"Days when financial services dictated how economy is run over" Thurso

12.00.00am GMT Tue 19th Jan 2010

Local MP reiterated his conviction today that a rebalanced economy must have manufacturing at its very heart - both in an outside of recession.

Speaking in a Westminster Hall debate on the future of manufacturing in this country John, who is Business spokesman for the Liberal Democrats, identified the availability of finance, the promotion of skills and the ability to commercialise on innovation as the three key engines of our manufacturing base in the future

Unlocking finance for industry was particularly important to those small and medium size industries which are the core of our manufacturing base. John has been strongly advocating a number of schemes over the last year to help unlock that finance. From Government pressure on the larger banks to the establishment of Regional Stock Exchanges and private local enterprise funds.

In his speech John mentioned Kirker Europe as an example of a successful local exporter in Invergordon. He also mentioned the "amazing potential of Nigg" on the Cromarty Firth, along with the warning that renewable platforms could end up being made in Rotterdam instead of in the UK if the project did not get proper support.

The full text of John's speech can be found below:

I congratulate Mr. Mitchell on securing the debate. Before I respond to him, however, I shall pick up on a point made by Mr. Hoyle about green industries, on which he was absolutely right. There is amazing potential in my part of the world for offshore wind and marine tidal energy, but there is a big danger that all the platforms will be made in Rotterdam, instead of in Nigg and all our constituencies, using the steel that we want in this country. If there is one thing that I have urged the Government to do-both the Department of Energy and Climate Change and BIS-it is to look at supply chain issues and ensure that we are capable of fulfilling what is needed.

Having made that personal plea on behalf of my constituency, I will move back to the speech made by the hon. Member for Great Grimsby. He made two overriding points in his opening remarks. The first was that manufacturing is strategic, and that we forget the strategic importance of manufacturing to UK industry at our peril. His second point was about the need to rebalance the economy away from such dependence on financial services. Interestingly, I came here from a sitting of the Treasury Committee, where Professor Goodhart and Professor Kay were having a solid argument about how that should be done. Everybody is agreed, however, that the days when the financial services industry dictated how the economy of the country should be run are over. We need a financial services industry, but it must be the servant of commerce and industry, not the master of speculation. The hon. Gentleman was right to raise that issue.

There has been an interesting debate about the concept of the exchange rate, and there is no doubt that the exchange rate has been a tremendous boost to a number of manufacturers. I have previously cited in this Chamber a company in Invergordon called Kirker Europe, which makes nail varnish for most of Europe. Its biggest competitors are in China, but during this period of financial uncertainty, most of its customers have returned. They are ordering not simply on price grounds, but because of security of supply and the fact that Kirker Europe can deliver anywhere in Europe within three days, whereas goods would take five or six weeks to come from China. Therefore, in the debate about cost in Britain, it is worth remembering that there is more to value than simply cost. The United Kingdom offers many things in its manufacturing industries that make up components of that value, and although cost is important, we should not talk down all the other factors that we have going for us.

This is the fourth debate on manufacturing in which I have spoken over as many months, and it is fascinating to note that each Member who secures such a debate addresses the subject from a slightly different angle. The central thrust is the importance of manufacturing and what we need to do about it, but many hon. Members have come at that from different directions. It is right to continue to raise the subject, however, as it is one of the most critical issues for our future. One hon. Member-I am not quite sure who-said that perhaps by having such debates on a repeated basis, we will get across to those concerned just how important the issue is.

I attended a business breakfast in the House last week that was chaired by Peter Luff, who chairs the Business, Innovation and Skills Committee. It was the launch of RBS's £1 billion loan fund for manufacturing. One of the most important points raised at the meeting was that we always talk a great deal about manufacturing when there is a recession, but forget about it as soon as the recession is over. If there is one lesson that I would like whoever next sits behind the desk of the "Lord High Great Grand-everything" to learn, it is that we should not forget. We need to learn that lesson this time round in a big way.

The hon. Member for Great Grimsby said that RBS was the bank involved with the bed manufacturer that he mentioned. RBS has launched a fund of £1 billion of secure money for manufacturing, and it has asked for MPs from all parties to let it know of companies that the money could help-I am dutifully passing on the message.

The other point made at the breakfast was that although we are good at talking ourselves down, a great British characteristic is that we do not talk up what we do well. Let me repeat what I have said before about the importance of manufacturing. We have the sixth largest manufacturing industry in the world, which accounted for more than £150 billion in 2008. Depending on whose figures we believe, between 2.7 million and 3 million people are employed in it. There has been growth in real terms, but it is right to say that there has been a decline in relative terms, for which there are a number of reasons. I believe that manufacturing is a success story for Britain and an opportunity for the future. Anyone aspiring to be in government must recognise that opportunity and undertake to support it.

There are three key drivers that will take forward all industry, particularly the manufacturing industry. First, without a stable financial system, we will not have an economy that can grow. Getting the banking system right-I happen to be in favour of narrow banking-is an absolute prerequisite. More than that, we must learn one of the critical lessons that has come out of the financial crisis: we cannot rely nearly so much on debt as part of the finance mix. More equity must be available, but it must be available across the board.

At the top end, the listed companies have not had any great problems in restructuring their balance sheets. They have been able to go to the markets and acquire more equity, now that that is in vogue, and the analysts are not asking them to sweat those balance sheets. However, that is a much more difficult proposition for early stage companies, small and medium-sized enterprises, and regional firms. For that reason, it is important that we put mechanisms in place to allow people with individual net worth who would like to invest in companies in their area to do so. I have put forward some ideas, one of which is a local enterprise fund. That is not about Government money, but about creating a mechanism to connect the investor with the company. However, I do not have enough time to go into detail about that.

The second vital area is getting our skills base right. The last time I spoke in the House on manufacturing was on 2 December. The previous day, I had attended a reception by Engineering UK, which had put across the scale of its problem. It estimates that we will need 587,000 more engineers by 2017-roughly 80,000 a year. On the other side of the skills equation, however, we are losing 30 per cent. of our further education lecturers, because they are retiring and not being replaced, and there is a 17 per cent. drop in the number of students. That is a major problem and I would like a form of bursary support for those in engineering and science to ensure that the right number of graduates come through.

Tony Lloyd spoke about apprenticeships-I could not agree with him more. I regret the day that the hotel and catering training levy board was taken away. I argued against that closure from the day it happened, and I will carry on with that argument for as long as I can.

My last point is about innovation. We are very good at innovation in this country. We do it well in the lab and in companies-we even do it quite well in the garden shed-but what we do not do is commercialise, and we need to work to be able to get to the stage at which innovations that start in this country are commercialised in this country, rather than ending up being commercialised overseas.

It is essential that we learn the lessons of the recent past and apply them wisely for the future. The greatest lesson that we need to learn is that manufacturing is strategically important, and woe betide any Government who do not understand and support that.