The claim that Britain’s manufacturing sector is heading for meltdown undermined the Government’s attempt last week to trumpet the results of its comprehensive spending review.
According to the British Chambers of Commerce’s quarterly economic survey, export sales and orders are at record lows and domestic sales and orders for manufacturers are at their lowest levels since spring 1992.
However, trade and industry secretary Margaret Beckett, speaking in the House of Commons, was in no mood to join the mourners.
Beckett told shadow trade and industry minister John Redwood: ‘To describe it as meltdown is of course nonsense. There is real concern and that is understandable, but there is also a rather more mixed picture than extravagant claims would suggest.’
The BCC survey was published the day after the Government revealed its spending plans for the next three years.
Outlining the Department of Trade and Industry’s objectives, Beckett said: ‘The new spending plans will result in a major modernisation of the science base, a new approach to business support, which will be more focused on small and medium-sized enterprises and innovation, and a strong emphasis on creating a positive business environment at home and abroad.’
Industry will have to wait until this autumn’s Competitiveness White Paper for details of the plans to boost manufacturing. But there was some new money.
The main chunk of extra cash consists of an injection of £1.1bn into the science budget over the next three years, which is ‘designed to combat the erosion of the UK’s science base’.
Beckett said the Government’s science budget would increase by £700m to £1.67bn over the next three years a rise of almost 15%. The Wellcome Trust is contributing an extra £400m for upgrading university laboratories and other essential infrastructure needs, with life sciences a priority.
Reversing the decline
‘This major injection of funds reverses the decline that our predecessors allowed,’ Beckett said a reference to claims in the Dearing Report on higher education that Britain’s science infrastructure has been deteriorating for years.
Industry and university representatives welcomed the move. Brian Fender, chief executive of the Higher Education Funding Council, said the extra funding would ‘provide a significant increase to the work we have started in modernising research laboratories and equipment in universities and colleges.’
Specific three-year budgets for the six research councils will not be announced until the autumn.
Beckett has fended off any large cuts. The extra money for science has not come out of the rest of the DTI’s budget, which is set to keep pace with inflation. It will rise from £1.76bn this year to £1.85bn in 1999 2000, to £2.11bn in 2000 2001 to cover an anticipated rise of up to £500m in compensation for mining injuries and fall back to £2.05bn in 2001 2002.
The sums allocated to promoting business are ringfenced, although there is no real increase. Under new arrangements, any unexpected liabilities will not have to be met out of these funds, which should make long-term planning for business support schemes easier.
Help for small business
The DTI’s funds will be focused on helping small and medium-sized businesses. As part of this process the DTI is reviewing its system of business support, including the small firms’ loan guarantee scheme, Business Links and Regional Selective Assistance.
Details of this review are expected to feature in the autumn White Paper but it will also be followed by more consultation ‘to help develop a coherent portfolio of measures to remove barriers to growth’.
According to a statement in the review: ‘The Government will assess all its support programmes in the light of these new priorities and ensure they have a clear rationale, demonstrate good value for taxpayers’ money and are based on partnership between government and the private sector.
‘The Government is reforming the system of industrial subsidies to businesses to ensure that the taxpayer gets value for money. The leading role the Government played in negotiating the phased abolition of shipbuilding operating subsidies across Europe is an example of this commitment to reform.’
Industry’s reaction to the comprehensive spending review was positive, if muted. The Engineering Employers’ Federation welcomed the additional cash announced for education (£19bn) and transport.
Transport spending excluding rail subsidies, London Underground and the Channel Tunnel rail link is planned to rise from £2.68bn in this financial year to £2.88bn next year and £3.67bn in 2001 02.
Spending on rail, the London Underground and the rail link will fall, however, from £1.99bn this year to £1.67bn next and £1.37bn in 2001 2002, largely as a result of declining rail subsidies.
The Transport White Paper was published this week (Monday).
Kate Barker, the CBI’s chief economic adviser, said the Confederation of British Industry welcomed the balance of current and capital spending which underpins the overall public spending targets.
‘In particular,’ she said, ‘the CBI welcomes the increases in public spending on key priority areas, including education, transport and science.’
As the Government lays foundations for what it hopes will be future growth, Beckett was able to point to the fact that many companies are continuing to invest in the UK.
According to figures from the Invest in Britain Bureau, inward investment in the UK has increased in the last year, despite the high value of sterling, the economic crisis in Asia and the failure to adopt the Euro next year.
New investment rise
Despite high-profile delays to investments by Hyundai, LG and Samsung, the IBB said it had recorded a 28% increase in new investment projects to 618 with nearly 125,000 jobs created or secured.
US investments such as that of IBM in Cambridge accounted for at least half of the new jobs created.
However, the figures also show the number of first-time projects rose by only 5% and the number of jobs created actually fell by 22,000 to 16,000. Investment by companies already resident in the UK including multinationals does not count as new.
There is some debate over the validity of the figures, however, as they include investments made as a result of foreign takeovers.
The Government is keen to see economic growth soon to fund its spending programme.
But in the short term, British industry is believed to be slipping rapidly towards recession. The BCC survey is just one of a number of recent influential reports such as those by the EEF and the Engineering & Marine Training Authority which predict a slowdown in orders at home and abroad.