There are some good economic reasons for the decline of British manufacturing. But decades of government policy are also to blame.

All manufacturers in rich countries face challenges and threats from cheaper labour costs overseas. We can compete successfully with a combination of high levels of productivity and investment, as well as getting the best out of our people.

Britain can do better at the leading edge of invention and technical expertise, and where there are high barriers to market entry.

What are the building blocks of successful manufacturing?

1. It is long term.

The product life of manufactured goods is many years or even decades. A manufactured part will commonly be made by the same factory for the lifetime of the product.

The decline of British manufacturing can be traced directly to the short term attitude of British shareholders and their managers. When manufacturers maximise short term profits rather than sustain business profitability over 10 years, the consequence is decline, sale or closure of the business. The most notable trend in the UK is the sale of its publicly owned manufacturing industry to foreign companies.

Manufacturers need functioning banks that lend. This Government has recognised banking failure for manufacturers by introducing the Green Investment Bank and the Regional Growth Fund.

2. Building constructive relationships.

Manufacturing development commonly takes years to reach the market. Over this period, businesses are working collaboratively with numerous partners to make their ideas work. In most cases, partnership working crosses national borders.

With 40% of all British exports going to other EU countries, it is destructive to British manufacturing interests for our government to promote an Eurosceptic agenda. If on the one hand manufacturers are building collaborative partnerships with other EU companies, but on the other hand the British government is pursuing a semi-hostile attitude to other EU governments, the result can only be negative. The sentiment will be that other EU countries and businesses will more easily work with, and do business with, each other. Euroscepticism marginalises British manufacturing from its biggest market.

There are of course big opportunities for British companies to export worldwide, but in most cases these export opportunities will be built on top of sales within the EU market.

3. Skill.

At the heart of successful manufacturing is skill. Product development requires innovation, knowledge and intelligence. There are alarming trends in Britain that we are losing our skills base, and that existing companies are struggling to find people with the expertise that they need.

Government commitment to rebuilding manufacturing needs a renewed commitment to the skills that manufacturers need. These skills will be different depending on the clusters of businesses in each area, so local solutions work more effectively.

The Role for the Liberal Democrats

Liberal Democrats are excellently placed as a party to champion the rebalancing of the British economy back towards manufacturing. Unlike the Conservatives, we are not tied to financial and Eurosceptic interests. We are a pragmatic party of business and wealth creation unlike Labour, and in the manufacturing heartlands our MPs already stand for jobs and renewed identity.

Becoming the party of manufacturing revival involves making tough choices on the Euro. The single market is changing slowly towards a single Eurozone market. EU membership is starting to count for less as political union edges forward. The well organised Eurosceptic lobby that daily predicts Euro disaster increasingly sound out of touch with the European reality.

Liberal Democrats in government are already making a big difference to UK manufacturing. Vince Cable has demonstrated how Britain can remain competitive in the car industry. A regular stream of banking initiatives targeted at manufacturing investment will bear fruit. The recent emphasis on infrastructure investment will help British companies.

The Liberal Democrats should be unashamedly becoming the party of manufacturing. Our policies on the banks, the Euro and tax incentives should all be driven by our commitment to rebuild British manufacturing – long term.

* William Hobhouse lives in Bath and is co-founder of the Lib Dem Campaign for Manufacturing.