British politicians debate Brexit, the future of UK manufacturing and productivity. Labour's Corbyn wins.

 

Earlier today, leading British politicians stood up in front of an invited audience at the national EEF manufacturing conference in London to discuss the future of the manufacturing industry, improving British productivity and to defuse concerns about the UK’s position in global markets in a post-Brexit era. It was a hard sell for the ruling Conservatives as Liam Fox, Secretary of State for International Trade refused to take questions while Jeremy Corbyn, leader of the Labour Opposition party answered questions for a full 20 minutes after his presentation before being whisked away.

By our reckoning, Fox's presentation was all business focused but bland. The usual platitudes about vigorous support for the UK's declining manufacturing sector, skills and progress (sic) made in the Brexit negotiations. The audience response was understandably muted.

Corbyn, on the other hand, gave a more expansive speech about Labour’s plans for investing in technical skills, women in work, Brexit, and ensuring finance is placed in the hands of British business, not speculative investments. (Blockchain and ICOs anyone?) He also took questions from manufacturers in the audience, with the audience jeering the Daily Mail correspondent who tried to ask off-topic questions. The room was electric after Corbyn left the stage, with cheers lasting long after he departed. This response is a surprise from what one might expect from British business, given the media’s representation of Corbyn as anti-business and 'old school socialist.'

However, it is worth noting that it is always easier for the political Opposition to inspire, as they’re not the ones tackling the day-to-day challenges of running the government. This right-leaning (and, in some quarters nationalistic) Conservative government has a Herculean task, dominated by Brexit, although it has made some progress in the form of its Industrial Strategy.

Despite clear differences, both parties agreed, that British manufacturing plays a central role in the country’s future growth and prospects internationally. Today, manufacturing is an industry that is traditionally underrepresented by those in power. That is as a result of past government's emphasis on promoting services industries, most notably financial services, at the expense of what was seen as inefficient industries like coal mining and auto manufacturing. However, it remains a fact that the UK has encouraged overseas investment into the UK, most notably Nissan which has significant manufacturing capability and inveestment in the UK's North East.

The Conservative view

Here's what Liam Fox’s had to say. He began by praising the industry for its resilience. Fox said:

Few other industries are doing as much to enhance the UK’s global reputation. Everywhere we go, the British manufacturing stamp is a mark of quality, innovation and world-leading technological advances.

All too often we encounter the lazy assertion that Britain doesn’t make anything anymore. Ill informed negativity. Today let’s send out a loud and clear message that British manufacturing is not only alive and well, but capable, cutting edge and confident.

Fox cited that the UK is one of the largest manufacturing economies in the world, with £270 billion in exports. He said that last year saw a particularly robust performance, (although failed to mention that is likely because of the British Pound falling in value), with manufacturing growing by 2.8%, compared to 1.8% for the economy as a whole. Fox added that:

...we’ve had the longest period of consecutive, monthly manufacturing growth for 30 years.

Fox said that his department stands ready to ensure that this capability is shared beyond the borders of the UK and pointed to exporting as a sustainable driver of increased profits, which can be supported by government investment.

In the light of Brexit, this export opportunity is likely to be skewed towards fast-growing economies, according to Fox. He said:

My department’s ultimate aim is to open up the world’s fastest growing markets for UK companies. Soon, for the first time in more than four decades, we will be able to develop a trade policy framework that works first and foremost for the UK economy, UK firms and UK citizens.

Already we are laying the groundwork for new trading relationships with countries across Africa and Asia. Many of these economies will be the drivers of global growth in the 21st century. As their people become more affluent and their industries more mature, demand for British manufacturing expertise will grow exponentially.

And of course, this all comes at a time when the UK is seeking a new trading relationship with the EU, although it’s still unclear what that will actually look like. Fox was unwilling to give too much away, beyond what is already widely known. He said:

I understand that every business here today will be seeking a glimpse of what this new relationship will look like. Naturally I know that businesses value certainty and stability above all else. But you will equally appreciate that I can’t comment on the ongoing negotiations.

What I can tell you, however, is that this government opposes erecting barriers to trade where none yet exist. Or disrupting the commercial relationships that exist between this country and our continental partners. In Geneva yesterday I was making the point that we have to seal a negotiation between the UK and the EU within a global context.

If Europe erects barriers to trade and investment that do not exist today, it will make Europe less competitive in a global context. And less attractive for international investments.”

The UK will always be the finest place in the world to live, study or do business. It is a big world out there and British manufacturing can lead the charge to ensure that the people of this country can take their rightful place in that global prosperity of the future.

The opposition’s view

Labour leader Jeremy Corbyn began his speech by talking about gender equality in the workplace, specifically in manufacturing and engineering. He said that women account for 43% of GPs and about half of all solicitors, but only 8% of professional engineers. Corbyn said this needs to change if we really want to build a solid, innovative, productive manufacturing base in the UK. He said:

This (8%) figure has remained static over this government. The proportion of women working in high tech industries has actually sadly declined. My mum was a fierce advocate of young women going into science and engineering. Not just as a matter of social justice, but as an economic imperative. We cannot build a more prosperous economy without making the use of the talents of everyone.

Similar to Fox, Corbyn cited the historical successes of manufacturing in the UK, pointing to inventions such as the cashpoint and the jet engine, which were created in the UK. He said that “manufacturing continues to punch way above its weight”, accounting for 10% of output, but 44% of exports. Output per hour is £4 higher in manufacturing than the average for all sectors, he added.

However, if Labour came into power, Corbyn promised the audience that his party would invest more in the country’s core infrastructure and in skills. He said:

For too long, government hasn’t done enough to support you. Businesses are crying out for infrastructure investment. We are lagging behind other leading economies. The government simply isn’t delivering. That’s why we have pledged to create a national transformation fund to upgrade our transport, energy and digital infrastructures.

We must also invest in our people, as well as our physical infrastructure. We have on the one hand university graduates can’t find a suitable job, while thousands of underemployed workers can’t get the skills they need to advance. On the other hand, business is struggling to recruit workers with the right skills.

Time and again businesses tell me how difficult it is to hire employees with the skills they need. Far to often school leavers are unprepared for the workplace. Labour’s national education service proposal will tackle that problem head on, by providing free, life-long learning for all.

So that anyone can retrain or upskill at any point in their life. We will put vocational education – too often the poor relation of our education system – at the heart. Ensuring that science and technical learning starts early, in primary schools. We will build links with industry into the national education service, to ensure that our education system keeps pace with the changing needs of our economy.

Corbyn said that the Conservative approach to Brexit is threatening to “turn our skills crisis into a catastrophe”, especially for manufacturers that now rely on recruiting skilled workers from overseas. He said that Labour would give an unconditional guarantee to EU citizens of their right to stay in Britain, not just now, but during the transition period as well. Corbyn also promised to ensure businesses had access to skilled workers after the transition period but didn’t want to see businesses continue to use the EU as a cheap talent pool, undermining other areas of the economy. The focus would be on upskilling, he said.

Further comments on Brexit aimed to provide some certainty for businesses. He said:

Brexit is an emotive subject. But for business, first and foremost, it’s a practical matter. To make decisions about where and when, perhaps even whether, to invest, you need to know what markets you will have access to, what regulations and product standards you will be expected to be subject to, and who you will be able to recruit to work with you.

What will happen to our very important supply chains, which of course extend to both sides of the channel? Which we all know are very integrated supply systems. That’s why Labour has from the start has taken the practical position of accepting the result of referendum and insisting the economy must come first. We are leaving the EU, but our businesses must not be forced to withdraw from the European markets. Business needs clarity.

Finally, Corbyn’s most profound comments came about how the UK’s finance industry views investment opportunities. He argued that for too long the banks have favored speculative investment that benefits the few, rather than funding the ‘real economy’, by putting money into the hands of businesses and people that can drive growth at a local level. He wants to see that change, with banks shifting their focus towards productive investments. Corbyn said:

For decades, Conservatives have created, encouraged and sustained a system that rewards those who lend and speculate, over those who make things. The Thatcher government’s progressive abolition of restrictions on financial trading, culminated in the big bang de-regulation of 1986, placed the needs of speculative finance at the helm of British economic life.

When that government took office, the ratio of private debt to GDP was 60% and the thirty years have followed, that has trebled. At the same time investment banks started creating new kinds of financial products, packing up debt in increasingly opaque ways, becoming ever more removed from the real economy, where people make things and deliver things.

Let me be very clear, finance has a central and essential role to play in a functioning economy. Without access to finance, how would the entrepreneur or business person find the needs to get their idea off the ground? How would a growing company afford new equipment to make their businesses more productive and more profitable? Or expand their activities? Finance is the grease that fuels the wheels of the economy.

But when private debt is twice the size of the real economy, when traders no longer understand the products their trading, and banks are funding their own speculation, something has gone grossly and badly wrong. Banks should be helping the real economy, not suffocating it.

Our take

It’s undeniable that the winner on today's performance day was Corbyn. He listened, he talked and his comments on investing in skills, infrastructure and “productive lending” were well received. The enthusiasm in the room was palpable.

Fox, on the other hand, did what everyone thought he would. He delivered a speech that has been heard a hundred times before. I’ve spoken to numerous business owners today that disparaged about his performance.

That said, Labour’s one sticking point is Brexit. It talks about access to EU markets and not introducing friction for trade but the details about what this looks like are unclear. It seems from today that Corbyn is talking about exiting the single market but establishing a new customs agreement with the EU, which would require close regulatory alignment with the trading bloc. If that is Labour’s position, then that may well be welcomed. But clarity is needed.

On the training and skills issues, Corbyn may have won on rhetoric but this has been an ongoing issue for more than 30 years. Britain stopped training the next generation of engineers many years ago and while there has been solid support for innovation in places like Cambridge and London, the former industrial powerhouses of the Midlands region have gone largely untouched.

It is easy for armchair quarterbacks like us to disparage talk of this kind but if politicians of both persuasions are serious about reskilling then we need to see concrete proof.

Corbyn's characterization around inequality is welcome but talk is cheap and the fact that women, in particular, are so pitifully unrepresented in management and leadership roles is depressingly familiar. We don't see how government per se can fix that. It requires joint commitment with industry leaders.