My Lords, ladies and gentlemen, good evening,
It is a pleasure to welcome you all here tonight and to introduce our keynote speaker, the Rt. Hon Alastair Darling MP, Chancellor of the Exchequer. But before I invite the Chancellor to speak I would like to say a few words about the health of manufacturing in the UK and some of the issues we face.
Now I’m not sure whether it’s my age, but it seems to me that the pace of change just keeps getting faster. This is certainly true for manufacturing, which operates in a constantly changing environment, because of consumer trends, because of new technologies and ever increasing competition.
The good news is that 2007 was another successful year for our sector, with EEF surveys showing some of the best conditions in ten years. This solid performance has come despite recent economic worries. And while the economic outlook remains uncertain, we expect manufacturing to continue growing in the year ahead.
This resilience reflects the many, sometimes painful changes that UK manufacturing has been through. Companies have increased their productivity, developed specialist markets and focused on innovation, design and services. Today they are much better equipped to handle whatever globalisation throws at them. This doesn’t mean we can afford to be complacent, new challenges still have to be faced every day.
Global challenges
At this point it is usual to talk about China and India. But there are actually lots of other challengers out there, like Thailand, Indonesia or Vietnam, the latter now rated by PWC as the most attractive destination for manufacturing investment.
And there’s fierce competition on our own doorstep with Central and Eastern Europe, for example, now accounting for more than half of Europe’s electronic manufacturing services. These countries are also a hub for automotive manufacturing. By 2012 it’s estimated that Slovakia will be producing more cars per capita than any other country in the world.
And China? Well China continues to grow apace and is increasingly adopting strategies aimed at climbing up the value chain. Such developments take time to implement and of course bring with them much greater affluence for the people of the country. This will give UK companies some breathing space, but more importantly is creating attractive new markets. Naturally this hasn’t escaped the attention of our competitors though, so we have to keep on adapting.
Policy-makers, meanwhile, need to provide us with an economic framework within which we can increase our competitiveness. And here I would like to pick out three specific areas where change is needed.
The skills challenge
First, skills. If the UK is to compete with high tech, high value-added goods and services it is clear that we need a skilled workforce. More needs to be done to promote and teach the key subjects of science, technology, engineering and maths if we are to increase the flow of skilled young people into industry. They need better careers advice, so that taking a vocational course, or joining an apprentice scheme, is not seen as a less valued career path. Business, meanwhile, must work with government to implement the Leitch Review and create a truly demand-led skills system which meets the needs of employers and employees.
Business Tax
The second area is tax. Over the last decade, the UK has slipped behind the average of OECD and even EU countries in tax competitiveness. And worse, constant changes to taxation rates, rules and allowances in the UK, have created the impression that business taxation lacks consistency and reliability. This was illustrated vividly with the changes to Capital Gains Tax that were announced in the pre-budget report. Abandoning the distinction between business and non-business assets sent out a signal that government no longer valued risk takers. The limited recent concessions you have made Chancellor are welcome. But this knee jerk decision has damaged the confidence of business in our government. This won’t easily be regained, but this must now be a top priority for the government.
Climate Change
The third area I have to mention is climate change. Manufacturing is often caricatured as the villain of global warming, but most companies are actively cutting their environmental footprint. It will also be our sector that delivers many of the innovative solutions to the problem. Legislation will be needed to help the UK meet its environmental targets, but we must avoid making the UK and EU less attractive places in which to invest, driving out production to parts of the world that are often much less committed to cutting emissions. That is why, on EU emissions trading for example, we believe that special cases must be made for sectors, like steel, which are unable to pass through increased costs.
Measures to cut emissions must go hand-in-hand with secure, sustainable and competitively priced energy supplies. The government showed courage in its recent decision on nuclear power. We hope that at the European level, other Member States show similar courage to ensure genuine liberalisation of the EU’s energy market.
It’s in these three areas that government policy is most critical to the success of manufacturing. But this wouldn’t be a business dinner if I didn’t have a go at another favourite bugbear of ours, excessive regulation. Here progress has been made with targets set for government departments to simplify legislation, but we still need to see concrete results that bring real savings for business.
Equally there is no point taking these steps if at the same time we saddle companies with new burdens elsewhere. In particular, the government must resist any deal on the Agency Worker and Working Time directives which damages the UK’s hard won labour market flexibility. And the government must also avoid heaping more home-made employment regulation burdens on business too.
The changing environment for manufacturing presents a challenge for EEF too. In addition to our job of representing manufacturing, we are one of the UK’s largest providers of business services and to strengthen both activities we have embarked on the biggest internal reorganisation in our history. This will see our 9 separate Associations in England and Wales merge into a single national organisation. We are calling this the ‘OneEEF’ programme.
This unified structure will allow us to devote resources to members more effectively and provide a consistent offering across the country while still retaining our regional focus. The final decision on this restructuring depends on the approval of our members; a vote is currently taking place, and I urge all members to support what will be an extremely positive development for EEF.
Before I introduce our speaker I would like to conclude by saying that our manufacturers are ready for the challenges they face. People say an optimist is someone who thinks the glass is half full and a pessimist is someone who thinks the same glass is half empty. An engineer, however, wonders how he can design a better glass in the future.
For my part, I’m optimistic about the robustness of our sector and its potential for the future but the importance of a successful partnership between business and government cannot be overemphasised.