Opinion: Making MORE in Britain with the Regional Growth Fund

Nick Clegg and Vince Cable at a factory 2 - Some rights reserved by Liberal DemocratsThe Spring Conference will debate the motion on creating a strong manufacturing sector in a strong economy. In Vince Cable, the coalition government has a powerful voice for manufacturing. Significant progress is being made in building a more resilient, diverse and balanced economy. Lib Dems are also becoming confident in charting an interventionist industrial strategy that avoids the twin failures of laissez faire and state support for ailing companies – the two positions characterised by historic Conservative and Labour thinking.

The Conference motion says that government funds made available through the Regional Growth Fund (RGF) has led to the creation and/or safeguarding of over 550,000 jobs, many in the manufacturing sector, and £14.5bn of private investment.

The motion resolves to support a further round of funding through the RGF. This funding will encourage new investment in manufacturing, increase manufacturing capacity, and lead to further job creation and preservation, while ensuring a continued commitment to a geographically rebalanced economy.

To give one typical example, Holroyd Precision, a foreign-owned engineering company in Greater Manchester, received £2.8 million from the first round of the RGF, a contribution towards building a new factory and R&D innovation centre in Britain. The company’s MD put it well:

This has enabled us to make further investments in additional staff, research and development projects, as well as securing the future of Holroyd Precision for many more years to come.

The RGF should be seen as a long-term and steady incentive for capacity building in UK manufacturing. It is supporting new investment in new production lines and general industrial capacity. It fits well with the Lib Dem success of increasing capital allowances from £25,000 to £250,000 for a two year period – another measure that encourages new investment.

Almost everything in manufacturing is long-term. And, just as important, manufacturing is technical. Product development can take years, product lifetimes are long too, and investment is usually upfront. Government policy that takes a similarly long-term view about British manufacturing will be successful.

That’s why a Lib Dem commitment to fully-funded future rounds of the RGF sends the right signal to UK, EU and international companies that here in Britain we are open for manufacturing business.

* William Hobhouse is on the board of Liberal Reform and is co-founder of the Lib Dem Campaign for Manufacturing.

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9 Comments

  • Given the level of infrastrucuture investment that is promised for the railway and energy sectors by 2030, I would hope that significant amounts of RGF will be used to ensure significant amounts of that investment remains in the UK rather than going aboard…

  • I am rather dubious about foreign owned companies receiving UK taxpayers’ cash. Shouldn’t we be looking in the long run to invest in UK owned companies and also to avoid selling off the remaining diminished band to outside bidders unless there is a very, very good reason for a foreign takeover? Otherwise, we can nurture UK companies all we like but if they are going to end up being flogged off to outsiders, we end up being the net losers in the process as further hollowing out takes place and supply chains are broken up even further, with our portion of the value added declining inexorably.

    Also, we need direct state intervention to improve drastically the quality of our industrial management, which has frankly been one of the reasons why the UK has performed so poorly relative to its peers. How about setting up new high powered industrial management postgraduate colleges in Manchester, Leeds and Newcastle, with bursaries to attract the best and brightest away from financial careers? Until we can achieve a cultural change towards best practice in UK management and a move away from financially engineering and short term gimmickry (anyone for complete and immediate offshoring of all production to China?).

    For me, incentivising the right kind of management and the right kind of ownership is key to solving the underlying problems of UK industry, not just shoving some well placed bungs at individual companies to bribe them into expanding their businesses in favoured regions.

  • “Until we can achieve a cultural change towards best practice in UK management and a move away from financially engineering and short term gimmickry (anyone for complete and immediate offshoring of all production to China?) we are going to be fighting a losing game”, I meant to say.

  • Liberal Eye 4th Mar '13 - 1:04pm

    We have deficits in food and energy as part of our overall persistent palance of payments deficit. So how are we going to finance necessary imports if others prove unwilling to continue extending loans at some point? William Hobhouse is absolutely right that manufacturing is vital; we need to get back into a position of better balance ASAP.

    … the twin failures of laissez faire and state support for ailing companies – the two positions characterised by historic Conservative and Labour thinking.

    Of course, the Tories too like to support ailing companies – as long as they are in the City no amount of public subsidy is too great.

  • @Liberal Eye

    “Of course, the Tories too like to support ailing companies – as long as they are in the City no amount of public subsidy is too great.”

    To be fair, Vince Cable was the first to urge bank nationalisation and Labour were the ones who went ahead with it. Had the Tories been in power alone, non intervention would have ruled and the whole financial system been allowed to implode with unthinkable consequences.

    You are right about the need to overcome deficits in food and energy, both of which are being exacerbated by world trends in commodity prices. But we need to be very much more insightful in the way we support manufacturing than we have been until now.

    Vince Cable has been brave and tenacious in breaking through the intellectual barrier of the doctrine of non-intervention.However, we need to go a long way beyond what has been done to rescue and revive our manufacturing base, including a step change improvement in the quality of both finance and management, as well as all the other work being done on skills and infrastructure. We are only just making a start on repairing the damage done under both Tories and Labour and it will take decades to reverse this.

  • Liberal Eye 4th Mar '13 - 5:12pm

    @ RC

    I agree with all you say. When the financial crisis first struck bank nationalisation was the only immediately available solution to prevent disaster. But that was a long time ago and what is quite remarkable is how little fundamental progress has been made since in implementing a ‘new order’. Some Tories – Boris Johnson comes to mind – make no secret of the fact that they are fully behind a policy of giving the banks whatever they want although he is quite bright enough to know that their implicit government guarantee is equivalent to a massive subsidy.

    It is odd, is it not, that the step change in support for manufacturing that is needed should include finance? One might suppose that with the City so close we would have the best financial support for industry and innovation in the world!!! Evidently, we don’t.

    The other big thing I would add to your shortlist is improved training. Every time the economy turns up slightly there are reports from worried engineering firms that they cannot find the skills they need. This suggests that the system for training is dysfunctional in an important way.

  • “Every time the economy turns up slightly there are reports from worried engineering firms that they cannot find the skills they need. ”

    I think they always say that. What they mean is, they can’t find the right skills *at the price they are willing to pay*. IMHO they need to wise up and realise that they should be investing more in engineering talent so that graduates aspire to work for their companies rather than going straight into the law or finance. The best companies, like Rolls Royce, see paying their best workers good salaries as an investment rather than just a cost. The rest of them can’t see past this most basic point and that is one of the causes of their failure. This is a cultural shortcoming that management in other countries like Germany seems to avoid.

    In any market there will always be a shortage of supply if you’re not willing to pay a decent price.

  • Stephen Donnelly 4th Mar '13 - 11:05pm

    I welcome the enthusiasm for manufacturing shown by William Hobhouse but let’s not over claim for the ability of government to change things for the good through direct intervention, it can often do more harm than good. For instance in the case quoted I hope there are no small British competitors being crushed under the weight of government support for a rival. It happens.

    The regional Growth Fund does little for small or medium sized businesses. The main beneficiaries are often bigger companies that have the resource to become skilled at extracting money from government, and of course the middlemen, who can take their cut.

    The good thing is that Industrial policy is being debated, unfortunately I cannot be in Brighton to join in, I have a company to run.

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