Select Committee on Trade and Industry Third Report


Prospects for manufacturing

    (a)  While manufacturing output seems likely to remain depressed in the short term, we note with interest reports of cautious optimism among manufacturers that markets and output will recover during this year. The evidence we received, however, did not suggest confidence that a sustained rise in output, which would suggest relative improvements in UK productivity, was in prospect. (paragraph 12)

Capital investment

    (b)  We think that the Government should consider introducing some form of tax credit for volume-based investment. It will be necessary, however, to ensure that such an incentive does not subsidise investment that would have been undertaken in any event. (paragraph 22)

Skill shortages

    (c)  It is essential that Local Learning and Skills Councils respond effectively to the views of manufacturing businesses to address the skills need of the sector in their area. The Government should review the proportion of funds available to meet specific local needs. (paragraph 25)

    (d)  We were perturbed to learn that the industry felt that there was a shortfall of perhaps 10,000 engineering-based modern apprenticeships. Given the importance to the sector of providing an adequate supply of suitably trained new entrants, the Government must take all the steps necessary to ensure that the supply of engineering modern apprenticeships meets demand in the future. (paragraph 30)

Management issues

    (e)   The identification and dissemination of best practice can help to overcome the reluctance of firms to embrace new techniques and thereby make major contributions to the improvement of productivity. We endorse the activities of the sector-specific Forum programmes, such as "Accelerate" and PICME, and the CBI's Fit for the Future Campaign, both of which are Government/Industry joint initiatives and which provide valuable sources of advice, particularly, but not exclusively, to SMEs. Support for such activities should be demand-led. The Government has already committed £20 million but should be prepared to provide extra resources should it be necessary. (paragraph 33)

    (f)  Companies need to invest in developing the skills of the key managers involved in production to take advantage of best practice in areas such as lean manufacturing. (paragraph 36)

Regional investment

    (g)  The many agencies concerned, and Central Government, will need to take steps to ensure that the implementation of national policy is effectively co-ordinated in each region, avoiding duplication of effort and competition between agencies, and making it easier to achieve the real target of all such schemes — easily accessed support to businesses to enable them to improve their performance and competitiveness. (paragraph 55)

Developing the Manufacturing Strategy

    (h)  What is needed is a focus across the DTI on the relative importance of the manufacturing industry and its needs. Through this, the DTI should lead other government departments, such as the Treasury and the Department for Education and Skills, to give the priority to the needs of manufacturing that its importance to the UK economy deserves. (paragraph 58)

    (i)  Manufacturing has suffered from decades of under-investment in plant, labour force skills and R&D. UK management has been slow to adopt good practices from abroad. Government can have only a limited role in solving these problems: managers, the workforce, capital markets, trade bodies and educational organisations all have at least as significant a role. But Government can show the importance it accords to manufacturing by giving a vigorous lead. Because of the nature of the problems faced by industry, the DTI must have the close co-operation of other Departments such as the DfES on training, the DTLR on planning and, not least, HM Treasury on incentives to promote investment in plant and R&D, if the UK is really to become a world leader in this sector. Recent initiatives by Government are a start. It is essential that the impetus be maintained; we will continue to monitor this area to assess whether it is. (paragraph 62)

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Prepared 12 June 2002