January 29, 2012 10:02 pm

Call for manufacturing to play bigger role

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Britain should back its “manufacturing winners” with a £4bn a year project to revitalise the production sector and engineer a lasting recovery from the financial crisis, according to one of the country’s most senior industrialists.

The call by Mike Turner, chairman of Babcock, the engineering and services group, fits in with efforts by the government to bring about a “rebalancing” of the economy with a bigger role for manufacturing – a sector that has fallen as a proportion of total output over the past 20 years.

It comes as government ministers are casting around for new ways to lift an economy that, following news last week that it contracted by 0.2 per cent in the three months to December, shows worrying signs of sliding into a new recession rather than rebounding from the 2008-09 crisis.

“What we should be doing is to look at areas of industry where we feel Britain’s got a part to play long term, and where the taxpayer can offer support with a solid programme of technology and investment support,” Mr Turner said in an interview with the FT.

His ideas for an “industrial strategy” would be financed with a programme of work costing up to £4bn a year, roughly half paid for by the taxpayer and the rest from companies. “There is no point putting money into industry unless you get private sector support at the same time,” said Mr Turner, a former chief executive of defence group BAE Systems , who will become chairman of the GKN engineering company in May.

Mr Turner would also like the government to set up a state-supported industry bank – with funds provided partly by the private sector – to lend to manufacturers, which in recent years have frequently found difficulties in attracting cash from conventional commercial banks.

“The money I am talking about [from the government] is peanuts compared with what Britain has spent supporting the banks and puts into welfare payments ,” said Mr Turner.

The proposal has been backed by John Cridland , director-general of the CBI employers’ group, who said his ideas were “timely and pertinent”. Mr Cridland said that following a run of poor economic news there was “an economic need and a political imperative” for the coalition to look at sensible ways to boost the economy.

Jim McColl, chairman and chief executive of Clyde Blowers, a Glasgow-based engineering company and one of the UK’s biggest private manufacturing groups, said Mr Turner’s suggestions were “right on the money”.

He added: “I share Mr Turner’s sense of frustration that the government – having identified an economic rebalancing as something it wants to see happen – has not done more to try to make it happen.”

Mr Turner’s ideas prompted a muted response from the Department for Business, Innovation and Skills which said that proposals for an industry bank were “not under active discussion”.

The department said it recognised the importance of manufacturing and had “a number of projects in place that were putting substantial sums towards the sector” in supporting growth. Such schemes included the £2.4bn regional growth fund and a series of regionally based technology and innovation centres.

However, Chuka Umunna, the Labour business spokesman, said: “Britain needs an industrial strategy to identify key areas of business where the country has a competitive advantage and which could be the growth sectors of the future. Once the strategy is identified the government should use whatever policy levers are available to support UK-based companies operating in these fields.” Labour is still considering whether supporting an industry bank, which was originally suggested by Lord Bhattacharyya, the Labour peer, should be part of official policy.

Under Mr Turner’s proposals, a series of “sector task forces”, consisting of government officials along with industry representatives, would identify investment and research projects in key areas of industry including automotive, defence and aerospace, and healthcare, as well as in non-manufacturing areas such as media and telecommunications.

The projects could span a range of disciplines from novel transmission technologies for cars to water-supply pipelines and would be oriented around supporting UK-based businesses.

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