Why “Built in Britain” is not always Best for Britain

If you’re a remainer, if you’re for an open Britain, if you’re a liberal, there’s little to cheer in Jeremy Corbyn’s latest policy announcement; helping firms make the most of the “opportunities” of Brexit by ending a “reliance on overseas workers” and returning government contracts to the UK from overseas, seemingly without any concern as to the costs.

If there are any opportunities in the UK leaving the European Union, which appears increasingly doubtful, they are certainly not to be found in either the scapegoating of migrants or economic protectionism. The language of Jeremy Corbyn in his speech was more befitting of Donald Trump’s “America first” agenda than that of the leader of the UK’s largest so-called ‘progressive’ party.

As Liberals, we not only understand the benefits of the free movement of people, but also of free trade. Free trade provides a greater choice of goods for UK consumers at more competitive prices, and provides UK exporters with the opportunity to do more business abroad. As noted in Liberal Democrat Newswire recently, Liberals have also had a long tradition of backing free trade “as an engine of peace, building links between nations and promoting a cooperative rather than a military interventionist approach to international problems.”

Corbyn’s notion that Brexit is of benefit to business is false, as the advantages gained by exporters by the fall in the Pound have been offset by the higher cost importers now face. It’s also worth noting that the division between importers and exporters is somewhat misleading. Many UK businesses will import raw materials and then export finished products, and even if on balance the pound’s fall can benefit them, the burden of cumbersome post-Brexit customs rules will likely more than offset this.

More to the point, Corbyn’s policy of seeing foreign business cut-out of UK markets wouldn’t exactly be taken sitting down by other nations. Any barriers we throw up are likely to be reciprocated by other countries in retaliation.

Corbyn raised the recent ‘offshoring’ of passport production to France, suggesting that the workers of De La Rue would now miss out. No doubt De La Rue would have appreciated the British government refusing to consider foreign bids. Then again, perhaps only in the short run given De La Rue also have currency and identity production contracts with two-thirds of the world’s countries. The success of Corbyn’s scaled up ‘buy local’ policy presumes no business would be lost to countries ending contracts with British businesses – a tall order.

Closing Britain off to the rest of the world is to everybody’s detriment; if Jeremy Corbyn were serious about rebalancing the UK economy away from financial services and the City of London, then he would instead look to make other areas of the UK economy more competitive in the global market. This should be done by focusing on what we as a country currently do best, in particular investing in our world-class research and development industries, as well as creating the economic conditions in which our creative and digital industries can thrive, including investing in ensuring that everyone has the required skills to work in such areas.

It is fanciful to believe that we as a country can turn back the clock and hope to compete once again at mass low-end manufacturing; not when costs are always likely to be lower in emerging economies with better access to natural resources and low-paid workers. However this is not something to be ashamed of; rather than following the Corbyn approach of taking a rose-tinted view of Britain’s past, we should aim to embrace the future, seeking to play a full role in the globalised economy, taking advantage of its many benefits, whilst at the same time providing workers with the skills and the safety net to allow them to flourish within it.

* Andy Briggs is Co-Chair of Liberal Reform, a pressure group for personal, political, social and economic liberalism.

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86 Comments

  • Nonconformistradical 30th Jul '18 - 10:48am

    “if Jeremy Corbyn were serious about rebalancing the UK economy away from financial services and the City of London, then he would instead look to make other areas of the UK economy more competitive in the global market. This should be done by focusing on what we as a country currently do best, in particular investing in our world-class research and development industries, as well as creating the economic conditions in which our creative and digital industries can thrive, including investing in ensuring that everyone has the required skills to work in such areas.”

    There are also essential areas where we don’t necessarily do well – and need to do very much better – such as quality of housebuilding – which isn’t great. And we need many more (cost-effectively built) homes but they need to be built properly – not ending up with a multi-page snags list.

    http://www.brand-newhomes.co.uk/why-new-homes-are-poor-quality.htm

  • Steve Trevethan 30th Jul '18 - 11:04am

    How is trade free when it relies on low paid workers in any activity?
    Is the importation of cheaper goods produced by the economically, and therefore politically weak, liberal or democratic?

  • @Steve Trevethan “Is the importation of cheaper goods produced by the economically, and therefore politically weak, liberal or democratic?”

    How do you think the economically weak improve their position? By free trade.

  • I really wonder about ‘Liberal Reform’ this is an example of their thinking. On the one hand we bemoan the lack of British industry (and the lack of ‘home grown’ expertise) and, on the other seem to believe that steps to ensure both are illiberal.
    In 2002 Dyson moved production to the far east making 800 redundant in Wiltshire and now it looks like another 240 are losing their jobs; try explaining how low cost overseas contracts are a good thing to those affected? No wonder Jo Swinson’s hubby lost his Wiltshire seat if your position was put to the electorate.
    Post Brexit there will be a clamour from the ‘Rees-Moggies’ that we, as a nation, are uncompetitive and that a drastic reduction in employment rights will be the answer. If profit, as you seem to suggest, is the sole arbiter of where and how, I despair of this country’s future.

  • It’s clear that anyone who supports a Liberal view of the world must see the importance of building interconnections through trade.

    We are seeing this currently in the absolute chaos being caused by Brexit, in which the complex supply chains required by modern manufacturing are being blown apart with huge economic damage.

    I struggle to understand those who see free trade, global competition and co-operation as a threat as identifying as Liberals.

  • Toby Fenwick 30th Jul '18 - 12:12pm

    It’s almost as if the Corbyn brains trust skipped class the day that “comparative advantage” was discussed….! This is an excellent article, and it rightly makes a mockery of the entire Corbyn economic programme, if indeed it even qualifies for that term. Corbyn’s speech also helpfully demonstrates the scale of the opportunity for the LibDems in presenting sensible liberal economic policy.

    @David Raw: the Fleet Solid Supply ships that Corbyn was referring to are *not* warships, so it is entirely reasonable to assume that GOM, Asquith or DLG would have embraced international competition to ensure best value for money for the British taxpayers. You overlook the point that if the British yards really wanted the FSS work, they’d make a competitive bid, rather than (De La Rue style) assuming that the work would come to them and bidding an uncompetitive price.

    Are you proposing to accept any bid at any price as long as it is made in the UK? Are you prepared to increase the defence budget to cover the additional “made in Britain” costs? If so, what would you cut, or which taxes would you raise?

  • I confess to being a little conflicted on this. Free Trade is obviously (or perhaps not so obviously) a good thing. But how many countries allow people free movement to work wherever they wish. Government has a duty to try to ensure that there is something approaching full employment for their citizens and it may well follow that it is necessary to favour home grown labour over those from overseas.
    Example : How many able young Britons would have liked a career in medicine, and yet we limit training places and import NHS doctors from developing countries, to the detriment of their health services. The Indian tax payer subsidising the NHS, is that really what we want ? Or just an example of the law of unintended consequences ?

  • Ha-Joon Chang contends that the Cobdenite free traders were, in fact, seeking to ensure that by “comparative advantage” Germany and the United States in particular remained low value agricultural specialists letting us get on with our high value technological advance 🙂

    Oh, and @Chris Cory – we limit medical training opportunities because the monopolist wants to keep their earnings up. The BMA and AMA abetted by the GMC and FDA respectively, have been protectionist rent seekers par excellence throughout their existence 🙂

  • Simon McGrath 30th Jul ’18 – 12:20pm……[email protected] Expats – Dyson moving some work outside the UK means they can continue to be a huge investor in the UK by making competitive products…………………@David Raw -the Govt ( rightly) isnt building warships overseas……

    If we follow the reasoning tha moving production overseas is beneficial then if ALL manufacturers move production overseas then, although we won’t actually ‘make’ anything, we’ll be better off.
    As for the ‘warships’ not being ‘warships’…I posted this on another thread…”That is the government argument, i.e. “They are not warships in that they will not have fighting role” and that, they are Royal Fleet Auxiliary ships supporting the fleet.
    Well that is the theory, but RFAs have been tasked with fighting anti-piracy and disaster relief (roles previously taken by ‘warships) in recent years, so the term ‘warship’ has become blurred and RFA’s may well take on further ‘front line’ duties, especially as our Type 45s are unable to operate in ‘warm’ water.

  • Geoffrey Payne 30th Jul '18 - 1:07pm

    It is worth remembering that the Blairite wing of the Labour party were also going down this road as well.
    By inclination I support free trade and free movement of labour but this whole business about Brexit and the growth of the extreme right in the EU and US is to do with people on low incomes feeling they are having the incomes driven down by more competition in the jobs market place.
    Bearing in mind that for many people perception is stronger than logic, if the author could tackle this issue then his article might be worth reading.

  • Peter Martin 30th Jul '18 - 1:12pm

    RIght. I’m told, by those who know more than myself about these things, that the Russian SU35 fighter jet is very good value for money and more than a match for NATO planes costing twice as much.

    So we buy them instead?

    I for one am not 100% convinced that Chinese telecom equipment, whilst competitively priced, doesn’t have secret backdoors to allow eavesdropping. Even worse, the possibility of the Hinckley Point power station being sabotaged by remote control!

    We have to do some essential things for ourselves. We have to earn our living in other ways besides selling Govt bonds!

  • Andy Briggs 30th Jul '18 - 1:29pm

    @Geoff Payne

    “we should aim to embrace the future, seeking to play a full role in the globalised economy, taking advantage of its many benefits, whilst at the same time providing workers with the skills and the safety net to allow them to flourish within it.”

    Perhaps you didn’t read this far, but I clearly have voiced the need for improved education standards and safety nets for those who currently feel left behind.

  • Comparative advantage is not absolute advantage. Absolute advantage refers to the ability to produce more or better goods and services than somebody else. Comparative advantage refers to the ability to produce goods and services at a lower opportunity cost, not necessarily at a greater volume.
    For free trade to work well there needs to be present both comparative advantage and relatively balanced trade with the rest of the world.
    When Britain was the workshop of the world, the economic model of importing raw materials and exporting finished goods was fairly clear although this model prevented neither unemployment of widespread poverty.
    In an age of automation countries with access to a pool of low cost workers do not necessarily have an absolute advantage. As technological progress allows the production of manufactured goods at ever greater volumes and lower costs the focus should turn from capital intensive manufacturing to labour intensive services and in particular how to achieve an overall trade balance in a service economy.

  • If all economic activity is internationally interdependent then there can be no wars without national self mutiliation.

  • @Jenny Barnes “The ex – coal miners, steel workers, ship builders, etc. looked around at the economy and while they could, no doubt, see that the hedge fund managers and banksters were doing really well, it didn’t help the size of their parcel at the local food bank.”

    Coal, Steel and Ship-Building were all state-owned monopolies kept going long beyond their sell-buy date by government, who thereby exacerbated the problem when finally they had to close, for short term political gain (client vote communities).

    Working class culture also mitigated against many working in those industries seeking to upskill / move into white collar “boss-class” jobs.

    Entrepreneurial spirit could take highly-skilled workers with translateable skills (wind-turbines anyone) and employ them in new, disruptive technologies where there would be a new comparative advantage. Unfortunately we have pervasive culture of people expecting things to be handed to them on a plate.

  • Toby,
    I suggest you read wolfstreet.com and their coverage of ship building in the far east, they don’t do “free trade” they do protectionism and building ships at cost or below cost. This fetishism about free trade is a worry, it doesn’t exist it never has existed, it is as real as the hidden hand of the market. In the real world trade is driven by power, give away your manufacturing and wealth creation and you won’t be rich for long. If Brexit teaches us anything an ideological approach to poltics is dangerous, settle on your priorities and find a practical way of achieving them, something ideology seems to fail at everytime (both from the left and the right).

  • Lorenzo Cherin 30th Jul '18 - 2:27pm

    Why is the answer to something some people do not like, considered to be the opposite of it?

    The reason I identify as being in the radical centre and moderate centre left is that I see the solution to something as containing elements different but not the extreme reverse.

    The trouble thus, here, with this on the whole positive and liberally sensible article, is the same as the on the whole negative and totally critical reactions, they go all of them, too far in one direction.

    There is in this article the reality of a situation, the acceptance of globalisation. There is no analysis of its faults at home or abroad.

    Workers rights to do something and be paid well are understandable and correct. Here they were won and are often lost. Constant lowest bidder in other nations eventually shall and correctly, lead to movements in those countries for better pay and conditions.

    We should build what we can here if here we have the talent, indeed the money should be invested.

    We should have free trade so that those and internationally based products can compete and at times even cooperate in the providing of goods or services.

    We should have freer movement than the protectionists want, more restricted than the laissez fairists desire, because the environment, supply ad demand for public health or education, is itself in need of or at present controlled, thus a free for all brings loss of quality because of lack of supply.

    The middle way, the area derided by the left and right, the New Communists and Alt Rightists, is the only way to find a solution and is radical in it is wise for it is a wisdom based on reality and aware of humanity.

  • Paul Reynolds 30th Jul '18 - 2:28pm

    Before the fall of the Berlin Wall, the standard ‘development model’ promoted by the Soviet Union to its client states round the world, from Mozambique to Vietnam, included import substitution, high tariff barriers or quotas, restricted licensing, directed state credit, heavy-industry industrialisation via protected state firms, and oppressive restrictions on private business and ‘speculators’. This was the model supporters by Corbyn when I came across him in the 1980s. He has since not changed his views it would seem, and he has been careful never to contradict the old model, although I note that these days he keeps his full opinions to himself. His new industrial policy is just the tip of the iceberg. I have met many younger Momentum supporters who idolise Corbyn, and speak of a ‘new communism’ without the oppression and absence of human rights. Few seems to have knowledge of the unintended and negative consequences of this model… neglect of agriculture and non-favoured sectors, low wages & poor working conditions (the state becomes a monoply purchaser of labour), high prices requiring subsidies, artificial exchange rates making foreign travel impossible, mega-scale corruption, and crumbling infrastructure as the state runs out of cash. These well-meaning folks seem to have no knowledge of why oppression and restrictions on inviduduals (and a one party state) are wholly necessary for the model to work. For example wages have to be supressed, ‘workers’ have to be banned from changing jobs, the media must e controlled, and the highly skilled banned from leaving the country. Whilst the current ‘crony-based, quasi-monopoly capitalism’ in the UK has its many failings, these failings in the end become wildly exaggerated under this model that Corbyn supports.

  • Paul Reynolds 30th Jul '18 - 2:38pm

    Having just read a couple more comments I am minded to point out that probably in Corbyn’s mind, when the Berlin Wall was demolished, hundreds of thousands of West Germans flocked to East Germany for the better lifestyle and greater freedom.

  • Sue Sutherland 30th Jul '18 - 2:43pm

    Jenny I absolutely agree with you. The economic benefits accruing from membership of the EU have been inadequately shared and Brexit was the result. Adam, people don’t just “feel” left behind, they are left behind. We support free movement of people but forget that those who live in social housing in this country do not, in practice, have the freedom to move within their own country unless they are willing to give up their tenancies.
    The people who have suffered from “free trade” do not only do so financially through low pay, but also because measures to protect their safety at work have been stripped away through the privatisation process here and in developing countries that protection doesn’t exist.
    Trade between countries has always been valued by Liberals because it promotes trust between those countries and Cobden worked hard against the kind of protectionism Trump is now exhibiting. The Free Trade movement grew from the campaign against the Corn Laws which protected the profits of landowners by tariffs on foreign imported cheaper grain. People were dying because they couldn’t even afford the basic food – bread. Free Trade was a cry to protect workers not exploit them.
    Time, and commerce and, thankfully, poverty have moved on since then and we must move on too. Fair trade should be the cry for this century

  • @Sue Sutherland “We support free movement of people but forget that those who live in social housing in this country do not, in practice, have the freedom to move within their own country unless they are willing to give up their tenancies.”

    Doesn’t that point to a huge problem with the social housing state monopoly model, rather than a problem with Labour mobility?

  • Toby,
    You also completely forgot about merchant cargo. Without a capability to build merchant cargoes for replacement, the UK would have had to capitulate against German Uboat campaign.

    JoeB
    So we have to forgo the majority of our manufacturing except for some small niches based on that theory? No, such thing would make us a toothless nation. Comparative adavantage in manufacturing can be acquired via learning and experience. In other words, we can actually rebuild our steel and shipbuilding industries from scratch, but with high-tech approach in order to compete with cheaper nations. Instead of using cheap labour, we can use robots to build ships.

    Not only defense industries, but direct supplier industries should be protected to some extent. For example, electronic equipment industry. I don’t want our army or navy to be equipped with Chinese equipment contain a hacking device within it.

    Andy Briggs – Russian Su-35 are very cost-effective, but we should not buy them. Retraining workers, but where will you put them when all manufacturing industries disappear except for some small niche? You don’t want all of them to become bankers or hedge fund managers, and actually most of them can’t.

    Oh, you can protect industries without using high tariffs. Government subsidies and procurement such measures. You can also levy VAT on consumer goods that are mostly/wholly imported, such as rice, spices, herbs… (actual rates will be based on the necessity of the consumer goods). One of our problems are over-consumption and low savings, and it will be wise to encourage savings and curb over-consumption.

    Any industry stragtegy will go to the toilet if you cannot develop a domestic supply chain to provide intermediate parts and components, i.e. most or all components have to be imported. For example, when we try to develop our wind energy industry, we must also equally emphasize support manufacturing industry/wind energy equipment manufacturing industry.

    Peter Martin – sorry to tell you that countries with export-led/Swabian Housewife will be far less exposed to such problems because they can make such equipment themselves unless they are underdeveloped countries exporting raw materials.

  • Daniel Carr 30th Jul '18 - 3:11pm

    Worth keeping in mind here that Corbyn’s main example in the speech was of a UK company losing a contract to a French one.

    The French hardly have a laissez faire labour market, so many of the comments bemoaning that issue seem a little misplaced. Corbyn wants out of the single market as he thinks doing business with countries like France is not OK when it means local businesses lose contracts. I very much worry about what trade policy he’d pursue if elected if that is his analysis.

    More broadly, the problem with this ‘buy local’ mentality is that we here about every government contract a British business loses domestically, but never hear about it when we win a big contract abroad, leaving people with a very skewed perception of what is happening. It’s just like how we’re now hearing of all these US companies suffering from the Trump tariffs due to their input costs soaring, and retaliatory tariffs damaging their exports.

    Policy prescriptions from Trump and Corbyn sound great, but only if you don’t consider the logical response of all trading partners.

  • Lorenzo Cherin – That’s why I want a public-private cooperative and state-indicative approach regarding industrial strategy, where the government provides guidance and support to companies, but the firms will not be shielded away from international competition. To make all of such things possible, we must incorporate an export-led model into our industrial strategy, because with an emphasis on export, firms involved in industrial strategy are still.subject to competition in the end. Politically, something that helps curb trade deficit will be attractive.

    Paul Reynolds – “directed credit”. While I don’t support such thing, I actually believes that credit to consumer loans and real estate speculation must be and instead channelled to real businesses, especially SMEs. “Protected state firm” – certain industries must be shielded, especially from foreign takeover – on national security ground, and Mr. Macron of all people also has such agenda. “Import substitution” – some import substitution measures actually should be a plan B if we fail to prevent Brexit. Again, this exists in Macron’s En Marche platform, if you want I can post the translated quote.

  • @Thomas “I want a public-private cooperative and state-indicative approach regarding industrial strategy, where the government provides guidance and support to companies,”

    What makes you think that Government knows better how to run a competitive business than business people do?

  • The more foreign ownership, job offshoring and open borders the better.

  • Daniel Carr – In this case, context matters. In defense related sectors, you don’t want a Chinese contractor wins the contract even with lower price, for their equipment is very likely to contain hacking devices and secret backdoors of all kinds. Also, in new/infant industries that involve the government as a major customer, it’s necessary for the government to award contracts to domestic producers especially at their early stages, until they mature and can compete by themselves.

    Unlike Trump, generally I don’t encourage the use of tariffs because they are to blatant and can easily trigger retaliation, unless they are in line with EU anti-dumping tariffs. However, public procurement and subsidies remain within the hands of our government. Regarding subsidies, I want a fund to be estiblished for the purpose of subsidize firms’ adoption of automation and energy efficiency technology, as well as private-sector R&D spending.

  • Toby Fenwick – You overlook the point that if the British yards really wanted the FSS work, they’d make a competitive bid, rather than (De La Rue style) assuming that the work would come to them and bidding an uncompetitive price.

    This does raise the question of just what is a competitive bid. I suggest because the companies and workers reside in the UK, it isn’t necessarily the lowest bid, because this fails to take into account the flow of monies and taxes (if the workers continue to be employed) or the flow of welfare (if the contract is placed overseas and so workers are not taken on or are laid off).

    In assessing this, I do take note of TCO’s comment “Coal, Steel and Ship-Building were all state-owned monopolies kept going long beyond their sell-buy date by government”. So there is a grey line between keeping a (UK resident) business going and keeping it going for the sake of it.

    So I suggest that actually Andy Briggs is missing the point by focusing on R&D, what the government needs to be doing is creating a more adaptive workforce, where the norm isn’t a job for life but jobs for life combined with lifelong learning/reskilling, ie. change the work culture. This however, comes face-to-face with traditional UK/English us-and-them culture. TCO kindly points out that “Working class culture also mitigated against many working in those industries seeking to upskill / move into white collar “boss-class” jobs.” however, we should not forget that this is largely a reaction to Upper/ruling class culture and its disdain for getting its hands physically dirty. [So in some respects whilst Brexit is likely to be a total unmitigated failure, there may be some cultural benefits… ]

  • @Thomas “In defense [sic] related sectors, you don’t want a Chinese contractor wins the contract even with lower price, for their equipment is very likely to contain hacking devices and secret backdoors of all kinds.”

    You don’t think US-supplied equipment has the same hacking/secret back doors?

  • TCO – many reasons:

    – Government is often the main investor in basic research, which may not generate income statement profits even in the long run. In some case, the expenses can be too huge that only the government can bear the risk.

    – I always like the way the military (public) sector and the civilian sector in the US cooperates. The Silicon Valley is the result of such cooperation, with entrepreneurs maximize the basic technology invented by the government/military.

    – Government can provide guidance to the financial sector to ensure that finance flows to real business, especially manufacturing, instead of real estate speculation, consumer loans or subprime loans of all kinds. Curbing over-consumption and encourage savings are desirable.

    – Manufacturers may not be able to apply newest technology such as energy efficiency or automation because of resource and skill constraints. Government can help them via various forms of support and subsidies. I want as many manufacturers as possible to automate their production lines, and this will lead to a massive productivity boost given Britain’s lag in automation. You know, South Korea employs over 600 robots per 10000 industrial workers, yet has lower unemployment rate than the UK.

    – A pivotal measure employed by Japanese and Korean policymakers to improve business efficiency is to both encourage and pressure manufacturers to export. And I don’t have to remind you that most studies show that engaging in export business have positive impacts on manufacturing firms’ productivity.

  • @Thomas

    Why do you think we all have to become bankers or hedge fund managers? Our tech sector’s thriving, our start-up culture’s thriving, so is medicine R&D and R&D in various other sectors. When you say you want to bring manufacturing back to Britain, what do you mean? Our labour force will never be able to compete with developing economies precisely because we’re too rich – we’re a post-industrial economy now. We don’t concern ourselves with the end process anymore – we instead do the big thinking behind all of the big manufacturing projects. This is all natural as we become a much more educated society.

    @Roland

    I love your “jobs for life” over “a job for life” idea. I’d encourage everyone to look into Denmark’s “flexicurity” model where the labour force is encouraged to retrain and move on, retrain and move on etc.

    https://en.wikipedia.org/wiki/Flexicurity

    Ideas and tech are moving far too fast in the world now to stick with 1 job.

  • Toby Fenwick – you know, mature/developed firms are more capable of making competitive bids than either young firms at early stage of business life cycle or declining firms. British shipbuilders are generally among these two groups, but mostly the latter.

  • Zak – tell that to Germany.

    I know that we cannot compete in things like textile and garment. But the UK even lags in high-tech stuffs, such as electronics, robots, machinery or machine tool. In fact, we lag very far behind other OECD nations in the adoption of automation in manufacturing. South Korea employs over 600 robots per 10000 industrial workers?, followed by Japan and Germany (each around over 300) and all of them have lower unemployment rate than the UK. And a study have shown that a large-scale retool towards automation would deliver a huge boost in national manufacturing productivity.

    Shipbuilding can be recreated into a mid-to-high tech industry. At least we must maintain a shipbuilding industry capable of supplying the whole RN, both warships and support ships alike.

    And regarding aerospace, Britain no longer has the capability to make a whole aircraft, military or civilian alike. But, this was because of Labour/Tory mismanagement over the last century.

    Steel and shipbuilding sectors are more of mid-tech industries, but they are vital to national security.

  • Toby Fenwick 30th Jul '18 - 4:12pm

    @Frankie: if there is dumping, then the Government should take the countries concerned to the WTO. But be a little bit careful – many goods (like ships or commercial aero engines) are sold at a loss with a profitable service contract attached – indeed, Rolls Royce’s service revenue is now 52% of the total. Let any yard bid for these three ships (and the military conversion works will occur in the UK anyway, as it did for the Korean-built Tide-class tankers), and let’s see what the bids are.

    @Thomas: are we speaking the same language? What proportion of the UK merchant fleet or ships that service our ports were built in UK yards? Almost none….. if we end up with WW2-style Battle of the North Atlantic, I’ll get right back to you.

  • Toby Fenwick 30th Jul '18 - 4:19pm

    @Thomas: sorry, I just saw your 3.55pm comment.

    I don’t agree about the provenance of UK yards (and in fact there’s only one yard in the UK large enough to assemble the blocks for FSS, which is Roysth), and if the yards are in decline, why stave off the inevitable? However, for the sake of argument, let’s accept your premise.

    Q1: How much more are you prepared to spend on having these two (or hopefully three) ships built in the UK?

    Q2: Who will fund that additional cost? It seems harsh to expect the MoD to do it for industrial policy, so you could ask BEIS or the devolved administrations, but I don’t see any of them footing the bill, either.

    Q3: If no one else is prepared to foot the bill for the additional costs of the British build, what are you prepared to cut from Government spending to fund it? Alternatively, which taxes will you raise, and how much?

  • Toby and how many divsions do the WTO have. What do you mean I hear you cry they can’t implement decsions without power and with Trump looking to pull out what power do they have; very little. Your faith in WTO is touching in reality they are a paper tiger. A hard fact in live and in trade those that have the power make the rules; I wish it wasn’t so but it is. Those putting their faith in toothless organisations or ideologies are doomed to disappointment. As to let’s get rid of manufacturing, well that’s fine until you can’t pay for goods at which point you are stuffed and no amount of free trade ideology will change that. As an aside where did all these new posters come from are they part of a club?

  • David Evans 30th Jul '18 - 4:56pm

    Toby Fenwick – How much extra income tax etc would the country collect if it did the work in the UK?

  • Toby Fenwick 30th Jul '18 - 5:24pm

    @Frankie: The WTO is anything but toothless – look how it allowed Antigua and Barbuda to take on the USA (https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds285_e.htm).

    And I’ve no idea about new posters – I specialise in defence and foreign affairs, so the FSS debate is very pertinent. As long as they promote polite informed debate, the more the merrier!

    @David Evans: You can come up with some rough numbers based on the wages paid in the process, and feel free to add them into the mix. But the fleet tanker contract, won by DSME in Korea, attracted no UK bids, and the approach of industry and the unions to FSS is about limiting competition, not making the case based on a best available bid. They’d do a lot better to make the best they can, and then make the case on taxes – I can only presume they don’t because they won’t come close, and therefore want to foreclose competition.

  • Sue Sutherland 30th Jul '18 - 6:29pm

    TCO I don’t think it’s a problem with the way social housing is provided. It’s a problem of a lack of response to strategic unemployment, so, if we had a government that thought about these things, government would have a role in enabling social housing to respond to changes in the economy. Of course we need far more money to be invested in social housing but we also need more housing in areas of high employment so people living in social housing can can take advantage of job opportunities in those areas. Housing providers are usually quite reluctant to include social housing in their developments so the market doesn’t provide an answer here.

  • As I just argued in another thread – trade is not a zero sum game. If you have bananas and I have strawberries then we can both trade, have a fruit salad and improve our “happiness/pleasure” (maximise our utility in economic jargon).

    If China makes cheaper smartphones then we all benefit by having to spend less on them. A modern economy wins not by churning out masses of low added value goods with high labour input. It wins on two fronts. By using its intellectual prowess and high infrastructure to make high value-added goods – using automation, robotics etc. Even on smartphones – a lot of the value comes back to developed (“western”) economies through the intellectual property in the software and chip design, marketing and brand value.

    The second is through exploiting intellectual property – where the cost is in the first copy and the marginal cost is almost zero. Films, tv shows, patented medicines, software, the branding, internet sites such as facebook and google etc.

    Clearly we operate as tribes – today the nation state – and we want our tribe to succeed and win – in the hope that we do too. And we want to grab a big share of the cake. But the trick is to realise that it is not a zero-sum game and grow the cake.

    Clearly we want Government spending to be as much as possible in this country. But if something is more expensive in this country then that is less money for the NHS. It may well be that where something is assembled is not an accurate guide to its content. Complex machines in particular have parts from all over the world plus intellectual property etc. So something assembled in Britain may be less British than something assembled abroad. And as has been pointed out elsewhere if we expect foreign Governments to spend money with British firms – it is highly likely that we will have to spend money with their firms.

  • David Evans 30th Jul '18 - 6:46pm

    Ah Toby, I thought, based on you being a serious policy guy, when you asked Thomas “If no one else is prepared to foot the bill for the additional costs of the British build, what are you prepared to cut from Government spending to fund it? Alternatively, which taxes will you raise, and how much?” you had done the maths and deduced there were still extra costs and so extra taxes were needed or cuts made.

    If you haven’t, perhaps you could have made it clear that you hadn’t allowed for that, as it could look like you were just flying a kite and hoping no one picked you up on it.

  • David Evans 30th Jul '18 - 7:04pm

    Michael1 – As I (and several others) have pointed out, it is by no means true that “if something is more expensive in this country then that is less money for the NHS.”

  • Steve Trevethan 30th Jul '18 - 7:15pm

    Is it realistic to discuss economic matters without reference to related social and political factors?
    Sometimes political powers hold down the pay of some sections of a society as we have seen here since 2008.
    Is this political protectionism?
    We have had/have needed skilled workers such as nurses starving to the point of needing to use food banks.
    Can any economic policy which causes this be considered to be socially efficient?
    Is/was it an economic or political policy?
    It is alleged that the garment industries in some countries rely on artificially and politically engineered low wages for their competitive advantage.
    Is it realistic to discuss free trade without discussion of the internal costs and distributions of the “nations” competing?

  • Toby Fenwick 30th Jul '18 - 8:03pm

    @DavidRaw @DavidEvans: Actually, you can both take back the ad homs, thanks. The maths of course is pretty complicated, because the amount in £ depends on the price, and any %ge amount depends on your assumptions about the proportion of the price which is labour, the proportion of the labour bill that lies in each tax and NI band, and what your assessment of the costs of universal credit for the displaced workers would be. You should reasonably assume that the corporation tax take will be minimal.

    In other words, it’s highly speculative, but I got to a figure of around 25% is probably about right – in line with CSEU, actually. What did you guys come up with from first principles?

    I’m perfectly happy (in fact, I’d be delighted) for a UK yard to produce a fixed-price bid backed by suitable performance bonding so that the MoD isn’t on the hook for price increases that aren’t it’s fault, within 25% of the best in the world price. After the failure of a single bid to come for the tanker deal, however, I have my doubts – doubts increased by the fact that we’re seeing a lot of lobbying to stop competition rather than competing to win.

    Happy? The point I’m making is that there is no national security need for this to be sourced in the UK, so it is entirely appropriate that we compete it.

    And @David Raw – I’m happy with my track record fighting the SNP, thanks….

  • Toby Fenwick 30th Jul '18 - 8:04pm

    @Arnold Kiel: precisely right.

  • @David Evans

    “As I (and several others) have pointed out, it is by no means true that “if something is more expensive in this country then that is less money for the NHS.””

    I appreciate the point that some of the money spent in this country comes back to the Government through taxation and potentially through the multiplier effect

    This doesn’t deal with all my other points though. And all Government spending has some “leakage” in this regard – money that is spent overseas and you would expect the NHS budget and other budgets to be spent efficiently. How many operations should the NHS cancel so it can buy, say, a more expensive computer from this country? Better may be to say do two operations instead of one and a foreign computer. In general if you are good at producing strawberries and I am good at producing bananas then we should trade so we can both have fruit salad.

    The Government propping up inefficient industries ultimately helps no-one and especially not the British economy. There have been quite a few examples – especially in the defence sector of the Government getting a really bad deal with poor quality equipment from Britain when they would have been much better off going abroad.

    As I say the “British” content of something assembled overseas may be less than something assembled here. And buying something cheaper overseas leaves money to be spent in this country.

    Overall we have a big trade surplus in defence – some $90 billion over ten years between 2007-16 against imports of some $20 billion – https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/631343/UK_defence_and_security_export_statistics_2016_Final_Version.pdf and via https://www.gov.uk/government/statistics/uk-defence-and-security-export-figures-2016

    Presumably most of this is bought by Governments – I have to say rare have been the occasions when I have popped down the shop for a inter-continental missile! It doesn’t mean that we would better off we stop our $20 billion of imports – in fact probably the opposite.

    1. You need to look at the actual “British” content
    2. Mostly it is in everyone’s interests to do what they are best at.
    3. Cheaper/better equipment may leave money over to be spent in this country and/or lower running costs etc.

  • Toby,
    I sugguest you Google “Trump WTO” and then come back and tell me how powerful WTO are. Their future doesn’t look good unless they start being the USA’s friend. As I said when push comes to shove power makes the rules, anything else is just polite make believe.
    He can’t do that, but he can just look at the Paris accord, the USA ain’t in that anymore.

    A sad but inevitable truth is ” If you lack the ability to enforce a decsion, it isn’t worth the paper it is written on”. The WTO can only enforce by consent and the consent is dying.

  • The point of free trade is that everyone benefits. Yes, I said everyone – even the “left behind” and the JAMs are better off now than in, say, the 1950’s.

    By allowing lower value work to be done in less developed countries, their economies grow and provide a market for our higher value work.

    In Corbyn-land, we would have more people stitching cheap clothes for Primark, and fewer building aircraft wings and engines.

  • I know that we cannot compete in things like textile and garment.
    Actually we can and do; albeit in certain sectors.

    Remember, part of the JIT culture is speed to market, so whilst we may not be able to directly compete on factory gate pricing, we can and do compete on delivered price. Yes this might be on small batch runs, or where speed is important. ie. areas where distance to factory is a long haul flight or several weeks on a ship.

    So the art isn’t so much giving up, but understanding the market’s needs and asking whether what we have can address them. This was the real value of the Single Market as it put a much larger market on the doorstep of UK manufacturers.

    It is effectively what the UK has done with respect to steel, yes we can’t compete in the general export market (and that is before Brexit), but by serving niches in the market we still have a steel industry.

  • Toby Fenwick 30th Jul '18 - 8:59pm

    @Frankie: Trump’s idiocy is self-limiting (and that excludes the likelihood of impeachment). His trade wars nonesense is already hurting those it is designed to protect – precisely because of the WTO allowing pin-point retaliation – hence the EU on Harley Davidson, leading to Harley moving jobs out of Trumpland (didn’t that work well, Donald?). So yes, the WTO is working, and ultimately the US will agree that its interests are best served by continuing with the rules-based system.

  • @Zak – Thanks for the reference, however you omitted a rather relevant and important point: The promotion of Flexicurity was included in the 2011 Euro Plus Pact, which was agreed by most of the EU, except Croatia, Czech Republic, Hungary, Sweden and UK…

  • David Evans 30th Jul '18 - 9:37pm

    Michael1 – As Toby has conceded, it is a lot more complicated than just hypothesising about “two operations instead of one and a foreign computer,” and then drawing some pretty wide ranging generalisations. It really does take some seriously hard econometric modelling. So while your point may be nice and simple, it could also be nice, simple and totally wrong.

  • Toby Fenwick 30th Jul '18 - 9:42pm

    @David Evans: I don’t recall conceding anything – merely demonstrating I’d done my homework and inviting others to answer some fundamental questions.

    Sadly, the fact that the UK yards and the unions are trying to undermine competition before it even starts means that they’re convinced that even making an argument around 25% tax take, they’re not going to get within a million miles of the bid price from abroad. You’ll find a 2014 report I wrote on the importance of maintaining competitive pressure in defence procurement at Centreforum somewhere – once they became EPI, I’m not sure where the archived papers went.

  • David Evans 30th Jul '18 - 9:44pm

    Toby, It’s not an ad Hom, more a searching and to the point question to someone who has made a debatable point and does have the time and contacts to at least make a start at an estimate as to the externalities and leakages, from someone who knows the theory, but certainly doesn’t have the contacts or time to do so.

    Let’s just say it is the politician in me. When faced with a point I think is questionable or potentially misleading by an officer or colleague, the question I always ask is why do you say that and what evidence have you to support it?

  • David Evans 30th Jul '18 - 9:54pm

    Toby, I’m sorry if you think I misrepresented you. But I think it is a fair conclusion to reach when as you say – “The maths of course is pretty complicated, because the amount in £ depends on the price, and any %ge amount depends on your assumptions about the proportion of the price which is labour, the proportion of the labour bill that lies in each tax and NI band, and what your assessment of the costs of universal credit for the displaced workers would be.”

    That to me is a fair bit more complex than ‘hypothesising about two operations instead of one and a foreign computer,’

    Perhaps you disagree.

  • Toby Fenwick 30th Jul '18 - 10:06pm

    Thanks @David Raw. It is complex, and I had a good look at the CSEU’s model, and it’s there or there abouts, though it is overoptimistic on corporate profits – ie, any SPV set up to actually contract this is likely to ensure that it pays no corporation tax, and the parents would too.

    I did write a pair of papers for Centreforum in 2014 on the importance of maintaining competition in defence for as long as possible, but they seem to have been lost in the new EPI website. I’ve asked one of the EPI guys to have a look tomorrow and if they find it, I’ll post a link. But the evidence is very clear – defence is not really that different to any other goods or services, and where competition is real, then performance improves much more rapidly than when it isn’t – the classic case is the US Air Force’s “Great Engine War” in the 1980s – seen her: https://www.amazon.co.uk/Air-Force-Great-Engine-War/dp/1410221741.

    Hope that helps,

    Toby

  • No Toby it is working because the EU has strength, not because of the WTO. If the EU was weak WTO would help, not at all. It isn’t helping the Ukraine against Russia now is it? Google WTO Ukraine and despair of your rules based delusion.
    PS Improvement in armaments is at its highest during wartime, look at the rate of technological advances that occur and that has nothing to do with markets.

  • Innocent Bystander 30th Jul '18 - 11:07pm

    Andy Briggs’ piece is partly right and partly wrong. Corbyn holds the view that lower sterling helps exporters because he has never set foot in a factory (probably rarely left London). It’s a naive view held by those who do not know that exports are made from imported energy, materials, components and sub-assemblies. He probably thinks (as do the lower form of economists) that our exports are still made from British coal and British iron ore.
    Where Briggs is wrong is his advice to give up manufacturing because low cost areas will always win. The Germans prove that such is not inevitable every day.
    Protectionism is a clear sign that our manufacturing industry is weak (it is) but I refute some urban myths.
    1. Mrs Thatcher destroyed it. No. I worked in heavy engineering on Scotswood Road Newcastle in the 70’s. The management bought a computer lathe. It was promptly ‘blacked’ by the union (ah! who can recall the word ‘blacked’, rare now but daily fare in all British factories then).
    The Prime Minister at the time? Why ! “Sunny Jim”.
    2. The government “bailed out” rich bankers. No. They rescued our money which was in the damned banks.
    3. You can have a successful industrial strategy just by wishing. No. They have been tried over and over again (I go as far back as Wilson’s NEDDY (look it up)) and they have all failed. Why? Corruption essentially. There are hordes of “intermediaries” who are supremely skill full at “scalping” every initiative that smug, but stupid, politicians come up with. No need for evidence. All government programmes cost several times more than any other governments. Just look.
    Any party that offers a ruthless clear out of our failed public sector will get the landslide the LibDems keep fantasising about.

  • @David Raw

    I COULD be wrong – I always entertain the possibility! So COULD you.

    I think rather than “nice and simple” – free trade is difficult and complex argument to make and it is protectionism that seems the “nice and simple” and easy option but I believe wrong option. Let’s wave the flag and earn a few patriotic brownie points with the electorate. Actually overall they are worse off.

    Money does come back to the Government if it spends it in the economy through taxation etc. – but there are a great many caveats to that if it is spending on more expensive contract because it is British.

    The first as I say the actual British content may not be much different. I think it was said that the average British assembled car effectively crosses the channel 8 times through partially assembled parts. The extra cost is coming out of the pockets of taxpayers who have less money to spend in the economy. And if the economy is at or near full capacity or that part of the economy is or the skilled workers are, this may not be much or any extra economic activity. As I also said the main purchasers of defence equipment are national governments with few individuals popping down the shops to get an inter-continental ballistic missile with their pint of milk. In that we are in surplus with other Governments and if we stopped entertaining bids from foreign companies then they might well do the same.

    As @Toby Fenwick alludes to, competition in any sector tends to be healthy and of benefit to this country and if foreign companies know that the Government is going to go with the British option come what may then that might lead to inefficient, bloated, lazy companies that is not of benefit

    The history of MOD defence procurement is disastrous with them often going for a more expensive “costs plus” British contract – the £3 billion plus waste on the Nimrod MRA4 plane being a prime example https://en.wikipedia.org/wiki/BAE_Systems_Nimrod_MRA4

    Clearly there are pros and cons and you can argue that if the British contract is 5%,10%, 25% more expensive it MIGHT (pr MIGHT NOT) be of net gain – but there is a lot to set against that.

  • Sorry it should be @David Evans rather than @David Raw

  • Toby Fenwick 30th Jul '18 - 11:53pm

    @frankie: Clearly the two are related – but the reason the EU is successful is not simply a question of power, but because it is clearly working through the rules-based system and that confers legitimacy of its own – notably, that Trump’s lacks, and his own team (let alone American business) are all too aware of.

  • Toby Fenwick – “I’m perfectly happy (in fact, I’d be delighted) for a UK yard to produce a fixed-price bid backed by suitable performance bonding so that the MoD isn’t on the hook for price increases that aren’t it’s fault, within 25% of the best in the world price. After the failure of a single bid to come for the tanker deal, however, I have my doubts – doubts increased by the fact that we’re seeing a lot of lobbying to stop competition rather than competing to win” – This is a ideal situation, but only if there is a competitive UK yard left. Assume that this is a case forced upon us, the first thing to do, let’s try to fix it, and to fix firstly you have to stave off the decline. Figure out whether the current problems involve management or technology, and I think both of them are problems. British management has been bad for decades, frankly since the late Victorian era, and the main parties have done nothing to tackle. Next is the technology problem. It’s very unlike for smaller British yards to offer a more competitive bid than larger, more technologically advanced Korean yards that benefits from economies of scale. Since the UK no longer involves in commmercial shipbuilding, its yards cannot expand to that scale (you must expand a plant to a certain size to benefit from economies of scale). Also, stats show that Korea has the most heavily automated manufacturing, with 600 robots used per 10000 workers, far exceedong the UK. This is an indication that other countries’ manufacturing sectors are also better equipped and more advanced than UK manufacturing, including shipbuilding and maybe except for auto industry. UK companies have been unwilling to modernize its plants because of resource constraints and industrial conservatism. Investing in modernize, computerize and automate factories require huge capital cost, and most British firms are too small to afford.

    And there is also a paradox, if British yards lack orders, they then will have to revenue to reinvest and will have to scale down its plants. They expertise and skills will continue to decline, and then their ability to mount a competitive bid will further fall – this was what happened with British shipbuilding during the 1920s-1930s, after ww1.

    Finally, if it is clear that British shipyards cannot be saved, let’s slow down the decline and make the inevitable transition less rough instead of letting them tank altogether.

  • Michael 1 – “In general if you are good at producing strawberries and I am good at producing bananas then we should trade so we can both have fruit salad” – And then world banana price slumps.

    “Complex machines in particular have parts from all over the world plus intellectual property etc. So something assembled in Britain may be less British than something assembled abroad” – Agree, but, let’s say: if British companies choose not to produce component part A from a British car and instead produce part B which they do better, it’s a purely rational decision based on opportunity costs/forgone opportunity. However, if British firms do not make part A because they lack skills and technology or their factories are less advanced, and thus lose the business to a foreign competitor, then this should be called a lost opportunity. And if such thing is an industry-wide problem, something must be done.

    When you talk about China, I don’t want the British government/military/intelligence to buy China electronic equipment that are very likely ro contains hacking devices, crypts, viruses or secret backdoors of all kinds. Imagine the British military buy a Chinese stuff for their control system that contains a piece that allows China to shut the system down via remote control.

  • Nick Baird 30th Jul ’18 – 8:30pm……………………….The point of free trade is that everyone benefits. Yes, I said everyone – even the “left behind” and the JAMs are better off now than in, say, the 1950’s……………..
    Were you around in the 1950s?
    I was and I don’t remember food banks, zero hour contracts, ‘payday loans’, etc. The most pessimistic figures show, that by the end of the 1950s, around 12% of the population lived below the ‘Supplementary Benefit’ level; today, using the same yardstick, that figure is over 21%.
    In the 1950s there were council homes which even those in a poorly paid job could afford and there were plenty of jobs. When I started university (in 1961) umpteen reasonably paid jobs were available for every holiday (a quick visit to the Labour exchange and, ‘bingo’ start tomorrow morning)…

  • @expats “Were you around in the 1950s?
    I was and I don’t remember food banks, zero hour contracts, ‘payday loans’, etc. The most pessimistic figures show, that by the end of the 1950s, around 12% of the population lived below the ‘Supplementary Benefit’ level; today, using the same yardstick, that figure is over 21%.
    In the 1950s there were council homes which even those in a poorly paid job could afford and there were plenty of jobs. When I started university (in 1961) umpteen reasonably paid jobs were available for every holiday (a quick visit to the Labour exchange and, ‘bingo’ start tomorrow morning)…”

    Then perhaps you’ll also remember no central heating, no double glazing, smogs, damp houses, no telephones or cars, grey stodgy food, no TVs, no internet, life expectancy of around 72, deference, rationing, casual racism, sexism and homophobia … I could go on.

  • Indeed TCO, but I don’t see what is the relevance of your point? Expats’ point was in response to a claim by Nick Baird that “The point of free trade is that everyone benefits. Yes, I said everyone – even the “left behind” and the JAMs are better off now than in, say, the 1950’s.”

    Expats is clearly not in agreement with that point and provides counter evidence. Your point seems to be just a list of things that have changed since then because of changing times, not things that the poorest would necessarily benefit from. Certainly as far as the seriously poor are concerned, there is still ‘no central heating, no double glazing, excess nitrous oxides in the air, damp houses, yes telephone (but there were in the 1950s) and cars (still not for the poor), grey stodgy food would be a treat for many now, no TVs (with endless reality shows?), no internet (wow), life expectancy nowhere near 72, deference (only if you gave it), rationing (and many people were better fed in those days), and casual racism, sexism and homophobia still exist now.

    I know we like to believe that things have got better, but not for everyone. That is expats point.

  • Toby Fenwick 31st Jul '18 - 12:14pm

    @Thomas: collectively, British yards could obviously bid and build the FSS ships – after all, the two carriers are at least half as big again and considerably more complex. But it isn’t for the Government to force the yards to work together or to modernise, and if your proposition that the industry is terminal is right, then the best course of action is to stop the bleeding and retrain the workers, unless you want to be on the hook for “one last ship” in perpetuity.

    British shipbuilding lost out in the 60s onwards to foreign competitors offering a better combination of cost and quality – as did most commercial shipbuiliding in Europe. Things were worse here because of the abysmal management and unions doing everything possible to wreck their own industry by their pigheadedness (and thanks to @innocentbystander for reminding us of unions “blacking” technology).

    Given the CSEU and GMB’s campaigns to stop compeition rather than produce a better bid, I’m far from convinced that these two unions have learned much since the 70s, sadly.

  • Perhaps if any good can come from Brexit, it will be from a rebalancing of our trade away from the EU to the global market place that historically we have been pivotal in forming. We can benefit from more flexibility in our trade relationships and where are immigrants come from. It could also diversify our culture if that is desirable or indeed possible.

  • @David Evans “Expats’ point was in response to a claim by Nick Baird that “The point of free trade is that everyone benefits. Yes, I said everyone – even the “left behind” and the JAMs are better off now than in, say, the 1950’s.” Expats is clearly not in agreement with that point and provides counter evidence.”

    I think Nick Baird’s point is clear – Absolute Poverty has decreased significantly since the 1950s, so indeed everyone is now better off now compared to then. I haven’t been able to find any statistics that go that far back, but this report shows how absolute poverty has fallen since the early 1990s: https://fullfact.org/economy/poverty-uk-guide-facts-and-figures/

    @David Raw “No cars in the 1950’s ? You’ve got to be joking. ”

    Not for the majority there weren’t. The number of privately owned vehicles has increased from c2m in 1950 to c30m today (a 15-fold increase), whereas the population has not increased by nearly as much (maybe 1.5 times)

    https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/8995/vehicles-summary.pdf

  • @Thomas

    Your point South Korea having more robotics and automation is interesting. What is also interesting is that South Korea TODAY is sending 70% of its youngster to university.

    Particularly in Germany but elsewhere too there is a move towards what is called “Industry 4.0” – a stage further than just robots – towards robots increasingly communicating and collaborating and co-operating together – not just doing a fixed job. China has its “Made in China 2025” project to move up the “value added” chain into pharmaceutical research, and higher-tech industry, AI etc.

    Today a vast amount of stuff is “made” without manufacturing it physically. Computer apps never get a physical manifestation – along with videos, e-books, websites and internet services. Medicines may take billions upon billions of pounds to bring the first pill to market and pennies to make the actual pills after that.

    What all this means is that if we are to compete in the world and become more productive – we need 70% of our youngsters being graduates against 50% – ideally TODAY but certainly in the next 10-20 years. And that means vastly increasing the pupil premium etc. so those from disadvantaged backgrounds don’t get left behind and increased real-terms funding for schools.

    Theoretically your imagined Part A car part that is not being made in this country would get made if there is a return on investing to make it here. And that depends on many conditions.

    One of those conditions is whether there is a highly skilled workforce with expertise.

    Another may be access to a big single market where you can sell your parts to many different car-makers without tariffs or paperwork!

    Now there’s and idea that might be worth implementing!

  • Sue Sutherland 31st Jul '18 - 1:16pm

    Carrying on the ‘ I remember the 1950s’ debate I think you are all correct. We were still recovering from the war and rationing was still in place for part of the 50s. Bomb sites were common in major cities. I don’t think a comparison between then and now gets us much further forward but if you look at the 60s and 70s in spite of strikes and power cuts, or sometimes because of them, most people’s incomes grew and there was less inequality of income. People still had jobs for life. They felt more secure. Of course, the level of poverty was worse for those who were poor compared with the level of poverty today but what is important to people is comparative poverty. We all compare our lives with our relatives and friends, but also with people who can afford the luxury goods that we cannot. In many ways we all live lives that are superior to the aristocrats of the past but they still outdo us in possessions.
    We are not just economic theorists, we are also Liberals and politicians and we seek to provide a better life for people. Choices about economic policy affect those people and have resulted in this Alice in Wonderland world in which we are told unemployment is at a low level, poverty is less severe than in the past and that more money is being put into welfare state provision than ever before, but at the same time we can see more homeless people on the street, food banks operating in most towns and cities and welfare, health and education provision being stretched to breaking point.
    Free trade may bring more and more people out of absolute poverty but we also need policies that create equality of opportunity to share in the riches that are created by new knowledge and new technology. At the moment it seems to me that we are living in a new aristocratic age at a higher level of living for all but the inequality of that system has brought about Trump in America and Brexit here. If we carry on like this we face new political extremism which has already emerged. It’s about time we Lib Dems who have a proud historic tradition in Liberal reform started a new reform movement to release people from their comparative poverty.

  • @Peter Hirst
    ‘rebalancing of our trade away from the EU’
    Have you ever thought about ‘what’ we trade.
    The majority of our manufacturing trade is ‘value added’ in a distributed manufacturing model spanning the EU. If are no longer in the EU that model will not be viable and a lot of that value added will be moved to Poland, Czech Rep etc. This will leave us with very little to trade with the rest of the world and a whole load of people picking up P45s.

  • @expats @David Raw

    aha – another thing that isn’t what it used to be – nostalgia.

    I agree with you…

    We should go back to those halcyon days of the fifties. With women doing back-breaking housework and slaving over a hot stove for their big families while the loan shark knocks on the door. The pill, ready meals and the microwave certainly have a lot to answer for! We can all settle down to a cosy sexist, racist sit com – none of this Love Island tripe – when father comes back from a gruelling, life-limiting job through the smog filled streets – by bicycle. No need for these namby-pamby gyms! And the good news is that we will need less spent on the NHS as he will be killed off before needing much expensive care.

    Of course sending the kids out to work at 14 will mean that they won’t get caught up in those nasty student loan things. It will also mean that we can restore universities to their rightful place as the preserve of those that had a private education. OK – we will let in a few poorer kids who are lucky enough to pass the 11-plus to show that we are not elitist really!

    Absolutely let’s go back to the fifties! Well – may be not!

  • TCO 31st Jul ’18 – 10:43am…………….Then perhaps you’ll also remember no central heating, no double glazing, smogs, damp houses, no telephones or cars, grey stodgy food, no TVs, no internet, life expectancy of around 72, deference, rationing, casual racism, sexism and homophobia … I could go on……

    I find almost nothing in your list that only affected the 1950s JAMs. True there were fewer cars and telephones among the JAMs but that was more than offset by frequent comprehensive and inexpensive public transport and a red callbox on every corner.

    Grey stodgy food????? Most of the JAMs had allotments and, although avocados and Quinoa were not on many menus, we managed. I, for one, never felt deprived in not having cherries and strawberries in January.
    As for deference? There is far more contempt shown by our so called betters towards the ‘lower orders’ today than ever before.

  • Michael 1 – South Korean students do not take Mickey Mouse degrees – a.k.a three-year holidays.

    https://www.washingtonpost.com/national/higher-ed/south-korea-outpaces-the-us-in-engineering-degrees/2012/07/17/gJQAOWagrW_story.html?utm_term=.a798ca1f4c04

    One in four South Korean college students majors in engineering. That figure is freaking high and might have excluded those majoring in basic science, medicine, law, business & economics, education…

    From that article, there is an illiberal policy to encourage students to take STEM: impose universal conscription and grant exempts to STEM students/vocational apprentices. A horde of young people will certainly go to STEM to avoid conscription.

    The world’s third leader in the use of automation in manufacturing is Germany, whose graduate proportion is lower than that of the UK as most young people go to vocational training/technical schools.

  • @Thomas

    Thanks for some very interesting points which I will discuss in a moment.

    I think some trends from the past are clear and if you woke up 100 years from now are likely to happen – these will maybe not-so-gradually happen even to a degree within the next 20-30 years.

    1. Virtually everyone will continue their education/training to 21. Just as the school leaving age has risen from 14 to essentially 18 in 70 years.
    2. Increasingly factories will be – as they have been places with fewer and fewer humans as robots become more and more flexible and versatile – and get on with the job amongst themselves.
    3. A large amount of the Western/developed economies will come from very high added-value “intellectual property”. Lower add-value jobs will go down the chain to countries like China, India etc. and from them to African/less developed countries.


    I appreciate the point about STEM subjects. Actually a vast amount of our future economic wealth will come from the creative industries – the media, tv, films, music, video, software (which has a high creative input), video games are high earners for the UK. Along with as you say economics, finance, law. Not necessarily from STEM subjects.

    Probably the university course with the highest economic payback of all time was the calligraphy class that Apple’s Steve Jobs took as it lead to him developing the Apple Mac with typefaces. Your “mickey mouse” degrees may be as important as STEM subjects.

    Perhaps 4% of intelligence is accounted for by genetics. the Flynn effect shows that IQ test scores have risen dramatically over the past few generations due to many factors but we are the same people genetically.

    I certainly think that 70% of the population is capable of doing a degree and we will need 70% doing “degree level” jobs if we are to compete by doing different jobs from the much cheaper and increasingly and itself more skilled labour elsewhere and robots. And the other 30% to develop their skills to high level post-18. We will need them to do so if are to compete in the world.

    It is why I have advocated on this site a doubling of the pupil premium. So that those who don’t qualify to go to university just because they are by chance born into a disadvantaged background can.

    I also want to see parity between non-university and university funding. Everyone – university and non-university given £27,000 lifetime funding for post-18 education/training.

  • john littler 5th Aug '18 - 8:28pm

    Jeff I believe you know little about actual manufacturing and that your assumptions are incorrect. Manufacturing in the UK does not have to be low end to expand. The UK will never compete at the bargain Chinese Indian level, but it can re-shore a large amount of manufacturing lost to China because technology and the net here reduces the amount of labour and admin required, while shipping and duty costs are cut, cash flow is faster, stock holding is reduced and very importantly demand can be reacted to very quickly.

    Already there are printing businesses who offer similar prices for literature and packaging as would be charged in Shanghai. I know because I organise these and compare them. The UK costs that can be obtained here are competitive in that area suddenly, so if this is the case, why not metalwork, or printed circuit boards or plastic moulding. I believe the re-structuring can happen but needs to be helped along by an industrial policy much as they have in Germany, where they have 5 times as much industry and a balance of payments surplus of 8%, plus low national debts and higher welfare, health and pension provisions.

    We don’t need to re-invent the wheel, as the model is largely there and being carried out by a centre right party in the EU, so forget Corbyn, who is stuck in the ’70’s. The German model is merely hampered by some over regulations that are tough on small business who cannot operate in a residential area, need related industry qualifications to start a business and need to pay big taxes in advance.

  • John Litter – You are correct. As far as I know, Adidas in recent years has begun producing shoes using automation technology in Europe instead of making them in China.

    The German model is essentially ordoliberalism. Also, a key part of that model is KfW bank, kind of a National Bank, which channels funds towards SMEs, who cannot raise funds in the markets.

    Michael 1 – The so-called creative industries involve more STEM work than you think. At least all relevant tech works are to be done by STEM staff. Also, while STEM graduates can easily adjust and retrain themselves to work in non-STEM jobs like art and fashion design or so, the same cannot be said with non-STEM students. For example, you cannot retrain a Media graduate to put him/her into a biotech research lab. Arts/Media students are also unlikely to land a job in, say, a Big 4 Audit firm, due to a lack of business/finance knowlegde.

    Degrees like Latin (a dead language), Ancient History, or Theology, Event management (what the hell) are essentially Mickey Mouse degrees. The exit opportunities are limited, and the rest of these graduates are difficult to retrain. They are more likely to end up working in a McDonald shop than to land a job in an investment bank or a consultancy.

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