EEF blog

Last week Rachel blogged about some of the trade-offs the government faces in the upcoming Spending Review. She argued that more government spending must be prioritised towards those areas that drive growth and boost the long-term competiveness of the UK. One of these areas is innovation.  

Innovation is vital to the long-term competitiveness of individual firms, and the UK economy as a whole 

But innovation is risky, and requires resources that companies – particularly SMEs – do not always have access to

As a result, Government must step in as an active partner

This is something that government already does, and the focus of support is right, but the level is insufficient 

Despite recent new initiatives, the level of support for innovation is low, especially when compared with support for science.

Both science and innovation require some public investment to deliver the optimal level of total investment.  But while the UK’s science base is highly successful, as an economy we have not always succeeded in capitalising its outputs. Innovation is necessary to do this. Without sufficient support for innovation, we risk an economy that is “all engine, no transmission”.

Recommendation: The TSB – and its budget – should be moved into the science ring-fence to create a protected “science and innovation” pot of approximately £5bn at current levels of funding. We would advocate a modest increase to the TSB’s budget of £43mn resource funding p.a., but at the very least the innovation budget should be protected.

Additional money for innovation should be used to strengthen the Catapult centres and increase support for SMEs:

Two of the key barriers companies face when innovating are access to facilities and expertise. Catapult centres help address this, but we have concerns that they neither have sufficient funding to keep their facilities at the cutting edge, nor to keep their research focused on innovation (rather than focusing on more commercial projects).

Recommendation: Double operational funding for the High Value Manufacturing Catapult

Almost all barriers to innovation are felt most acutely by smaller companies; as such it is important that there is sufficient support directed towards SMEs. The Smart grant successfully boosts innovation in smaller companies, but despite recent increases in budget – the grants are oversubscribed, “highly competitive”   and consequently have a low success rate of only around 20%.

Recommendation: The funding for Smart should be increased from £40mn to £50mn to make the success rate more comparable with other TSB schemes.

Universities, Catapult centres and other research institutes offer facilities and expertise and can be a vital support for innovative companies. Innovation vouchers are an effective way to increase SMEs’ access to the research base. The scheme has recently been reintroduced but it could be better aligned with other innovation support.

Recommendation: extend Innovation Vouchers to align them more closely with the technologies currently covered by Catapult centres; the budget should be increased by ½mn p.a. for each of the Catapult areas not currently covered, at a total cost of £3mn p.a.

The TSB must remain the responsible agency for innovation support

The TSB is currently the primary agency for dispensing innovation support. In general it does so successfully, despite some concerns about relatively complicated application processes. As such we have some concerns about possible changes to the innovation support landscape.

Proposals to integrate the TSB into the Business Bank risk adding an unnecessary additional layer of bureaucracy to application processes for innovation support if access to support was dependent on a generic diagnosis of needs.

The TSB is not a natural candidate for inclusion within the Business Bank. It offers different support from some of the other programmes that might be included, meaning it is not clear how companies would benefit from a unified front end.

Recommendation: The TSB should remain separate from the Business Bank

The move towards delivering innovation support through a national agency was a positive one, as it removed confusing regional support and reduced the potential for duplication of efforts – something that is particularly important given the small budget for innovation. As such, we are concerned that innovation funding could be channelled through LEPs. LEPs are likely to develop expertise that could help to shape and inform how the TSB allocates its funding, but the ultimate decision should lie with the TSB, which has oversight of national priorities.

Recommendation: Innovation support should be distributed at a national level

Future sector strategies must deliver maximum value for money

The growth partnerships and resultant sector strategies are an important component in addressing some of long-term challenges faced by UK industries. But we need to ensure the spending prioritised through sector strategies delivers maximum value money for the economy as a whole. A budget of £1.6bn has been set aside for sector strategies, but – after the release of only four out of eleven strategies – most of this has already been committed, leaving very little in the pot for the remaining strategies.

Recommendation: Decisions around sector strategies will face the same squeeze as everything else. Unless it is prepared to increase the funds available to sector strategies post 2015/16, the government should wait until all strategies have been produced to understand which proposals will garner the highest return for the economy and make some tough prioritisation decisions.

It is right that sector strategies should interact with the support the TSB offers and that some of the TSB’s competitions should be influenced by these priorities, but the strategies should not imply new constraints on the competitions the TSB runs. In order to provide flexibility for the TSB to support new technologies and supply chains that are not directly covered by sector strategies, decision-makers at the TSB must ultimately be the ones who allocate competitions.

Recommendation: The TSB must also be allowed to run its competitions independently of the government’s sector strategies

Lord Heseltine today published his review No stone unturned in pursuit of Growth. The review is a welcome recognition of some of the key issues that are holding the UK economy back from the growth that the UK needs.

• The need to improve the competitiveness of the UK as a place to do business, and
  
• The need to have a more joined-up government placing a greater focus on growth.

Lee outlined some of the aspects we thought this review needed to address in her blog yesterday, in particular the need for changes that lead to a reduction in the hurdles that companies face in successfully investing and innovating across our economy.

So what do we think?

Lord Heseltine’s review has provided some much-needed thinking on how we can create a more competitive and stronger economy.

Now the proverbial baton has now been passed to the government. The government needs to consider the proposals carefully to ensure that they offer value for money, that the proposals will not lead to unintended consequences that could adversely affect industry and how they can be made to work in practice.

Some of the review's recommendations in brief 

The review is very wide-ranging and makes 89 recommendations focusing on how the government interacts and impacts industry. Recommendations cover issues ranging from the structure of the private sector to the structure of government, the link and relationship between central and local government, as well as specific policy areas such as skills and innovation. There is too much to cover effectively in one blog so I have summarised some of the key areas.

Improving the structure of government

The review recognises the lack of ownership of the growth problem across government, with many departments not placing a sufficient focus on the extent to which their policy impacts growth. The review recommends

• Setting a clear economic strategy;
  
• Establishing a growth council chaired by the PM with the aim of driving the government's growth agenda;
  
• Establishing sector councils; and
  
• A range of recommendations aimed at strengthening the civil service.

Establishing a central group to focus on and drive growth is a positive move and in line with the recommendations we set out in EEF’s A route to Growth. Making sure the group has the teeth it needs to make a difference is important – it should focus not only on strategy but also on implementation, and how it interacts with and works across government and with other areas of government (i.e. sector councils if established) needs to be clear so that it doesn’t become just another bureaucratic step in the policy process.

Increasing control at the local level

Lord Heseltine identifies a lot of the key issues at the local government level – the need to rationalise local government and simplify its funding, the need to get better value for money from expenditure and to improve the way it engages with business. Recommendations include

• Giving LEPs the resources and authority to drive local growth and act as an effective ‘business voice’ on key issues;
  
• Consolidating ‘growth-related’ local funding (e.g. business services, houses, infrastructure, skills) into a single pot and allocating on a competitive basis over a longer time horizon; and
  
• Encouraging a local government landscape with fewer, single-tiered, authorities.

Heseltine rightly points to the need for simplification of local government. Dealing with one authority rather than several is easier for businesses. Giving LEPs the tools and funds to make a real impact on issues such as planning and transport, and the power to cut through the obstacles to growth at the local level makes sense and may well drive efficiency across areas like procurement.

Simplifying local funding and driving efficiencies by making it more competitive are good ideas. However, government needs to make sure that LEPs and local authorities are up to the task before giving them control of large pots of public money and there are areas where it should be cautious about giving them additional powers. Plus the government must not underestimate the administrative task of running and assessing a five-yearly competition for a £50bn fund.

Boosting science and innovation

Broadly speaking, the review correctly identified the problems with innovation and science: the UK spends less on R&D and innovation than many competitor nations and there are issues with the procurement of innovative goods, namely that public sector procurement can too often tend towards ‘best price’ and ‘off the shelf’ solutions rather than looking at long term value, and the impact of decisions on industry. Recommendations include

• Committing to long-term stability of science funding;
  
• Greater use of public procurement standards across government;
  
• A role for LEPs in delivering innovation policy; and
  
• Expanding the TSB’s area of responsibility.

While many of these are in line with current policy, the role of LEPs and an expanded role for TSB need to be carefully thought through to ensure the right level of resources are provided and incentives are aligned.

Improving support for businesses, including advice and support for exporting

The review identified problems with the provision of advice and support to UK businesses. It suggested access to and knowledge of the right advice and support are not helping UK performance, including the UKs export performance. The review suggests some solutions to address this issue including

• Using the Chambers of Commerce to be one-stop shop for business with easy access to business services including advice and support on exporting.
  
• Strengthen international chambers, especially in key growth markets.

The Review’s focus on support for improving access, advice and support for business services is positive. Industry will welcome the Review’s focus on support for exports which needs to be better resourced, better marketed and more accessible.

Flicking past the continuing coverage of Team GB's awesome medal tally and then the continuing coverage of the eurozone crisis in the FT, there is an interesting piece on some of the factors that have contributed to the long term success of the German Mittelstand.

Policy makers often look at this particular part of the continent and look for the qualities we should seek to emulate in the UK.  And never more so than now as we struggle to generate growth based on trade and investment that our economy needs.  So what are the secrets of the Mittlestand - here's five to get started with. 

...but has someone already let the cat out of the bag?

1. Innovate and retain a manufacturing base in your home market

We've been writing quite a bit about innovation recently.  It's key to growth, key to driving productivity gains and for a majority of UK manufacturers, it's key to meeting their strategic objectives, according to our Shape of British Industry survey. If there is no such thing as a sustainable competitive advantage in manufacturing, innovation is a vital area of investment that can keep companies ahead of the competition.  

Take a chemicals company that, in response to rising raw materials prices, responded with innovation to redesign some of its product range to minimise price increases for customers without compromising quality. 

This agility was helped by having production and innovation closely linked.  The production process can be as important when it comes to world class manufacturing.  For some manufacturers, there are clear advantages to having core manufacturing activities in the home market.  Our Global Value Chains survey showed that one in seven companies had returned some production from lower labour cost economies back to the UK because inconsistent quality, unpredictable lead times and variable costs were undermining their competitiveness.

2. It's all about services too

And it's not just product innovation that matters for UK manufacturers.  EEF's Innovation Monitor shows a steadily increasing proportion of manufacturers engaging in service innovation.  As one capital equipment manufacturer put it "it's no longer enough to sell product, you have to provide the support services that will maintain it through its life cycle". 

In addition to being a differentiator, more UK manufacturers are deriving revenue from such services, which can provide a cushion through a period of weaker demand.

3. Help train future employees

For UK manufacturers, recruiting and retaining skilled employees has been an uphill challenge for more than a decade.  With problems at multiple points in the STEM skills pipeline UK companies have become more and more active in building a talent pool for the industry.  Last year's Manufacturing Workforce survey showed that 55% of manufacturers were planning to up their investment in skills in the next 12 months and that the recruitment of new apprentices was also high on the agenda. 

Good practice can be found in the machinery sector with one company working closely with other local manufacturers to maximise the recruitment of apprentices and the benefits that brings to the community and supply chain.  Another large company has a long running relationship with local schools, offering opportunities to visit the company and supporting the delivery of the STEM curriculum.

4. Expanding into foreign markets is essential - but be careful

UK manufacturers are clearly looking beyond the domestic market and the sluggish growth prospects in Europe for other potential bright spots.  In May markets outside Europe overtook our traditional EU trading partner as the main destination for goods exports.  But even this underplays some of the significant growth rates in exports to emerging markets over the past few years - see our exporting medals table for more details. 

5. Harness networks

Collaboration happens in the UK too.  It is important for companies of all sizes when it comes to product development and forward planning.  Collaborative activity can strengthen supplier and customer relations, improve demand visibility, reduce costs and improve flexibility.    

PS When is a 2.9% month on month fall in output good news?  When the consensus was expecting a fall of 4.3%. 

The Index of Production data for June was always likely to signal a sharp drop in output, given the disruption to working patterns over the Bank Holidays.  However, the latest manufacturing figures from ONS suggest the fall was a lot less than first estimated.  So what does this tell us ... well not a great deal.  Our feedback still suggests that although confidence is fragile there is still growth to be found in overseas markets. The real question is whether July's data will confirm that output was simply displaced or whether we really have got something to worry about. 

The third of our ambitions we want the government to set out in a stronger, clearer growth strategy on Budget Day is to see more companies in the UK bringing new products and services to market.

Why is this important?

There is no such thing as a sustainable competitive advantage. Firms that invest in innovation grow faster and are more productive. This is essential to stay ahead of the competition, especially given the inability of the UK to compete with fast-growing developing countries on relative labour costs.

We have strengths supporting the development of new products and services already. The UK has a good ‘knowledge infrastructure’ (e.g. world-leading universities) and the government has protected its investment in our science base.

However, we are weak in other parts of the innovation chain, in particular commercialising new products and services – taking a design from prototype or proof-of-concept to a commercially produced and sold reality.

How can we measure performance against this ambition?

In common with our other ambitions, we think the government needs to establish a credible set of measures by which progress can be demonstrated. For this ambition we think the measures should be by 2015 that:

• Real business enterprise sector investment in R&D returned to the UK’s pre-recession peak;
• 60% increase in the take-up of the SME R&D tax credit

We’ve chosen these measures quite deliberately – let me explain:

Real business enterprise sector investment in R&D to return to the UK’s pre-recession peak

To see companies bringing new products and services to market in the UK we need to see more basic research capitalised here. This will be driven primarily by businesses. Real business enterprise sector investment in R&D (BERD) is also an internationally comparable metric of business R&D.

National Statistics show that the 2007 figure for BERD in the UK was just under £12 billion. This fell to £11 billion by 2010 (both 2007 and 2010 figures in 2010 prices).

To return to 2007 levels would require 1.5% year on year growth in real business investment in R&D (roughly 8% growth in total). This is below the UK average growth rate from 2002-2007 – but BERD has fallen in every year from 2007-2010.

So we think returning BERD to the pre-recession 2007 peak is a stretching but realistic target.

60% increase in the take-up of the SME R&D tax credit

While the BERD target captures the overall level of business spending on R&D it doesn’t tell us about the number of firms, particularly SMEs, which face the greatest barriers to investing in R&D.

A boost in the number of smaller firms investing in R&D would be indicative of more of our SMEs moving into more productive growth cycle.

A 60% increase in the take up of the SME R&D tax credit would be measured from 2014/15 relative to 2009/10.

HMRC statistics show that average growth in claims since 2003/04 has been c7%; but from 2007/08-2009/10 (the latest year available) the annual average growth has been 12%.

60% growth over the five year period would require growth in 2010/11 of 7% but then growth accelerating to 11%pa 2011/12-14/15. Given that the government has increased the generosity of the scheme, we think this is realistic.

However the billions of pounds worth of estimated unclaimed R&D tax credits suggests the government has some work to do to get the word - and benefit - out there about the scheme.

Yesterday we launched our first edition of Manufacturing Focus, a new series of EEF publications sponsored by RBS and looking in detail at matters of importance to manufacturers.

The first edition focuses on managing materials prices.

As you’d expect with such a diverse sector in the UK, response to managing prices by different companies vary greatly. However there are some common themes.

The two most common responses, each employed by two thirds of respondents we questioned, were to monitor what’s happening to prices more closely and to seek alternative sourcing options.

Perhaps this isn’t surprising; these are relatively low-cost options for addressing the phenomenon of sharply rising prices.

It’s the more sophisticated approaches that manufacturers are employing that are arguably more interesting.
Traditional methods for handling materials price rises have been shown up in the context of recent strong rises.

For example trigger points in contracts, which allow prices to be renegotiated once a certain increase is reached, are not effective against sustained strong rises – meaning much more resource is being put into the process of negotiation.

This puts the spotlight on innovation.

As you’d expect our manufacturers are in an almost constant state of innovation as they seek to stay ahead of their global competitors.

But the impact of rising material prices has given the process of innovation an even higher importance – particularly innovations to remove cost.

For example one of the companies we spoke to, a manufacturer of industrial coatings, created an explicit incentive scheme for their coatings formula designers to eliminate a set percentage of costs.

This is not a simple process as coatings users set exacting quality standards that any new reformulation cannot compromise.

Another example of innovation is the redesign of the customer offering put forward by manufacturers. Adding visible value to customers is an important corollary for maintaining an ongoing relationship where external factors may be pushing up product prices.

One engine manufacturer we spoke to offered their in-house design expertise to customers to redesign cabs to take new models of engine.

So while no two companies approach the challenge of managing materials prices in quite the same way, from the straightforward responses to the more tailored there are common themes.

Heightened vigilance and innovation are the orders of the day.

In the FT today, Peter Marsh reports that the government’s ‘rebalancing agenda’ has been criticised for being incoherent. This may be true. The term 'rebalancing' does seem to be used with a degree of abandon to refer alternately to regional, industrial or public/private balance, depending on which is most convenient at the time. While there is, in fact, rationale behind each of these uses we would point to two key elements of rebalancing.

As David Willets noted in a speech last year:

“Future growth has to be driven by business investment;
it needs to be export led”

In this speech Willets mentions the importance of innovation to drive both of these things.

But what exactly is innovation?

David Willets notes that:

Innovation covers “a broad range of activities” and is “more than research and development, vital though that is. Knowledge transfer, design, branding and customer insight all matter”

He is right. Innovation is broad. But it is also targeted. Companies innovate as a response to competitive pressure. Innovation is commercially driven. And this is why it is so broad, competitive pressures do not just apply to products. Developing new processes or marketing techniques is equally innovative, and equally important to maintaining a competitive edge.

So innovation is commercially-targeted development of any or all elements of a business. And Willets is right, it's crucial for growth. Or, for that matter, rebalancing.

Regular readers of this blog should take a look at the Infor Manufacturing Blog.*

My first post for the blog looks at why investment in innovation and IT have helped manufacturers drive the broader economic recovery. However, I also flag up some of the key challenges firms face when innovating in the UK:

"Tackling technical troubles [while innovating] can cost firms time and money as they strive to get to market quickly.

Yet in competitive global markets, time and money are luxuries that most manufacturers do not have."

UK manufacturers don’t compete on price or labour, they compete on innovation and technology. The longer it takes, the more cash is spent in developing and commercialising innovation, the less likely the company will generate a return on its investments in innovation.

What does this mean for the Chancellor's Budget in under two weeks time? Well, R&D tax credits could play a part here.

Right now, the UK only provides tax credits for research and tax breaks for patents. Yet it’s the time-consuming and costly development phase of R&D where the value of innovation – the profits, the jobs & the growth – is generated. And because we don’t support development and commercialisation, other countries reap the economic benefit of our innovative ideas.

The bottom line is that we can't take growth for granted: firms will invest, innovate and grow; they have to if they want to stay in business. The question is whether the Chancellor give them a reason to invest, innovate and grow in the UK?

* Full disclosure: Infor and EEF have a long-standing relationship. This includes partnering with our economists on two reports: the 2008 IT & Productivity survey and our 2010 Innovation Monitor. Infor are also the lead partner for EEF's Future Manufacturing Awards.

At EEF, we do our best not to get caught up in the circumstances of individual companies - it's the breadth of manufacturing that matters, and in most cases, we're not close enough to the details of a particular company to comment credibly on their issues.

Yet there is a story on the cover of the FT today about a plastic electronics company that got its start in Cambridge, but is headquartered in the US, bases production in Germany and has now received over £400 million in investment from a state-backed Russian company.

Unfortanetly this is an all-too-familiar story - a new technology is created in the UK, but is financed and produced outside the UK. That means the value of innovation - the jobs, the profits and the growth - aren't captured in the UK, but by our competitors instead.

In these instances, the policy debate becomes about what the UK government should or shouldn't be doing to support innovative, growing companies: in other words, should the state take stakes in innovative companies?

This was the starting point for Lord Mandelson's industrial activism and is the basis for Science Minister David Willets comment in the FT:

...there was "no way" any UK government agency would invest £400 million into a technology company to help its expansion. "Plastic Logic is a fantastic company which has developed its intellectual property in the UK and will continue to have deep roots here."

But this is the right answer to the wrong question.

Even if government did have the cash to invest in 100 such companies, the UK government shouldn't be taking these stakes - it leads to a picking winners approach that isn't likely to deliver value for taxpayers' money.

So what are the right questions? There are two that spring to mind:

1. Why do companies like Plastic Logic leave the UK in the first place?
2. What does it say about the UK's business environment that start-up after start-up finds it easier to create jobs and grow by expanding overseas?

These are harder questions to answer than whether government should simply splash cash around.

Just because a company develops IP in the UK, doesn't mean that the innovation is complete. Once a company proven that a new technology can work, they need to prove it is commercially viable. Put simply, innovation doesn't stop with the first prototype. It keeps going as companies try to prove they can produce the technology quickly, to cost and to scale. Otherwise the market will look elsewhere.

The UK is a great place for companies beginning to innovate, but problem for the UK is that we don't have a business environment that supports the costly and relatively risky, but complete process of innovation.

Russia has to use state-controlled companies to make investments because it doesn't have an entrepreneur-friendly business environment. That's fine - that's the decision Russia is making to remain competitive in the global economy.

But if the UK isn't going to compete on state-backed finance (and we don't think it should), then it needs to compete on the business environment - through substantive reforms to the tax system, by moving beyond bank-bashing to increase lending through greater competition in the finance sector, by actually getting rid of regulations and improving adult apprenticeships.  Because we don't have a competitive business environment, the UK's innovations are being bought by the highest bidder.

While some of this is going on because of the government's Growth Review, the challenge for government is to ask the right questions - about how to keep the value of innovation in the UK - as it consults with businesses on how to support growth.

How well prepared are UK manufacturers for the next challenge of turning their investments in productivity and competitiveness over the past decade into transformational growth in the next?

To answer this question and to understand the current state of British industry, our new report - The Shape of British Industry - Growing from strong foundations - draws on a survey of 300 manufacturers as well as in-depth discussions with dozens of businesses.

What comes out is a picture of an industry starting from strength, but cautious about growth. Having weathered the recession, UK manufacturing emerges as an innovative, diverse and globally engaged sector. Firms have continued to boost productivity and competitiveness, even if they have struggled to deliver profits or meet their ambitions. According to our new report there's both good and bad news.

Chart 1 - SMEs less likely to turn productivity boost into profits or growth
% balance with increase in productivity, profits and meeting growth objectives

There is, however, one striking feature: the UK, has relatively fewer large manufacturers – those employing more than 250 people – than our closest competitors.

Chart 2 - UK has relatively fewer larger manufacturers,
Number of manufcturers with 250+ employees (US figure is for firms with 500+ employees), and large companies as % of total manufacturers

The twin dynamics that could drive growth in manufacturing are large companies creating markets for a dynamic, diverse supply chain and innovative, agile suppliers attracting large, mobile multinationals to the UK. The danger for manufacturing and the economy is that the lack of larger companies could slow this dynamic, leading to a hollowing out of supply chains and placing a cap on future growth

After a deep recession in which the economy shrunk by 6%, a manufacturing-led recovery has helped drive a year of good economic news. Exports to developing economies are booming and the private sector is slowly creating jobs again. But with public sector cuts looming and a currency war threatening to derail the global economy, we cannot take this growth for granted.

Generating long-term, sustainable growth will require the private sector and government to work together to build on the strengths of sectors – such as manufacturing – that are essential to tackling our future challenges, such as global security, demographic change and climate change. Government, therefore, has a big part to play in providing the right framework that will support and catalyse private sector investment and business growth.

As the Prime Minister stated in his speech on growth, this will mean more than government getting out of the way.

Instead it will need to be clear about what its role is in generating and supporting growth.

The previous government’s preferred approach was overly focused on industrial champions. The current government’s attention to start-ups and young businesses is helpful, but is in danger of swinging too far in the opposite direction.

Yet growth is not a big or small issue. It is about providing sufficient demand to sustain a dynamic and diverse supply network. It is about big businesses with the capacity to drive innovation and productivity down supply chains. And it is about growing bigger businesses with the scale and muscle to invest in tackling our long-term economic challenges.

Prior to the recession, manufacturers’ investments in innovation, their collaboration and their agility were paying dividends. But knocked off their plans for growth during the recession, many companies are now justifiably cautious about investing in growth until they gain greater certainty over the economic and business environment.

Growing more, larger manufacturers is, in part, about continuing to attract new ones to the UK. But it is also about ensuring small and medium-sized manufacturers overcome barriers that constrain them.

The limited availability of affordable finance traps some young and small companies in a Catch-22: unable to get the necessary finance, their ability to plan for growth is constrained, yet unable to demonstrate clear ambitions for growth, some firms find it difficult to get the appropriate finance. If they do manage to grow, these firms would be caught in the thicket of tax and red tape that helps make mid-sized cautious about planning to become truly global in scale.

Chart 13 Tax and regulation are major concerns for mid-size firms
% balance of companies citing UK strengths by company size

The Prime Minister has challenged industry to commit “to create and innovate; to invest and grow; to develop and break boundaries”.

This report shows that manufacturers are already rising to the challenge, but it also sets out where both manufacturers as well as government must make better progress if we are to grow a generation of bigger manufacturers.

Maintaining momentum behind the recovery is crucial. But not all economic growth is equal: imbalanced and unsustainable growth can leave a terrible legacy, as the recent financial crisis and recession have shown.

To ensure our economy can pay its own way in the future, the UK does not need a handful of bigger manufacturers, we need hundreds of them.