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Failing Industrial Strategy Needs An Overhaul

Today’s employment figures do not shine any light on the state of UK manufacturing, but plenty of recent coverage has highlighted the extreme pressures that UK manufacturing is facing in the midst of ongoing Brexit uncertainty, as the latest news about the closure of Honda's Swindon plant shows.

Recent GDP figures have shown manufacturing output falling for six consecutive months, while a whole host of manufacturing giants (Jaguar Land Rover, Ford, Nissan etc.) have made crystal clear the problems they are, and will continue to, face as a result of Brexit.

CLASS spoke to Linda McCulloch, National Officer at Unite the Union, about the state of manufacturing. She said that government had not put in place a real industrial strategy to boost investment. Watch the video below:

Mick Joyce, a lift engineer and senior shop steward, talked about the importance of maintaining Britain's industrial base and called for a minister for manufacturing. Watch the video below:

The problems in manufacturing date further back than the vote to leave the European Union. Manufacturing’s share of total employment has fallen from around 17 per cent in 1997 to 9 per cent today. That equates to around one and a half million less people employed in the industry than they were two decades ago. Since the 1990s, manufacturing output has shrunk faster in the UK than in any other advanced economy. Today, the industry constitutes just 10 per cent of GDP. In Germany, for comparison, the figure is 23 per cent.

In this context, the government’s Industrial Strategy (which we should understand as measures to strategically manage the economy) is a step in the right direction, but a fundamentally weak one. There was next to no mention of trade unions in the government’s Industrial Strategy White Paper, the recently established Industrial Strategy Council has only one representative from the labour movement among twenty people and references to the trade unions were barely present in the government’s Good Work Plan. This obviously runs counter to the stated aim of “more good jobs and better pay.”

Furthermore, any proper industrial strategy needs to be fully separated from the government’s ongoing austerity agenda. The current way the UK government measures public debt actually discourages investment (see this blog for a more detailed explanation). Given this self-imposed straightjacket, the government is unlikely to front the money needed to properly stimulate the productive capacity of the economy and support industries such as manufacturing.

What is needed, therefore, is a National Investment Bank (NIB) which could provide long-term finance to industries that are, at present, starved of investment. Such a move would not only enable a general upgrading of the economy’s productive capacity but target support in specific areas. Targeted support would enable the state to address chronic failings and support specific ‘missions’, one of which, for example, could be “greening” the economy.

A NIB, with its regional arms, would also be able to more effectively spread investment across the UK. Currently, London and the South East are the overwhelming benefactors of investment and big infrastructure projects such as HS2 and the third runway at Heathrow risk further centralising the UK economy. Very little has been done to rectify this with the so-called Northern Powerhouse criticised for being void of ambition and financial backing.

Any industrial strategy must be properly devolved but it also must be democratised. It must focus on developing the capabilities and institutions that allow people to contribute to the economy, irrespective of their location. The Industrial Strategy Commission originally proposed the government adopt the principle of universal basic infrastructure. Adopting this mission would not only be an important first step in rebalancing the UK economy, but also increase the supply of good-quality jobs and apprenticeships that we desperately need.

Liam Kennedy is CLASS Research Officer

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