Why now is the time to fight for a favourable Brexit

EEF chief executive, Terry Scuoler believes the weakened position of the post-election Tory government offers manufacturers a much better chance of fighting for a favourable Brexit and a comprehensive industrial strategy.

EEF Terry Scuoler addressing the National Manufacturing Conference 2017 at the QEII Centre, London (image courtesy of EEF).
EEF Terry Scuoler addressing the National Manufacturing Conference 2017 at the QEII Centre, London – image courtesy of EEF.

He sat down with The Manufacturer’s editorial director, Nick Peters to discuss this, and the state of UK manufacturing, as he prepares for his retirement later this year.

Terry Scuoler joined EEF as chief executive in 2010. When he leaves later this year, he’ll take with him a CBE, awarded in the Queen’s Birthday Honours for services to manufacturing, and the knowledge that he leaves the sector in decidedly better shape than when he arrived.

That was a very difficult period, the Great Recession seriously damaging the sector, as it did so many other parts of the economy.

He was something of a latecomer to manufacturing, having started his working life in the Army, before enjoying various jobs in publishing, construction and eventually as European marketing manager for Royal Ordnance, which today is part of BAE Systems.

The pinnacle of his career pre-EEF came in 1999 when he became managing director of Ferranti Technologies, which had suffered years of decline. He led a management buy-in and went on to reverse the troubled company’s fortunes, leading to a period of high growth and profit.

As well as leading EEF, Terry sits on the board of the University of Sheffield Advanced Manufacturing Institute (AMI). He is also chair of the Council of European Employers of the Metal, Engineering and Technology-based Industries (CEEMET), representing some 200,000 businesses and 35 million employees across Europe.

This article first appeared in the July/August issue of The Manufacturer magazine. To subscribe, please click here.

How would you assess the health of UK manufacturing as you leave it, compared with when you came to EEF seven years ago? 

Terry Scuoler: Clearly, we are in a better position than we were seven years ago. Manufacturing in the spring of 2010 was some 15% below the output levels that we’d seen in April two years earlier. One could say that that progress is in danger of being reversed by Brexit. However, if you look at our export performance and some other indicators, then there has undoubtedly been steady progress over the last seven years, but one could ask, “Has it been dynamic enough?”

The majority of CIOs in the UK (94%) said that Brexit has impacted their IT decision-making.
“Uncertainty is a fact of life. Brexit now is a fact of life. We’re going to deliver Brexit, so let’s make sure it’s done as sensibly and smoothly as possible – but let’s get on with it.”

You mentioned Brexit. It has sent shock waves through the political establishment, and we now have a huge question mark over what kind of Brexit it is going to be.

Manufacturers need to know with certainty what’s going to happen, yet we have more uncertainty piled on uncertainty. This can’t be healthy for UK manufacturing.

Uncertainty is bad for business and bad for investment, but I know this manufacturing community pretty well. I have to say to my colleagues in manufacturing, “Ladies and gentlemen, if it’s certainty you’re looking for in this world, then wake up and smell the coffee.”

Uncertainty is a fact of life. Brexit now is a fact of life. We’re going to deliver Brexit, so let’s make sure it’s done as sensibly and smoothly as possible – but let’s get on with it.

While all this is going on, we have a minority Conservative government, which has put in motion a consultation process leading to a white paper on industrial strategy later this summer.

Are you confident that process is still going to go forward, because there’s an awful lot of work being done in the background by Jürgen Maier and the Industrial Digitalisation Review. Do you believe that the industrial strategy will actually see the light of day?

This is a very, very good question. From the morning of 9 June, the dynamic has entirely changed and I think that I and many other manufacturers and business leaders now want a period of stability from this government.

The last thing this country needs is another election. Let us get on with the day job of driving the economy, driving business forward. So what I would like to see, with due consultation, is the white paper popping out of the system and then getting on with delivering significant elements of its 10 strategy pillars.

The industrial strategy will lead to a greater degree of government intervention in industry and the economy. The fact is we need it because we are significantly under invested in British manufacturing compared with our G7 comrades. We’ve got an awful lot of ground to make up if we’re to have any chance of succeeding post-Brexit.

 I have to agree with you; our levels of investment in research and development and innovation do not compare favourably with rival nations. Not just in the developing world, which one could partially excuse in terms of the South Koreas and Singapores, but equally our neighbouring EU partners across the Channel.

That is something we must resolve. I sincerely hope the industrial strategy can deliver more direct funding for R&D innovation, and indeed more indirect funding or support into encouraging the private sector to invest more in itself.

UK Advanced Manufacturers Budget Cash Finance Investment Money Coins Working Capital GDP Figures
“Our levels of investment in research and development and innovation do not compare favourably with rival nations.”

So yes, whether it be through innovation, or through support to productivity, we’re looking for key elements of that industrial strategy to be supportive, without being unduly interventionist. That is an important balance which needs to be struck.

There is clearly a link between businessmen and women’s perception of what government is doing for them, or rather with them, and their proclivity to invest. If I may quote a famous German banker, who once said, “If a nation’s businessmen and women have confidence in its government, it will have confidence in itself.”

Now I accept that – up to a point. But equally, I have to look at my fellow manufacturers and ask if a Dyson would be prevented from doing what he’s doing and creating billions of pounds worth of productivity and turnover, regardless of what government was doing?

I do have to push back against my fellow manufacturers’ caution and say, “Come on. We need to manage risk. We need to take risk. We do need to invest.” Government is there as a facilitator. It is not there as a deliverer.

In terms of investment, I wouldn’t blame manufacturers for the under investment. We live in an economy, which is very heavily biased towards financial services, and manufacturing is barely given a thought by society as a whole.

We, inside it, know that it’s very, very vibrant, but the fact is it doesn’t get the credit for being so, and perhaps that’s why, in terms of finance, it just doesn’t receive the investment it requires.

 I think it’s fair to say that as a nation we did lose our way. In the 1970s, 80s, and probably even into the early 90s, we undoubtedly took our eye off the ball and thought that services, including financial services at their height, were a massive revenue generator of the future. I think the Great Recession, the tragic recession of seven or eight years ago, has changed opinion.

To be fair, it certainly changed government opinion. I take the view that a nation that makes things, a nation that exports things, not only makes money from it, but builds self esteem. A nation that exports and makes things feels better about itself. Have we got the message across to the government and the wider public? Certainly to government, we’re seeing some response there. But does the wider public want their young boys and girls to go into manufacturing and engineering as a career? I still think there’s work to be done.

Is it EEF’s role to get that message across, and to the extent that it hasn’t – at least to what we would regard as the optimal level – is it down to EEF that it hasn’t worked?

We clearly must be part of this and we must do more. I know your challenge to us is not one of failure, but have we done enough here? My goodness, I hope we are making a difference. We train 1,000 men and women a year in our technology training centre, we push government hard, but let us be clear… there’s not enough being done by all of us.

Skills Apprenticeships Apprenticeship Apprentices Workers Manufacturing Stock Image
“We must get young men and women into training. And of course, not just the young, but also older adults – help them understand that they can retrain and can have careers well beyond what they would currently regard as approaching retirement age.”

Manufacturing companies are clearly part of the challenge, but I think it’s also schools, parents, those organisations that support young people at the point when they must make choices.

So in answer to your question, I can only acknowledge there’s a lot more to be done, but equally when some progress is made, let us celebrate it.

Anyone who works in manufacturing would understand that one organisation in and of itself can’t take responsibility for all that. Perhaps our problem is generational.

Today’s schoolchildren’s grandparents were laid off in the 70s and 80s, and their children never even got into manufacturing, so the only attitude they have is one that was handed down by their parents. We have two generations of misunderstanding to overcome and that perhaps calls for a national campaign.

Absolutely right. We must recognise that you go can to parts of the UK where, for example in Middlesbrough, up until a generation ago, a half generation ago, ICI employed 30,000 high-skilled, well-paid people on Teesside. Some of those communities have suffered badly and they need encouragement for daughters and sons to go into the sector.

Would you encourage your successor to run with this national campaign?

Absolutely. You picked up on the issue of skills, which is critical. We must get young men and women into training. And of course, not just the young, but also older adults – help them understand that they can retrain and can have careers well beyond what they would currently regard as approaching retirement age.

The other thing you mentioned is this concept of investing, taking calculated risk, which is what I did at Ferranti. You have to take calculated risks. You have to put your money where your mouth is and if you do, then as a so-called entrepreneur, you deserve to be rewarded sensibly and fairly and supported by government.

That tells me that you’re looking forward to a country, to an economy, to a manufacturing sector where all the bits and pieces ultimately fall into line and we get an efficient partnership between government and industry. I have to say that at the moment it doesn’t look very hopeful.

Manufacturers - Prime Minister Theresa May will use her first regional Cabinet meeting to launch a modern Industrial Strategy.
“If you look back over the last six months and at the content of the manifesto, then some of the government’s messaging was – one could use strong language here – unhelpful.”

Well, we enjoy significant, enormous engagement with the business secretary and his team. However, I do fear that while this Conservative government is pro-business, if you look back over the last six months and at the content of the manifesto, then some of the government’s messaging was – one could use strong language here – unhelpful. That needs to be rebooted.

We have to work with government. As a result of the election, we in business, we in industry are emboldened. We are emboldened to push for what, in terms of industrial strategy and Brexit, suits the British economy and British business.

Let me just clarify that – emboldened by the fact that the election did not go the way that Theresa May anticipated?

Yes. If there had been a very strong, Conservative majority for Theresa May then I think the prospect of a hard, potentially cliff-edge Brexit would have been more real. I think there’s now an opportunity with this government for a less ideologically driven Brexit agenda and I think that will be good for business.

In tandem with a positive, well-thought-out industrial strategy?

Absolutely. It is infrastructure, the courage to drive not just big infrastructure projects, which I support, like Heathrow, Crossrail2 and HS2, but also smaller roads, whether it be ‘A’ roads, or links to airports, whether it be seaports, and so on. Innovation we’ve touched on. Skills we’ve touched on. Perhaps one that we may need to spend a few moments on is, of course, energy policy, which, as you know has been lacking.

If you talk to anybody in this country’s steel industry they would say, “How can we be competitive when we have an energy policy that makes our prices higher than our competitors?”

Absolutely true. Some of our businesses, particularly steel and other energy-intensive users and businesses are seriously disadvantaged here. They are disadvantaged through government policy. I look at the drive to clean up our atmosphere with a significant passion. On the other hand, I look at the way we are closing down coal-fired power stations to a rigorous EU driven schedule, and worry that we’re not bringing on new sources of energy in line with that. Clearly, something is badly awry.

Does that mean that you would support the drive for fracking, as detailed in the Conservative manifesto? It’s unclear whether it will be policy going forward.

Fracking is clearly is an emotive issue, but yes, given strict environmental controls, I and the EEF strongly support fracking. Let us recognise, however, that is only likely to deliver 5 – 10% of our future energy needs based on the current geological understanding of those reserves.