his observations on UK manufacturing in a speech in the House of Lords. He spoke as follows:
I don’t think there is much dispute that Britain’s industrial base is too weak and too narrow.  If that weren’t the case we probably wouldn’t be in a double dip recession.  And we certainly wouldn’t be in a crisis with 2.6 million unemployed, youth unemployment of more than 1m, and national income still significantly lower than before the 2008 crash.  It is taking us longer to get out of this recession even than it did to get out of Great Depression of the 1930s.
Without a stronger industrial base, we face a bleak future. And I think we now all understand the need to be bold and explicit about this.  Until recently, the words ‘industrial strategy’ were unmentionable in polite society; regarded as a hangover – in all senses – from the disastrous 1970s and British Leyland.  But as Vince Cable put it in his Imperial College speech last month, “We can have an industrial strategy by default or design.  Ignoring this reality is not a policy, it is just negligence.”  He continued, and I agree with this too: “Just as bad would be to approach all our possible interventions in an ad hoc way, subjecting every policy decision to a short term tactical decision.  There is not a serious and successful major company in the world that would proceed in such an unplanned way.”
This is precisely how we have been proceeding, and it has to change.
In my experience, telling stories is more powerful than reciting statistics when painting a big picture.  So I want to tell four brief stories.
Yesterday, I went out on a boat to see the huge new Statoil wind far off the Norfolk coast at Sheringham Shoal.  When I wasn’t sea sick, I was amazed at the size and scale of the turbines: 88 of them, across a huge stretch of sea, each rotor 350 feet in diameter, generating enough electricity for 220,000 homes between them.  This is only the beginning: the plan for nearby Dogger Bank – which I previously knew only from weather forecasts – is for 3,000 of these giant turbines, construction starting in 2015 if the finance can be put together by the development consortium.
This is green energy in action.  By luck of geography, we have a greater opportunity to develop it than any European nation besides Germany and Denmark.  It is also a huge growing industry in construction, design and maintenance.  Yet in industrial terms we are seriously behind the curve.
The Statoil project director told me that barely a fifth of the construction and assembly work for Sheringham Shoal is done by companies located in Britain.  The turbines are made by Siemens and imported: and the foundations, the offshore cables, and a good deal of the work installing the turbines is done by overseas companies with little or no physical presence in the UK.
I was, alas, told by Statoil that infrastructure is another weakness; in particular the absence of superfast broadband on the Norfolk coast and terrible mobile phone reception. As for the huge Dogger Bank investment, uncertainty over long-term policy for renewable energy is a big issue.  So, we are in the midst of a green energy revolution. Yet new jobs and investment will be delayed, and/or go abroad, unless we get our act together. This needs to start, crucially, by ensuring that Siemens do indeed build their proposed £210m wind turbine factory in Hull, whose fate is now uncertain because of government prevarication on wind energy.
Story two, last week I visited Airbus at Filton near Bristol, part of the pan-European operation which has made Airbus so brilliant a rival to Boeing with its A320s, 330s, the soon-to-be 350s and the giant 380s.  As well as its success in China, Airbus has taken the competition directly to the US with a new factory in Alabama. The expertise in designing and making aircraft wings at Filton is second to none, just as the engine technology at next door Rolls Royce is second to none.
Airbus itself is a fruit of industrial policy which dared not speak its name in the 1980s, when state loans made possible the A320, investment which has been repaid many times over.  Similar state industrial policy is now equally imperative in decisions surrounding the proposed BAE/EADS merger to create a military equivalent of Airbus.  The government can’t just leave this to the market. It is the market in this case.  The critical requirements are that the UK should be an equal not a subordinate partner and that the UK’s position at the heart of any military equipment consortium should be assured.
We discussed all this at Filton.  But just as pressing to Airbus were their skills requirements.  Last year the company had 1,500 applicants for 86 apprenticeships.  Yet despite this number, they couldn’t recruit enough school-leavers with the required Bs in A level maths and physics required for their higher level apprenticeships.  Partly to tackle this they are a sponsor of the proposed new Bristol University Technical College, which will specialise in engineering for 14 to 18 year-olds. But far broader action is required to supply their skills needs.
It was the same story when I visited Jaguar Land Rover’s state-or-the-art facility at Gaydon near Warwick last month.  Again, a brilliant success story both in technology and products, including the new Range Rover. JLR benefits from a deep partnership with the University of Warwick, which my noble friend Lord Battacharya has done so much to forge over so many years.  But again, real concerns over skill levels: too small a pool of engineering graduates from which to recruit – JLR told me that by their estimate the UK is producing only half the number of graduate engineers it needs – and too few would-be apprentices with the right skills.
Another key issue for JLR is its supply chain, too little of which is local or even British.  Yet British suppliers are often finding it hard, if not impossible, to secure the patient finance they need to expand; and new inward investors likewise.  The Society of Motor Manufacturers and Traders published a devastating report in June specifying how the growth of supply chain companies in Britain was being constrained by access to capital and lack of sectoral and regional expertise on the part of the banks.
My fourth story is from my experience as Transport Secretary in the last government in awarding contracts for new trains – a big potential source of jobs and value to UK plc which will get steadily bigger as rail travel grows and HS2 is constructed in the next decade and beyond.
The state is the procurer of these trains: to paraphrase Vince Cable, its contract decisions constitute an industrial strategy by default or design, and if it‘s not by design then that’s pure negligence.
The issue is simple: because of past negligence, 21st century Britain – amazingly – no longer has a domestically owned rail manufacturer. There is only one international company – Bombadier – which even makes trains in Britain.  So as Transport Secretary I decided to have an industrial policy by design in respect of the £4.5 billion contract to supply the successor trains to the Intercity 125.  To cut a long story short this is what we did: Hitachi, the most experienced high-speed train manufacturer in the world, now onto the 7th series of Japanese bullet trains, won the contract and agreed as part of the deal to build a factory in Newton Aycliffe in County Durham – not far from Nissan, another great Japanese inward investor in transport manufacturing.  The present government stuck with the contract, the factory is being built with more than 700 new jobs.
Now I had hoped that this would be the beginning of a coherent industrial strategy to build up domestic rail manufacturing.  But alas, the present government awarded the next rail contract – for the new Thameslink trains – to Siemens without securing UK manufacturing.  This was serious negligence.  If Siemens can build a wind turbine factory in Hull, and can even be persuaded by the Russian government to build a train manufacturing plant in the Urals in order to get state contracts, it ought not to have been beyond the wit and ingenuity of Her Majesty’s government to have secured a factory in return for the £1.4 billion Thameslink order.  The failure to do so was a major failure of public policy which must not be repeated with the forthcoming order for Crossrail trains.
So my lords, four stories.  What are the lessons for industrial strategy?  It is that the fundamental planks of a modern industrial strategy are skills, technology, innovation, procurement, infrastructure, finance, and supply chains. We need a strong and dynamic private sector aided by a strong and dynamic state in all seven of these of these areas.  The state needs to act strategically, not tactically; overtly not covertly.  In short, we have got to end the negligence of the past and get real about building an industrial base capable of delivering the jobs and companies Britain needs for the future.
Discussion - One Comment
  1. Jon Hunt

    Oct 10, 2012  at 3:31 pm

    If you get a B grade in maths and physics at A level you will probably go on to do engineering at degree level. They are competing with the universities for school-leavers. Certainly a lot more students, especially women, could study physics at A level. The answer must surely be vocational courses that engage more young people in developing engineering skills, especially those who do not think of themselves as academic.

    Tends to confirm the impression that Adonis is actually quite good at industrial policy but dreadful at educational policy.


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