Is the UK Manufacturing Tomorrow? Energy, Skills and Public Sector Procurement
On Tuesday 17 November 2015 the Industry and Parliament Trust held a breakfast meeting to explore the question: Is the UK Manufacturing Tomorrow? There was an interesting exchange between representatives from business, Whitehall and academia.
There is a simple answer to the question – yes, the UK will be manufacturing tomorrow. Nevertheless, there are many challenges and also opportunities. It was considered that there is room for some policy interventions that would address some of the problems facing British manufacturing in 2015. Many of these problems are not caused by the forces of global competition, but lie within the UK policy environment. This is to accept that the wider framework conditions that support British manufacturing require some enhancement. It was considered that the renewed emphasis placed on apprenticeships is a timely intervention, but that there are some problems with the administration of the apprenticeship levy. The levy does not take into consideration the ways in which some British firms organise their governance structure within the UK. The group welcomed the decision to establish the National Infrastructure Commission: national and even some local infrastructure must be planned outside the constraints imposed by the electoral cycle.
Three important points where identified during the discussion. First, both national and local government should develop guidelines that would ensure that government procurement is used to enhance innovation and competitiveness across British industry. This is not about grants, but to ensure that public sector projects draw upon the outputs of British industry and in doing so support continual innovation and investment within British manufacturing. A whole cost approach should be developed and applied to public sector procurement that takes into consideration job creation and retention as well as taxation. Compared to many other countries, the UK is failing to use public sector procurement strategically. Second, access to energy and the cost of energy remains a continual problem. This is preventing investment in new plants within the UK and is forcing firms to locate production in countries with access to affordable energy. The absence of an energy policy for British industry was considered to be a major challenge that continues to inhibit growth in employment and GVA. Third, is the problem of skills. This is a continual challenge for many firms and like energy holds back growth. One could argue that this country’s failure to rebalance the economy with growth in manufacturing employment, GVA and exports can be explained by problems with skills, energy and possibly planning permissions. The skills problem is a long-term problem. Part of this problem comes from the educational system in which there is limited understanding of British manufacturing and the careers that are available in this sector. One of the firms taking part in the discussion has found that introducing school teachers to their operations via organised visits is an effective way of encouraging them to ‘sell’ British manufacturing as a viable and exciting career option.
Overall, the discussion demonstrated that Whitehall needs to reengage with British manufacturing. There was much support for continued investment in innovation linked to blue skies research and the commercialisation of research. Continued investment in innovation linked to manufacturing was considered to be a critical and non-negotiable issue. Nevertheless, energy, skills and the strategic deployment of public sector procurement are challenges facing British manufacturing firms that require an on-going supportive political debate.
Professor of Enterprise and Economic Geography