UK manufacturing is ready for a renaissance, but the government must stand ready to help
Britain needs a clear and detailed industrial strategy that gives businesses the confidence they need to bring manufacturing jobs back to the UK.
After years of decline, as companies have moved production lines to emerging economies with cheaper labour and lower taxes, British industry is showing signs of a comeback.
There were renewed fears today of a triple-dip recession as official figures showed UK manufacturing output fell by 1.5% in January.
But, in an essay published by the independent Westminster think tank Civitas, the Labour MP and historian Tristram Hunt says companies are showing a willingness to reverse the trend of “offshoring” and are exploring ways of relocating manufacturing operations to the UK.
He argues, however, they need more certainty about the business environment they are likely to face over the next 15 years.
The benefits are clear: a renaissance in manufacturing would create more and better jobs, stronger communities and the opportunity to rebalance the UK economy away from the financial and services sector on which it has become so reliant. Dr Hunt holds out the prospect of Britain’s “reindustrialisation”.
But there are challenges too. Britain is facing a skills crisis that must be rectified if it is to provide the ever-more highly skilled workforce that companies need in the 21st century. This must be tackled as a “national emergency”, Dr Hunt says.
The government must also do more to encourage investment in new technology, plant improvements and infrastructure, in which there are stark regional imbalances.
A virtuous circle
Dr Hunt, a leading light of Labour’s 2010 intake of MPs, also warns that the quietly emerging trend to relocate to Britain requires the government to provide “a degree of certainty” about future business conditions in the UK which requires “an explicit, joined-up UK industrial strategy”.
“The immediate benefits of bringing production home are self-evident. More manufacturing activity means an increase in local employment and a greater diversity of local economic activity.
“This in turn leads to more resilient communities. And there is almost a snowball effect to re-industrialisation, a ‘virtuous circle’ that can transform the local skills environment, attracts higher skilled young employment to the area which then becomes a reason for future investment in itself.
“If we can continue to attract companies to re-shore then we can radically transform our communities, laying down the foundation for future resilience and long-term prosperity.”
Dr Hunt’s intervention is published in a new book, Rebalancing the British Economy, edited by the MP and published by Civitas.
His essay, “Rebalancing, Reshoring and Creating an Industrial Commons”, features alongside contributions from across the political spectrum, ranging from Labour’s former business secretary Lord (Peter) Mandelson to Jo Johnson, the Conservative MP and now a Government whip.
There is also input from the worlds of academia, business and journalism, including Roger Bootle, managing director at Capital Economics; David Green, director of Civitas; Chris Giles, economics editor of the Financial Times; and Julia Hobsbawm, chief executive officer of Editorial Intelligence.
The book seeks to build on the growing consensus among the main political parties about the need for a new industrial policy in the aftermath of the financial crisis and recession.
As Dr Hunt writes in a foreword, “There is a growing concern that the UK economy’s centre of gravity has shifted too far away from industry and we need to think seriously about what a twenty-first century industrial strategy will look like.”
In his essay, he expands on the manufacturing opportunities available to Britain and which governments now and in the future must do more to exploit.
“With Sterling’s (relative) weakness and China beginning to be affected by rising labour, energy and transport costs, the emerging trend is one of companies looking to move production back to the UK; ‘of re-shoring’. The question now is how, in the Potteries and elsewhere, we sustain this?”
An explicit, joined-up industrial strategy
This “re-shoring” throws up a skills challenge for the UK which needs tackling with “all the vigour of a national emergency”.
“The future of manufacturing is emphatically high skill. However, I do still believe that if we get our policy right on skills, apprenticeships and ‘on the job’ vocational training, manufacturing offers far more scope for post-education social mobility than the service sector.”
He says that compared with the UK’s foreign competitors, Britain needs to improve its link-ups between manufacturers, businesses and higher education, particularly in technology and engineering.
“Growing specialised clusters of success, such as the Cambridge Hi-tech cluster, where supply chains, human resources and institutions work together as an ‘industrial commons’, creating and reinforcing innovative capabilities, is the surest way to attract companies back to the UK,” he says.
“But all this requires investment in infrastructure, R&D and new technologies. The government could do a lot more with capital allowances to encourage firms to invest in new technology or plant improvements that could dramatically improve their competitiveness and capacity for growth.
“And specifically on infrastructure we need more attempts to rebalance the significant regional disparities in investment.”
But he warns that this emerging trend requires the government to provide more reassurance about future conditions in the UK.
“In many respects this is less about the sum total and more about the knowledge that costs will stay roughly the same in the long-term, enabling companies to plan five, ten or fifteen years into the future,” he says.
“Therefore a strategic direction, an explicit, joined-up UK industrial strategy becomes even more important and lends current government discussions about energy security even more urgency.”
Dr Hunt, the MP for Stoke-on-Trent Central, is the co-chair of the All-Party Parliamentary Group on Rebalancing the British Economy and senior lecturer in modern British history at Queen Mary, University of London.
A copy of Rebalancing the British Economy can be accessed below. Hard copies are available on request.
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Civitas: Institute for the Study of Civil Society is an independent Westminster think tank which receives no state funding and has no links to political parties