It seems a long time since Vince Cable was leading the Department of Business, Innovation and Skills. During his tenure, one of his greatest achievements was the Industrial Strategy. In automotive, aerospace, nuclear and renewables, long term partnerships and structures had been set up to ensure that UK manufacturing stayed at the cutting edge of R&D and that we grew the skills and capacity to manufacture the next generation of products.
The visit of the Chinese President Xi Jinping to the UK has clarified the new government thinking. Taking three industrial issues in turn:
Steel: everyone knows that steel prices go up and down and competitive advantage changes with exchange rates and oversupply. At a time when the automotive industry in the UK is flourishing, the closure of steel mills demonstrates that government sees no link between a UK steel industry and UK automotive. We can, the argument goes, quite happily import steel at the cheapest price at the time and retain our long term success in automotive. The counter argument is that we will not retain our leadership in the industry if the next generation of cars uses steel technology developed in Germany or China – because other things being equal it would be better to assemble the car closer to the supply chain.
Nuclear: the tie up with China for Hinckley Point and future nuclear power stations means one thing – Chinese firms will be building some of the plant. The Industrial Strategy for Nuclear set out to create the next generation of skilled nuclear engineers and R&D scientists. This is dead now. The engineers and scientists will be from French owned EDF and from China.
Graphene: this material is undoubtedly one of the exciting scientific developments of recent years to come out of the UK. The problem is applying the invention to industrial production. Patents are being filed at a great rate because it is incredibly difficult to turn an idea of a very thin material into products that can be manufactured. Graphene neatly represents the British problem of having great inventions for others to apply and make money out of. The jury is still out, but the Chinese are anything but stupid and if they can have an inside track for graphene development courtesy of George Osborne, then it is them, not us who will be making it in the future. Vince Cable’s Industrial Strategy – the vision of long term partnerships from product invention to product application 10 or 20 years later – is being swept away.
* William Hobhouse lives in Bath and is co-founder of the Lib Dem Campaign for Manufacturing.
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16 Comments
I’m surprised the SNP haven’t taken more flak over the use of Chinese steel in the new Forth Crossing.
A couple of pandas in exchange for our steel industry doesn’t seem a fair swap at all.
A long time (since Vince’s strategy) indeed. Good read and useful to have this focus, William. Thanks.
Did the Lib Dems do enough to sell Vince’s industrial strategy in government? One of the few departments with a Lib Dem SOS and yet little seemed to be done to emphasise what was being done.
We should be making more cars out of alumimium alloy, which does not rust and which, being lighter than steel, requires less fuel when the vehicle is in use. Some Jaguar E-Types were made from aluminium and now sell for big money. Carbon fibre can also be used in part, as in Formula 1 racing cars, again to save weight.
What happened to the option to build a second Channel Tunnel? Should we have others, to the Isle of Wight? to the Isle of Man? to Northern Ireland?
“Did the Lib Dems do enough to sell Vince’s industrial strategy in government?”
Or is it closer to the truth that, whilst Vince tried to build UK manufacturing strengths, he couldn’t single-handedly reverse thirty years of financialisation, especially in a Coalition which set its face against borrowing to invest?
It doesn’t make much sense to make steel here in the UK from imported coal and iron ore. We have high energy costs. Better would be to make it somewhere hot and sunny where much of the energy can come form concentrated solar power. I’m not convinced that there’s a good supply chain argument for uk steel either. That said, we clearly need to look after those who lose their jobs in situations like this. The curren treatment of job seekers is poor. Citizens income would be a much better option than spending tax payers money trying to “pick winner” or slow down losses.
Richard Underhill (24th Oct ’15 – 3:22pm) – I agree, in part…
>”We should be making more cars out of …”
Well the drive to fuel and emissions efficiency is and will continue to drive down the weight of cars and lead manufacturers to invest in strong lightweight materials. Comparing my 2002 car with my more recent car, it is is significant to see that ‘plastic’ is being used for structural elements. To my mind we probably need to reduce the ‘safety’ of vehicles if we really want to see significant weight savings.
>”What happened to the option to build a second Channel Tunnel?”
Well I remember on a previous LDV discussion bringing this one up, given the significant lead and build times on such a project this is something we perhaps should be starting to talk about…
>”Should we have others, to the Isle of Wight? to the Isle of Man? to Northern Ireland?”
Well I brought up something similar in the HS2 debates, saying that if economic development, engineering prowess and reducing airflights were important then we would route a joined up high speed line from the channel tunnel, through London, Bristol, Cardiff, Dublin, Belfast, Glasgow and potentially terminating in Aberdeen… The laugh being that correctly structured we would most probably get EU funding towards the cost and so it could end up costing the UK taxpayer the same as the high-speed London-Birmingham shuttle…
@ Jenny – “It doesn’t make much sense to make steel here in the UK from imported coal and iron ore. We have high energy costs.”
**cough** “The climate change levy, perhaps?
jedi.. not really. Long term, although we have a fair amount of wind, that’s not enough to drive heavy industry. It makes no sense to build sevearl thousand mile long HVDC lines to bring concentrated solar here when you can put the plant in the hot sunny place. We’re importing the coal and iron ore anyway , so it doesn’t really matter where it is. As I said, we should be providing much better support for people that lose their jobs as the world changes . The Full Monty is not an industrial strategy. Simiilar remarks apply to cement, and aluminium.
Hi William, thankyou for this article-it is very relevant.Jennies point about sourcing heavy industry close to suitable supplies of green energy is very well made.I think it must be cheaper to transport sheet steel than cars- so our automobile industry might not be too badly affected. Your point about graphene ,the wizard and the Chinese is very worrying. He was soon claiming that it was JC who was the national security risk.
“As I said, we should be providing much better support for people that lose their jobs as the world changes . ”
Jenny, that is putting the cart before the horse, to provide jobs we need a coherent industrial strategy.
Without jobs there isn’t the wealth/income to pay for the support you are asking we give to people who lose their jobs.
It seems that in order to get expensive infrastructure projects off the ground the Tory government’s answer is foreign investment. This is a win/win for the Tories. They can claim credit for these projects without any detriment to the budget deficit. And what a wonderful opportunity for the Chinese, who love investing in this sort of thing.
This exposes the lack of willingness by British investors to put money into British infrastructure projects, as well as British innovation. It has always been the complaint. Does anyone have any real data to back up or refute this assertion ?
Both the UK steel and aluminium industries are under threat from all directions, as we are all well aware.
As technology advances, it may well be that in the next 20 to 30 years these industries will be in terminal decline worldwide.
Graphene is one reason, as it looks to be the material of the future.
Aluminium technology is set for a revolution as well. California based HRL is working with Boeing and NASA to produce a microlattice of tiny interwoven tubes of aluminium material reducing the weight of a sheet of aluminium by 50%, while doubling its strength.
For the UK to be in the forefront of this kind of exciting and innovative research our investment banks need to be encouraged to invest more and spend less time innovating products just to make money and avoid tax.
Any one for a well funded Green Investment Bank ?
“This exposes the lack of willingness by British investors to put money into British infrastructure projects, as well as British innovation. It has always been the complaint. Does anyone have any real data to back up or refute this assertion ?”
Well the deals with the Chinese et al shows that the Conservatives don’t have the backbone to invest in Britain!
Remember it wasn’t that long ago that the Conservatives were talking about creating a “Sovereign Fund” which it would get our pensions fund to invest into. Out of this £100+bn fund they were going to fund new infrastructure projects like: new nuclear, high-speed rail…
Additionally, we saw that Labour had zero faith in British skills, by firstly selling of BNF to Toshiba and then selling nuclear generators to EDF…
But then Margaret Thatcher did get the channel tunnel built and managed to attract private investment to the project…
The trouble with major infrastructure investment is getting to a break even point and then making a profit. Naturally the way the deal is financed has a big impact on just how far out the breakeven point is. We are seeing just how important this is with the costs of Hinkley Point. Yes they going up, massively, because the interest on the monies spent on construction is being factored in; hence why an estimate of £16bn has become £24.5bn. However, that isn’t the final cost. Because once up and running there will be a period of several decades, the last estimate was circa 35 years (with the plant having a design life of 50 years), where the plant will be operated at a net loss because all revenues will be consumed in operating the plant and servicing the debts. Hence why the government has had to agree to a tariff of £92.50 per MWh…
Interestingly, the government isn’t being so forthcoming about the true costs of HS2…
In my opinion, we need a “Sovereign Fund” (and a Green Investment Bank) into which we make regular investments (at least 0.7% of GDP pa?). The benefit of such a fund is to make it normal to think about and include very long-term investments in our normal financial planning activities, thus get away from major infrastructure investment being exceptional expenditure. With the government’s current approach to major infrastructure project financing and delivery, we are moving even further away from creating an internal (ie. UK) investment market and delivery capability.
The Chinese are not ‘investing’ in any meaningful sense. They get a guaranteed return from the taxpayer. What is really happening is we are borrowing from the Chinese and imposing a tax on householders in order to fund repayment. Of course we could do this much cheaper by just borrowing directly from the money markets but this wouldn’t fit the Tories political narrative on debt and borrowing. So as a country we waste a ton of money on an off-the-books financial wheeze just to maintain Tory spin. We get the wool pulled over our eyes then we get presented with a bill for the wool.
AndrewR – very well put!