Can manufacturing summit tackle an industry’s decline?

The Government has asked a group of industrialists to help prepare UK manufacturing for the next century. Paul Carslake looks at the issues facing the sector most in need of a shot in the arm

Plans to get industrialists together to hold a `manufacturing summit’, announced by Trade and Industry Secretary Stephen Byers in June last year, were dismissed by one critic at the time as `a summer holiday for toadying industrialists’.

In fact, the event has overshot summer. And with a meeting lasting just half a day in a room at the Department of Trade and Industry, it doesn’t sound much like a holiday.

Joining Byers and his DTI officials at the event this Friday (10 September) will be a mix of industrialists from companies of all sizes, union bosses, and representatives of the main manufacturing lobby groups.

There will be little time for toadying – many industry figures are becoming increasingly strident in their criticism of the Blair government’s lack of support for the sector.

It is easy to be cynical about such initiatives. The summit was called with the ambitious brief of preparing the UK’s manufacturing sector to meet the challenges of the 21st century, when `there will be greater reliance on knowledge manufacturing’, as Byers puts it. But behind the rhetoric, the DTI is desperate to know how it can energise British industry to boost its productivity, skills and competitiveness.

So what are the policy areas on the agenda? The immediate concerns facing industry will crop up, if only to set the scene. The high pound is still hurting, and there must be no rise in interest rates. Industrial companies are facing tighter margins, while investment plans are being squeezed. The energy tax and the fuel duty escalator are distinctly unwelcome.

For the longer term, debate is likely to focus on the following areas:

* Investment: This remains too low, leaving the UK trailing its international competitors. The joint CBI and DTI campaign, Fit for the Future, is advocating a programme of honest comparisons of operating standards between UK companies and the best in the world, to bring home to British firms how far behind they are, and identify areas for improvement. They can then decide whether they need to invest, or reorganise their business methods.

A related initiative, which already has a £15m pledge from the DTI, is to create industry groupings to pass world-class business and organisation techniques from top-level manufacturers down to their suppliers. Such an initiative has already created tangible savings in the automotive industry through the SMMT Industry Forum, the blueprint for the initiative.

The summit will need to find ways of making this happen more quickly, apart from the knee-jerk trade association response of calling for more tax incentives for investment.

* Skills shortages: British industry is not getting the workforce it needs and faces huge difficulties persuading school leavers to go into industry. The `cool Britannia’ image based on fashion, music and up-market leisure sectors is just one symptom of the lack of regard for science and technology. As if that were not enough, there is little state support for the apprentices needed to replace industry’s missing core of highly-skilled technicians. The two problems will have to be addressed simultaneously.

* The knowledge-based economy: We cannot compete with the Chinese or Taiwanese on price, so industry is shifting to activities with a higher degree of added value. As this trend continues, the intellectual capital of a company outstrips the value of its buildings and assets – a trend seen nowhere more clearly than in information technology.

Securing the best brains and nurturing the best ideas, whether in companies or within universities, makes us more competitive internationally, as does a deregulated climate. Companies must also be encouraged to make better use of the country’s sophisticated services and financial base: Byers will want to identify incentives to get firms moving in this direction.

There is likely to be a heated debate over whether policies should favour start-ups companies or the established engineering groups that are still conducting and applying high-tech research and development from laboratories hidden among what look like traditional engineering sites.

* Aid for industry: Incentives are still in place for inward investors, but attempts are being made to add strings to such deals, demanding promises of long-term investment in the workforce.

Alongside this are more local initiatives to support start-up enterprises by creating sectoral clusters; areas where, with a leg-up from limited government funding, private entrepreneurs can thrive. This system probably costs taxpayers less per job created, though many would argue that British industry should benefit from both kinds of aid to keep us on a par with our European competitors.

In four hours, the summit can only skate over these issues. Government action over the next few months will show whether the exercise was anything more than a well-meaning talking shop.