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Emergency Budget should focus on manufacturing to bridge productivity gap, declares Lord Bilimoria

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Osborne set out his plan to rebalance the economy in 2011, using his budget to declare: “We want the words ‘Made in Britain‘, ‘Created in Britain’, ‘Designed in Britain’, and ‘Invented in Britain’, to drive our nation forward. A Britain carried aloft by the march of the makers.”

This was reprised in his 2014 budget, when he described it as being one “for the makers”. It came at an uncertain period for the UK’s manufacturing industry. Reports speculated that it had become a much smaller part of the economy than it was in 1948.

In 1978, 25 per cent of UK jobs were in the manufacturing sector. By 2014, only eight per cent of jobs remained, according to ONS statistics. At the same time, however, productivity has been rising in the sector, now well-known for defying the odds.

One can’t help but remember the episode of Top Gear where the team paraded British cars down Pall Mall to display the UK’s manufacturing might.

“We’re always being told that Britain’s manufacturing industry is dead, and that we don’t make anything anymore,” Jeremy Clarkson said. “Turns out, we do.”

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He rolled out a succession of statistics to demonstrate just how significant motor manufacturing was – including that a new car is made in the UK every 20 seconds. Furthermore, one in three of all Ford engines used worldwide is made in Britain, while Sunderland’s Nissan plant makes more cars per year than the entire Italian motor industry.

The manufacturing industry has always displayed its resilience at times where other industries tumbled, as was seen during the economic downturns in the 1970s, early 1990s, and notably 2008.

Yet while Eurozone growth prospects have improved recently, the weakness of the euro against the pound has made it harder for UK businesses to compete and Greece’s ongoing problems could exacerbate May’s somewhat disappointing figures.

In this case, the UK’s “makers” will want to know how Osborne plans to power their march. Among those leading the charge is Bilimoria, who claimed that Osborne’s call for the makers to fuel the economy tank will play a key role in opening up the nation for global partnerships with emerging markets. He said: “We urgently need to see this spirit in action.”

With just one per cent of the world’s population today, the UK is the fifth largest economy in the world. Having endured the worst recession in a century, Britain has recovered remarkably well, he said.

“We have low inflation, low interest rates, high employment rates and a growing economy,” he added. “We are the envy of Europe.”

One of the British economy’s greatest deficits is in pride, according to Bilimoria, who suggested that the nation has struggled to articulate the strengths of British industry to the world. This stunts our economic growth, he said.

It is a subject that Bilimoria is keen to explore. Speaking at Value Creation, a Real Business event exclusively focused on unlocking growth, he claimed that the hallmark “Made in Britain” has been an assurance of excellence. Shorthand for tradition, heritage and integrity. However, it is a label that is woefully under-utilised.

There are many ways for businesses to boost this reputation, he explained. One such method is to rely on its quality manufacturing.

Britain has a number of bold strategies to boost manufacturing exports to the wider world, including the UKTI’s GREAT Campaign, which showcased Britain’s vast food manufacturing industry at the Milan EXPO and is proven to yield phenomenal returns.

However, he suggested that the Treasury needed to do whatever it could to bolster these displays of pride in British exports by setting a target to raise the manufacturing sector’s share of UK GDP. He further emphasised that it had dropped from 30 per cent to little over ten per cent since the 1970s.

Emergency Budget: Cut and cull or invest and infuse?

“We need a vision similar to that of Indian prime minister Narendra Modi’s ‘Make in India’ campaign, which aims to increase the share of manufacturing in the country’s GDP from 16 per cent to 25 per cent.” he said.

The campaign, he explained, was important given that manufacturing was “absolutely key” when it came to Cobra Beer. The UK, however, has been neglecting the industry for many years, he said.

Bilimoria noted that not only did Modi’s focus create more jobs, it was essentially tied to creating skills. A similar approach is therefore vital to rebalancing the UK economy and boosting economic productivity, he explained.

“Boosting the manufacturing sector starts with a broad strategy to increase the skills of the workforce and the investment in R&D to ensure Britain continues to make the things that the world demands,” he said.

Though, in Britain, manufacturing takes a smaller share of GDP than other industries, the sector makes up 45 per cent of all our exports. A strong manufacturing sector therefore plays a vital role in increasing the strength of Britain’s bonds with worldwide partners, he said.

He suggested that Osborne would no doubt be aware that the UK invests less in R&D as a percentage of GDP than the US, EU, and the whole of the OECD, and this deficit is reflected in Britain’s poor labour productivity performance.

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