Andrew Adonis on the need for a new industrial strategy
I don’t think there is much dispute that Britain’s industrial base is too weak and too narrow. If that weren’t the case we probably wouldn’t be in a double dip recession. And we certainly wouldn’t be in a crisis with 2.6m unemployed, youth unemployment of more than 1 million, and national income still significantly lower than before the 2008 crash. It is taking us longer to get out of this recession even than it did to get out of Great Depression of the 1930s.
Without a stronger industrial base, we face a bleak future. Until recently, the words ‘industrial strategy’ were unmentionable in polite society; regarded as a hangover – in all senses – from the disastrous 1970s and British Leyland. No longer.
What will it take? Here are four vignettes.
1. Yesterday, I went out on a boat to see the huge new Statoil wind far off the Norfolk coast at Sheringham Shoal. I was amazed at the size and scale of the turbines: 88 of them, across a huge stretch of sea, each rotor 350 feet in diameter, generating enough electricity for 220,000 homes between them. This is only the beginning: the plan for nearby Dogger Bank is for 3,000 of these giant turbines, construction starting in 2015 if the finance can be put together by the development consortium.
This is green energy in action. By luck of geography, we have a greater opportunity to develop it than any European nation besides Germany and Denmark. It is also a huge growing industry in construction, design and maintenance. Yet in industrial terms we are seriously behind the curve.
Barely a fifth of the construction and assembly work for Sheringham Shoal is done by companies located in Britain. The turbines are made by Siemens and imported: and the foundations, the offshore cables, and a good deal of the work installing the turbines is done by overseas companies with little or no physical presence in the UK.
Infrastructure is another weakness; in particular the absence of superfast broadband on the Norfolk coast and terrible mobile phone reception. As for the huge Dogger Bank investment, uncertainty over long-term policy for renewable energy is a big issue. So, we are in the midst of a green energy revolution. Yet new jobs and investment will be delayed, and/or go abroad, unless we get our act together. This needs to start, crucially, by ensuring that Siemens build their proposed £210m wind turbine factory in Hull, whose fate is now uncertain because of government prevarication on wind energy.
2. Last week I visited Airbus at Filton near Bristol, part of the pan-European operation which has made Airbus so brilliant a rival to Boeing with its A320s, 330s, the soon-to-be 350s and the giant 380s. As well as its success in China, Airbus has taken the competition directly to the US.
Airbus itself is a fruit of industrial policy which dared not speak its name in the 1980s, when state loans made possible the A320, investment which has been repaid many times over. Similar state industrial policy is now equally imperative in decisions surrounding the proposed BAE/EADS merger to create a military equivalent of Airbus. The government can’t just leave this to the market. It is the market in this case.
We discussed all this at Filton. But just as pressing to Airbus were their skills requirements. Last year the company had 1,500 applicants for 86 apprenticeships. Yet despite this number, they couldn’t recruit enough school-leavers with the required Bs in A level maths and physics.
3. It was the same story when I visited Jaguar Land Rover’s state-or-the-art facility at Gaydon near Warwick. JLR benefits from a deep partnership with the University of Warwick, which my noble friend Lord Battacharya has done so much to forge over so many years. But again, real concerns over skill levels: in particular, too small a pool of engineering graduates from which to recruit. Another key issue for JLR is its supply chain, too little of which is local or even British.
The Society of Motor Manufacturers and Traders published a devastating report in June specifying how the growth of supply chain companies in Britain was being constrained by access to capital and lack of sectoral and regional expertise on the part of the banks.
4. My experience as Transport Secretary in the last government in awarding contracts for new trains.
21st century Britain – amazingly – no longer has a domestically owned rail manufacturer. There is only one international company which even makes trains in Britain. So as Transport Secretary I decided to have an industrial policy by design in respect of the £4.5bn contract to supply the successor trains to the Intercity 125.
This is what we did: Hitachi, the most experienced high-speed train manufacturer in the world, now onto the 7th series of Japanese bullet trains, won the contract and agreed as part of the deal to build a factory in Newton Aycliffe in County Durham – not far from Nissan, another great Japanese inward investor in transport manufacturing. The present government stuck with the contract, the factory is being built with more than 700 new jobs.
I had hoped that this would be the beginning of a coherent industrial strategy to build up domestic rail manufacturing. But alas, the present government awarded the next rail contract – for the new Thameslink trains – to Siemens without securing UK manufacturing. This was serious negligence. If Siemens can build a wind turbine factory in Hull, it ought not to have been beyond the wit and ingenuity of ministers to have secured a factory in return for the £1.4bn Thameslink order.
I conclude this. The fundamental planks of a modern industrial strategy are skills, technology, innovation, procurement, infrastructure, finance, and supply chains. We need a strong and dynamic private sector aided by a strong and dynamic state in all these areas. The state needs to act strategically, not tactically; overtly not covertly. We have got to end the negligence of the past and get real about building an industrial base capable of delivering the jobs and companies Britain needs for the future.
Lord Andrew Adonis is a former Head of the Downing Street Policy Unit and a backbench Labour Peer
Published 9th October 2012