2012: the year when manufacturing drove policy

Posted on 7 Dec 2012

While resisting use of the word ‘watershed’, 2012 was an important year for UK manufacturing, and for Great Britain, says Will Stirling.

No review of 2012 would be complete without mentioning the London Olympic Games.

Great Britain won 65 medals, 29 of them gold – an outstanding achievement relative to our population. And Bradley Wiggins won the Tour de France, the first Brit ever to do so. It’s a shame he wasn’t riding a bike made in Nottingham and not Taiwan, but hats off to Wiggo.

Manufacturing had a mixed year with output up and down but overall flat. Employment in manufacturing rose in the first two quarters of 2012 but Europe dominated the news. Thoughts turn to a difficult 2013 in our major export market – though happily exports to non- EU markets were up 10% on the year to September. Still room for improvement, but a positive step.

Some sectors had a sticky year, but others punched above their weight. Output of electrical equipment was up by 21%; metal products up 23%; motor vehicles up 27%; mechanical equipment up 36% and other transport, including trains, up a massive 43%.

And despite the lamenting that larger companies are “sitting on unprecedented cash piles”, manufacturers invested at a faster pace than the rest of economy. Since 2009, spending on capital equipment in non-manufacturing sectors rose 7%; in manufacturing it rose 14%.

Policy which pleases

It’s so easy to pick holes in government business policy but, in the round, there were some very important and encouraging announcements in 2012.

Vince Cable announced his Industrial Strategy in September, a framework built on five pillars: Sectors, Skills, Technologies, a Business Bank and [government] Procurement. Work within some pillars was established before the announcement – for example, the establishment of the Aerospace Growth Partnership – and more work is scheduled.

What is missing is rock-solid evidence that all parties, and departments within government, recognise the Strategy and give it their unambiguous support.

Funding for Lending was introduced early in 2012 as the latest scheme to kick-start the economy. Banks borrow from the Bank of England about one per cent cheaper than the market interbank rate, and they have to pass the savings on to borrowers. Supported by business groups like EEF, by September the scheme had signed up 13 banks to borrow cheap funds totalling £60bn.

This is short of its £80bn lending goal but nevertheless, Richard Holden, head of manufacturing at LloydsTSB, said the FLS is the reason that his loan portfolio to the manufacturing sector rose “quite significantly” in 2012.

On skills, 500,000 people started an apprenticeship in the 2011-2012 year – more than the number who became undergraduates. There were two reviews, the Holt Review and the Richard Review, a BIS Select Committee report and several business group surveys on apprenticeships.

The conclusion? Apprenticeship standards should rise, employers should have more control of the funding and the composition of their own apprenticeships, and they should last for one year minimum. While some will say “I could have told you that”, the Richard Review proposes a useful, business-friendly means to finance them via tax credits.

The Heseltine Review in November proposed devolving power and money from Westminster to the regions. So why did you abolish the Regional Development Agencies? Some business groups warned that giving the volunteer-based Local Enterprise Partnership board members a load more money and responsibility in areas like skills funding might not be so prudent. But the principle of devolving power to the regions will be popular with manufacturers.

The Technology Strategy Board launched a string of competitions to stimulate and help fund company projects in fields like supply chain, low carbon vehicles, composites, marine R&D and the digital economy. When it comes to funding, some people feel that manufacturing projects are at a disadvantage to science research; the science budget is ringfenced, and the Research Councils are well capitalised. In 2013 with growth so flat, there will be calls to increase and ringfence an “Engineering and Manufacturing Budget”.

Thanks to Lee Hopley at EEF for providing the economic / output data.


Visit themanufacturer.com/2012highlights for more highlights of 2012