Labour’s Britain: A sea change in manufacturing

Britain, long known as a nation of shopkeepers, is now better described as a nation of financial advisors, lawyers, business strategists, architects, advertising executives, and media consultants. These are the workers of the service economy which now makes up over 70 per cent of our GDP – who have helped cement the UK’s position as a nexus of global trade, finance and creative endeavour.

Yet the success of this London-dominated service sector is often not mirrored in the many corners of our country that once boasted full employment and a host of local industries making things. With new technology and increasing emphasis on controlling waste and costs, there is a growing opportunity for more production to return to domestic companies. It should be the priority of a Labour government in 2015 to correct the current imbalance, ensuring that the sectors we already excel in are strengthened, whilst overseeing a revival of our traditional manufacturing communities. The prizes on offer – good jobs across the country, community renewal, and a fairer society in which everyone plays their part – are the embodiment of Labour’s vision for opportunity for all.

This is a complex agenda, but here are three core pillars of the strategy. The first is training. For manufacturers, taking on apprentices is the surest way of securing productive employees for the long term. However, the current government’s system is not performing as it should. Too many apprenticeships are simply re-badged training programmes which lack the necessary rigour to justify the public subsidy. Ministers keen to show that they are increasing apprenticeships are allowing far too many older people to join the schemes when they would often be better suited to more skilled training elsewhere. A Labour government would re-focus the system on school leavers only, and would design schemes with employers to give the title ‘apprentice’ the same weight it has in Germany; that of a benchmark of technical skill and competence. At the same time, a strategy should be developed that significantly strengthens in-work and part time college courses to enhance the skills of those already in work.

We should also address gender imbalance across apprenticeship sectors by targeting job stereotyping, which currently consigns girls to lower-paid career paths with fewer opportunities. A gradual devolution of training and skills spending from Whitehall to councils and local enterprise partnerships should be pursued, so that the needs of local manufacturers can influence the funding of apprenticeship places and training courses. This would help avoid the wasteful misallocation of funding which last year saw 94,000 people graduate from hair and beauty courses when only 18,000 job openings existed in this area nationwide, whilst 123,000 people trained for a job in construction when over 275,000 jobs were on offer in that sector. When many manufacturers are struggling to find employees to replace ageing workers with specific skillsets, it makes no sense to maintain the centralised funding model which has created these mismatches.

The second pillar concerns access to finance. Raising capital is key to helping manufacturers grow, from export finance to loans for investment in new plant and machinery. The squeeze in lending from high street banks following the financial crisis has shown little sign of relenting, yet government help for manufactures has failed to compensate for the shortfall, leading to viable businesses failing. The solution is not adding to the array of funding schemes dispensed by the Department of Business, Innovation and Skills, nor does it lie in the coalition’s Business Bank, which is effectively only a shell for the department’s existing provision. What we really need is a properly resourced British Investment Bank. Manufacturers demanding patient, long-term funding solutions, could tap into this capital via a network of regional banks, like Germany’s Sparkassen. These institutions upped their lending to Germany’s small business when the country’s larger commercial banks cut back during the financial crisis. Our manufacturers need the same level of support and local knowledge.

The third pillar concerns the importance of business networks to the success of export-focussed manufacturers. This is an area that the UK currently underperforms in. A Labour government should outline a legislative framework for chambers of commerce, with real incentives to promote membership across a variety of key sectors. We currently have 4.8 million business in the UK – roughly the same as Germany – yet only 104,000 are members of the British Chambers of Commerce, compared to 3.6 million in the German chambers. Our overseas business representation is poor, and other leading nations have far better developed structures for championing the interest of businesses trading overseas. UKTI needs to integrate better with overseas business networks and should aim to match Germany’s success at securing export customers the world over. If we are to help bring the benefits of a manufacturing economy to the UK, we must focus on exports, and that requires a sea change in the way we represent and support businesses seeking to do so.

These ideas represent only a small fraction of what a Labour government could do to revive and strengthen manufacturing in the UK. If businesses can raise capital easily, hire skilled workers and access a network of support and advice to boost exports, we will see manufacturing gain a larger share of our economy. This should be at the heart of Labour’s vision for 2015.