Specific long-term challenges in Britain include a relatively weak skills base compared to other countries, and a deep reluctance on the part of successive governments to adopt a national industrial policy. For many on the roundtable the current government’s withdrawal of support for Sheffield Forgemasters is emblematic of a more general failing to pursue a coherent industrial strategy.
In contrast to Germany and many other advanced economies, Britain does not have a central investment bank committed to investing in new and innovative companies. As a result, innovative technology is often not developed in Britain as many commercial investors consider the risks to be too high. There is therefore an important role for a public investment vehicle – like Germany’s KfW- that is able to take productive risks that benefit the manufacturing sector, and the wider economy, over the long run. There were also longer term concerns about the skills base of the U.K workforce, particularly the lack of skilled engineers. Once again, this was attributed to the lack of a coherent national strategy in the U.K, described by one of the speakers as ‘an embarrassment’.
A more positive success story in the British case has been the growth of collaborative research centres, based in universities and jointly funded by industry. Nevertheless, there were worries that such centres would be not be sustainable if the forthcoming Comprehensive Spending Review forced universities to impose significant staff and research budget cuts.
A wider range of specific immediate concerns were raised regarding the current government’s policy and fiscal austerity. One key worry was the lack of credit flowing from banks to SMEs. Another was the replacement of Regional Development Agencies (generally agreed to be broadly successful) with Local Enterprise Partnerships, signally a more hands off approach to industrial policy in the regions. A number of contributors thought that SMEs would struggle without the financial supports of the RDAs, and that this would have a negative impact on local job creation and economic recovery.
Specific concerns were also raised regarding the current tax structure of the U.K, with a reduction in corporation tax that favours the services sector more than manufacturing, which would benefit more from an increase in capital allowances. The new immigration cap also caused some alarm amongst participants, as it is very likely to deprive U.K manufacturers of the skilled labour needed not just to innovate, but to function on a day to day basis.
The roundtable closed with some final reflections from the panel on the future of British manufacturing, with panelists asked to name their top policy priority. The need for a coherent, national investment strategy driven by government emerged as the single most important priority if we are to successfully rebalance the British economy.
This event was kindly supported by EEF and FDF
