A ten point plan to revive British manufacturing
The wealth, independence, and security of our country are all intimately linked with the health of our manufacturing industry. In towns like Birkenhead, and regions like Merseyside, a healthy manufacturing industry brings with it opportunities for people to gain new skills, get and keep a job, earn good wages, and develop and make the innovative new products and services that our country needs to pay its way in the world and to defend itself.
However, for far too many people in our town, and across our region, such opportunities have been restricted in recent decades – nationally, since 1979, four million jobs have been lost in manufacturing. We desperately need a new deal from the government to support manufacturing and increase the numbers of jobs within this vital industry.
I have submitted to the Prime Minister a ten-point plan which has as its objective a turbocharging of British industry and the creation of at least a million new jobs in manufacturing over the next decade. Each of the proposals stems from my recent discussions and correspondence with manufacturing firms in and around Birkenhead, on the policies that they believe could achieve this objective, as well as what the available evidence tells us about an effective pro-manufacturing policy.
As a major purchaser of goods and services, the Government has a leading role to play. I have asked the Prime Minister to commit to a ‘Buy British’ preference after Brexit, to apply to all new ships, trains, and other manufactured goods being procured by central and local government.
The ability of shipyards like Cammell Laird to move seamlessly between naval and commercial shipbuilding is crucial to the avoidance of ‘boom and bust’ patterns in employment. This, in turn, is vital to the economic fortunes of towns like Birkenhead which rely heavily on the success of our shipyards. We therefore need this broader economic benefit, which is generated by commercial shipyards, to form a central part of the tendering process for defence orders.
If one were to combine all of our country’s publicly owned ships – such as Mersey Ferries, CalMac, NorthLink Ferries, and Trinity House – which together account for more than 60 vessels, and add them to the current and future Royal Navy fleet, there would be enough overall demand to create a renaissance in British shipbuilding. But we need the rules around procurement to reflect this major opportunity.
The health of our manufacturing industry depends, in no small part, on its ability to research and develop innovative new products. According to the House of Commons Library, our country’s total expenditure on research and development has stayed relatively constant, at between 1.5 per cent and 1.7 per cent of GDP, since 2000. I have asked the Prime Minister to make a commitment to raise this expenditure to 2 per cent of GDP within a decade, which would take us above the EU average of 1.9 per cent.
Another indicator of how successfully we are innovating is the number of patents granted for new products and services. Since 2011, the number of patents granted in this country has ranged from 4,986 to 7,173. Again I have asked the Prime Minister to move us gradually towards 10,000 patents being granted each year, and for this target to be linked to the increase in research and development expenditure.
In Merseyside, our manufacturers’ attempts to research and develop innovative new products have been supported by an agglomeration with Liverpool’s universities, through the LCR 4.0 initiative. We need a guarantee of longer term funding for this initiative and, in return, a requirement for it to offer all manufacturing firms in the region support from, and formal contact with, one of our university departments which is best placed to meet their needs (ranging from marketing to engineering, for example).
There is much untapped potential in Merseyside for our small and medium sized firms, in particular, to export their products to overseas markets. Success on this front would, of course, expand the number of jobs available within those firms. I have therefore proposed a new Exporters’ Tax Credit to incentivise small and medium sized manufacturers to increase their net exports.
If they are to be able to expand their operations, and offer more high-waged jobs, it is vital for manufacturing firms to have access to a skilled workforce. However, there is huge concern in Birkenhead around the effectiveness and availability of the Apprenticeship Levy. It runs the risk of being viewed as a tax on businesses, rather than a dedicated source of funds with which to train or retrain people. We need the Government to build greater flexibility into the Apprenticeship Levy by enabling firms to pass funding down their supply chains, pool funds with other local employers or nationally as an industry, and to fund employee wages during training. Similarly, the rules should be rewritten so that the Levy enables any worker whose job is at risk to retrain into a different role that is less at risk, with their current or future employer.
In addition to this reform, I fully support the Onward thinktank’s proposal for a Retrainers’ Tax Credit to help workers with the fewest recognised skills gain new formal qualifications and reduce the overall cost to employers of having staff on training courses.
Poor physical infrastructure raises the costs of production and limits export opportunities, thereby hampering manufacturers’ ability to grow and create more jobs. Interconnectivity is vital if our small and medium sized manufacturers, in particular, are to expand and prosper. In Merseyside, we are hamstrung by inadequate road and rail connections. As one local firm put it to me, ‘at its most basic level to travel from Liverpool to Manchester, Leeds, Hull, or Newcastle by road or rail is challenging and unwieldy to say the least’. We need investment as a matter of urgency in High Speed Rail which links Merseyside with Tyneside, via Manchester, Leeds, and Hull.
The current system of business rates, in some cases, penalises firms for investing in new factories or equipment. Taking the steel industry as an example, sites in this country pay between five and ten times more than their counterparts elsewhere in Europe. Counterintuitively, the more they invest to enhance and improve facilities, the heavier the penalty they must pay. If sectors such as cars, construction, aerospace and fabricated metals are to thrive in this country, they will need to be backed up by a productive steel industry.
We therefore require a package of incentives for firms, including those in the steel industry, to make continuous investments in their factories and equipment. In the short term, this would entail removing plant and machinery from business rates and reintroducing tax relief on industrial buildings. In the longer term, I believe there is a valid case for replacing business rates with a levy that would tax only the land value of a commercial site, not the value of buildings.
Where industrial policies have been most successful overseas, they have entailed a statutory requirement for all manufacturers to join chambers of commerce. In turn, each chamber is given statutory powers and responsibilities to guarantee minimum service levels to each manufacturer.
I have asked the Prime Minister to embrace this reform and, in doing so, to ensure the minimum service levels incorporate vocational training, information and guidance, marketing, product development, technology transfer, law, energy efficiency, exporting, and co-operative purchasing of high-cost goods and services. The Government should ensure also that, as one of their statutory responsibilities, chambers must involve and consult with trade unions on the shape and development of these services.
One institution that already exists in this country is the Industrial Policy Council. To help guide the public and political debate on the health of our manufacturing industry, I have asked the Government to give the Council a duty to publish an annual audit of British manufacturing, with a series of recommendations for strengthening industrial policy and creating more jobs. I hope this reform would bring an element of policy co-ordination, given that increasing support for research and development, alone, will not lead to more jobs without simultaneous improvements to manufacturers’ access to finance, for example. Moreover, when each of the Sector Deals comes up for renewal, the Government should consider including job creation targets for each sector within the terms of renegotiation.
Access to finance
We need the right corporate governance and financing structures to make long-term investments in manufacturing both possible and attractive. A healthy manufacturing industry is only likely to be possible if it is backed by patient capital and can access the finance it needs to expand. I have asked the Prime Minister to examine the case for a tax reduction on dividends from longer term shareholding in manufacturing firms, stronger voting rights for shareholders who are longer-term investors, and a requirement for banks to lend more than a certain proportion of their money to productive manufacturers.
One existing policy that is proven to be effective, particularly in helping manufacturers create more jobs, is the provision of credit or loan guarantees. We need the Government to commit to an increase in the number of manufacturers supported by such guarantees. Similarly, I hope the Government will consider extending these guarantees, to facilitate the production of electric cars, to the entire car industry. It needs to consider also raising the ceiling on allowable costs under the Annual Investment Allowance, for investment in factories or equipment based or used in deprived parts of the country.
Heavy industry is particularly susceptible to high energy costs. This country’s electricity prices for large industrial energy users are higher than those in any other EU country. Steel producers here, for example, pay 51 per cent more than German producers and 110 per cent more than French ones, even after the compensation and exemption schemes already provided by the Government.
We need the Government to bring electricity prices for heavy industry in this country into line with those borne in other European countries, perhaps by requiring energy companies to offer more competitive rates to manufacturers which guarantee certain levels of employment in deprived areas. Separately, I am pushing the Government to outline the steps being taken to help manufacturers research and develop carbon capture and storage technologies, as part of a quick transition to a low- or zero-carbon economy. I am also asking what moves the Prime Minister is making to increase employment in the manufacturing of goods that improve energy efficiency and of goods used to produce and store renewable energy.
Over the past year, I have been making the case for free ports to be established after Brexit as a means of attracting manufacturing jobs to deprived areas. Now the Prime Minister has adopted this policy, there is much enthusiasm in Merseyside for our region to be included within his initial raft of ten new free ports.
I will shortly be submitting to the Treasury a proposal which would see our region using a new free port to become a global enterprise and trade zone that delivers economic benefits for the whole of the North West of England.