Congratulations to the Award Winners so far and thank you to IMechE and its Partners and Sponsors for doing something tonight that is vital and that we don’t do enough of – which is showcase and celebrate success in modern, high-tech Manufacturing.
It never ceases to amaze me that instead of recognising Manufacturing as one of the most successful sectors in Britain, it is seen by many as in decline. Manufacturing is indeed the unsung triumph of the British economy, with leading global companies.
The facts speak for themselves: We are the world’s the largest Manufacturer. We are globally competitive – Manufacturing accounts for half of Britain’s exports and exports account for half of Manufacturing output. Productivity in Manufacturing has grown by 50% since 1997, more than twice as fast as the rest of the economy. A vital contribution to making the UK’s productivity growth the fastest in the G7.
My only explanation for this lack of popular recognition is, first, that the sector has undergone a difficult restructuring in the face of intense global competition and that has stuck in the popular imagination. And second, it is one of the most globalised of all sectors with fragmentation of supply chains across the world allowing niche players and specialists to thrive. That means less recognisable household brands for end products. And third Manufacturing is now so transformed that it is no longer recognisable as Manufacturing to most people. The popular image is still of dark satanic mills and repetitive work.
As Keynes said, the difficulty lies not so much in developing new ideas as escaping from old ones.
Most of your success is now underpinned by a move to higher value-added, knowledge intensive differentiated sectors based on innovation and R&D and Specialisation. We have new sectors that do not fit Manufacturing stereotypes: We are leaders in electronics and semiconductors which display many characteristics of “new” Manufacturing with fragmented supply chains: we are actually amongst the top three producers in Europe. The UK has 40% of the market in integrated circuit application design and is renowned for silicon design. And even in the more traditional sectors such as the automotive industry, we are displaying our comparative advantage in modern Manufacturing. Every mini coming out of Cowley is personalised to individual customers. And the Nissan Design centre in Paddington Basin is for the first time doing the design work for a car aimed exclusively at the Japanese market. Alongside designing a brand new model to be built in Sunderland, the most productive car plant in Europe.
An interesting characteristic of successful modern Manufacturing is investment in intangible assets such as design, brands and training. Emerging research points to intangibles investment growing faster than traditional capital expenditure. In fact proportionately it suggests Manufacturers are investing more in intangibles than the service sector. And that is why Manufacturing will be a key part of Britain’s future because it has restructured and become globally competitive. We all know Britain cannot compete solely on the basis of raw material endowments, capital or low wages, but through turning innovation in products, processes and services into profits.
If we think we are going to be the innovation nation that lives off its value adding brain power, let us be clear where the future is. 75% of business R&D in the UK is from Manufacturing. Manufacturing R&D is up 14% in real terms since 1997. The recent EEF survey showed ¾ of companies increased their expenditure on Innovation in the past three years. Not many other sectors can say that.
With manufacturing changing so fundamentally, government support for it is changing too, and we are currently reviewing the Manufacturing Strategy to ensure that it continues to address your needs. We want to build on the success of the Manufacturing Advisory Service – sponsors of tonight’s overall award. In my visits to regions I have found it one of the most popular services Government funds. It has helped thousands of companies to generate added value of over £540 million to date.
The National Skills Academy for Manufacturing will provide focused skills development for Manufacturers. We have increased investment in leadership and management skills in SMEs to £30M a year. But in the Manufacturing Review we are very much focused on further simplifying skills provision and to make it much more responsive to your needs.
I would also like the Review to help redefine the sector in the public eye and to raise its profile. Changing perception about Manufacturing would of course make us feel good about ourselves. But actually it is really important because we need to attract more young people into the sector and into Engineering. And I think there is an opportunity to do that because of climate change. We all know the idealism of teenagers about dealing with emissions and climate change. So what should we say to a teenager who wants to save the planet? Become an Engineer. Not a Lawyer, Journalist, Campaigner, Banker or even Politician. BUT AN ENGINEER.
Because we know just as Britain drove a revolution around the world with our development of steam and iron technologies, UK Manufacturing can lead the world in the transition to a low carbon future. Whether it is in hybrid and electric drivetrain development or in the Nuclear Supply Chain. As the Prime Minister said this morning at our Low Carbon Summit, “As Britain was to the age of steam, California was to the age of silicon, so in the clean energy age I want Britain again to be a beacon of innovation and wealth creation.”
I know some of you are facing an uncomfortable time with sudden rises in global oil and material prices creating pressures on margins, weakening consumer confidence and perhaps issues around access to credit. But it is important not to talk ourselves into thinking that it is all doom and gloom. We are well placed to weather the storm, especially compared to previous times and to most of our competitors. Employment levels are high. In the Corporate Sector you have recorded a surplus in excess of 2% of GDP. Corporate profitability is high. Corporate debt is relatively low – with the overwhelming majority of investment funded from retained profits. Indeed, according to the last global projections the IMF published, the UK is set to be the fastest-growing economy in the G7 in 2008 albeit at a slower rate.
Please do not mistake this for complacency. It is going to be tough. The Prime Minister and every member of government has committed as our highest priority in the coming year, action on the economy. We will bring forward measures to help businesses and households for the short and medium term. But looking forward, remember Britain was made for Globalisation. It plays to our strengths – we are arguably the most open and flexible major economy in the world. Our Businesses are global leaders. We have a history of free Trade, Creativity and Innovation. And we own the International Language of Business. What the finalists tonight prove is that we can make this Britain’s century because innovation is the heart of our competitiveness and success. I congratulate you for having the drive and determination and ideas to reach new heights, and wish you the very best of luck in the pursuit of continued success.