Written response to follow-up questions
from The Department of Trade and Industry
REVIEW OF
MANUFACTURING STRATEGY
1. The Review of the Government's Manufacturing
Strategy includes plans to measure manufacturing performance.
How will this be undertaken; and will it be evaluated, region
by region as well as for the UK?
When we published the Government's Manufacturing
Strategy in May 2000, we said that we would draw up a set of measures
of success for manufacturing. During the process of reviewing
the Manufacturing Strategy earlier this year, we worked with stakeholders
including the TUC, CBI and EEF and with consultants KMPG LLP,
to develop a set of Key Performance Indicators (KPIs) to show
the health of UK manufacturing.
We devised a set of six KPIs which are specific
to manufacturing, are measurable over a long-term timeframe, provide
an international comparison of the UK's performance, and are easily
understandable. The indicators cover output, investment, innovation,
productivity, profitability and skills. We will publish an update
of the KPIs on an annual basis.
The aim of the KPIs is to provide an "at
a glance" assessment of the current state of manufacturing.
The emphasis is on simplicity—so they will not provide a
region by region evaluation. However, the Government Offices (GO)
in each English region monitor and report to DTI on the performance
of each Regional Development Agency (RDA) on a six monthly basis.
The RDAs form a key part of the Manufacturing Strategy through
the Manufacturing Advisory Service, established in partnership
with the RDAs, and RDA activity to support manufacturing will
be captured through the GO monitoring and reporting role.
2. Does the DTI have an explicit (or implicit)
regional dispersive remit? For example, if an inward investor
was looking to locate in Reading, would there be a presumption
to at least point out the lower costs involved, sat in Swindon
or points West?
Inward investment is client driven. It would
be counter productive to try and steer potential investors to
locations, which do not meet their business needs. The nature
of the inward investment market worldwide is changing: for a mature
economy like the UK, competitive advantage comes with technology
and knowledge, not low labour costs. All regions need to ensure
that they have the right offer for investors. Invest UK, both
in London and overseas, will help any UK region to promote its
strengths. It is a question of matching a region's "product
offer" (ie skills, sites, supply chain) with a "client's
need", which is the real measure of success. Ultimately,
the final location decision is made on commercial grounds by the
individual prospective investor after taking all factors into
account.
Foreign Direct Investment (EDI) into Wales has
greatly assisted the diversification of the traditional manufacturing
base. While the emergence of low-cost production locations around
the globe has created intense competition for future EDI, during
2002-03 the UK remained Europe's top inward investment location
and Wales increased its share of that investment. To a large extent,
this reflects the excellent partnership between Invest UK and
the Welsh Development Agency (WDA) and the Agency's own high standing
reputation as a first class operator in this highly competitive
arena.
3. The Government has a target of "narrowing
the gap in economic growth rates" between less favoured regions.
Is the DTI explicitly signed up to this?
Yes, the DTI is a co-signatory with Office of
the Deputy Prime Minister and HM Treasury to the following Public
Service Agreement:
"[to] make sustainable improvements in the
economic performance of all the English regions by 2008 and over
the long term reduce the persistent gap in growth rates between
the regions, demonstrating progress by 2006".
A joint team drawn from all three departments
is taking this work forward, with the co-operation of other departments,
such as Department for Education and Skills, Department for Work
and Pensions and Department for Transport, whose responsibilities
have a bearing on regional economic performance.
4. The Review describes the Manufacturing
Advisory Service as "a huge success" [page 36] with
high customer satisfaction ratings. We are therefore surprised
to hear from Andrew Davies AM that you are proposing to cut its
funding. Why is funding being cut from such a successful service?
The Department transferred £1.35 million
to the Welsh Assembly Government in 2002 to cover the setting
up and running of MAS Cymru over the three year period ending
2004-05. I am keen to see MAS Cymru continue to provide a successful
service to manufacturers in Wales and DTI will continue to contribute
to its funding in the Spending Review period to 2008.
My officials are urgently talking to the Welsh
Assembly and Welsh Development Agency about the amount of funding
that should be made available. We are hopeful of a satisfactory
outcome.
Total funding for MAS over the SR2004 period
will be £34 million—representing an increase of £4
million compared with the SR2002 period.
5. The Review sets out the Government's infrastructure
achievements over the past few years and its aspirations for the
coming years. However, all the big improvements appear to be based
in England [see pages 49-50]. Many of our witnesses (including
the Welsh Assembly Government) have argued that faster links between
Wales and the South East of England are vital to the economic
health of Wales. How can we be reassured that Wales is receiving
its fair share of infrastructure projects?
Wales has seen significant benefits from structural
funds (over £1 billion in grants to date). Examples of how
European funds have helped the infrastructure include:
— £70 million to develop high
quality sites and premises for SMEs;
— Roads, rail and sea port networks
are being improved thanks to availability of around £50 million
of European funds eg. major new berth at Port of Holyhead; work
to reopen Ebbw Vale Railway to passengers, due for completion
in 2006; multi-million pound investment under Broadband Wales
initiative—info given previously.
Regarding links between Wales and the South
East the London to South West and South Wales Multi-Modal Study
(SWARMMS), which concluded in 2002, looked at the two major transport
corridors between London the SW, and Wales and the M4/M5 road
corridor via Swindon and Bristol. It also looked at the case for
improving the rail corridors which runs parallel to this road,
the Great Western Mainline.
In response to the study, the Government concluded
that there should not be any widespread widening of the region's
motorways, as this would generate substantial traffic which would
reduce the degree of congestion relief that it was designed to
achieve:
— Around Bristol climbing lanes at
four locations (M4 J18, M5 J17-18, M5 J19-20 and M5 J20-19) should
be provided to improve strategic through movements. These have
been added to Highways Agency's Targeted Programme of Improvements.
— Other improvements to the M4 and
M5 around Bristol should be looked at in a further study, the
Greater Bristol Strategic Transport Study. Work began on this
in November 2003 and the Welsh Assembly Government is involved
in the process.
— The A303 should be improved to provide
a second major corridor to the South West and relieve traffic
levels on the M4. Work is being progressed by the Highways Agency
and this includes preparations for schemes on the A303 east of
Ilminster and either the A303 or the A358 west of Ilminster.
On Rail, the Strategic Rail Authority is carrying
out a Route Utilisation Strategy of the Great Western line and
final conclusions are likely to be available later this year.
Route Utilisation Strategies are aimed at trying to get the best
out of the current railway infrastructure along the whole of the
Great Western route without the need for costly major infrastructure
works in the short term.
SCIENCE AND
TECHNOLOGY
6. Is there an evaluation of DII science and
technology actions at a regional level?
DTI conducted a thorough review of innovation
that concluded with the publication of the Innovation Review in
December 2003. During the Review, officials reviewed the evidence
from a number of evaluations of DTI funded Science and Technology
(S&T) programmes. The evidence suggests that in many cases
DTI programmes have delivered substantial benefits to participating
firms and society as a whole. The programmes aimed to benefit
firms throughout the UK so evaluations of regional or national
impact were not carried out.
The Department has recently completed a Review
of its business support programmes including S&T. It has resulted
in further changes to improve the management, clarity and impact
of DTI interventions. This has also led to improvements in data
collection that will allow more data to be collected at a regional
or national level.
7. Do you know how much R&D spending goes
to less favoured regions? Is there the possibility of increasing
this spending and, if not, what are the limiting factors?
R&D intensity in Wales is lower than the
UK average—£117 per head compared to £308 per
head for the UK as a whole (2001). Differences in R&D intensity
between regions are largely driven by differences in business
R&D and around 8,500 of the difference in R&D per head
in Wales is due to lower business R&D. In 2001, the amount
of R&D per head by business in Wales was £47, compared
to £209 for the UK as a whole.
Gross Expenditure on Research and Development
(GERD), 2001
|
| Expenditure within (£ million) Businesses1
Government1, 2
| Higher education institutions
| Expenditure as a percentage of total regional GVA1 Businesses1
Government1, 2
| Higher education institutions
| Expenditure per person (£)
|
|
| Businesses1 | Government1, 2
| Higher education institutions
|
| United Kingdom | 12,336
| 1,829 | 4,035
| 1.4 | 0.2
| 0.5 | 209
| 31 | 66
|
| North East | 119
| 4 | 142
| 0.4 | 0.0
| 0.5 | 47
| 2 | 56
|
| North West | 1,512
| 66 | 322
| 1.7 | 0.1
| 0.4 | 223
| 10 | 48
|
| Yorkshire and the Humber | 298
| 50 | 317
| 0.5 | 0.1
| 0.5 | 60
| 10 | 64
|
| East Midlands | 951
| 69 | 224
| 1.7 | 0.1
| 0.4 | 227
| 16 | 54
|
| West Midlands | 662
| 65 | 207
| 10 | 0.1
| 0.3 | 125
| 12 | 39
|
| East | 2,916
| 277 | 366
| 34 | 0.3
| 0.4 | 540
| 51 | 66
|
| London | 738
| 236 | 980
| 0.5 | 0.2
| 0.7 | 101
| 33 | 134
|
| South East | 3,317
| 515 | 562
| 2.4 | 0.4
| 0.4 | 414
| 64 | 70
|
| South West | 1,025
| 254 | 178
| 1.6 | 0.4
| 0.3 | 208
| 51 | 36
|
| England | 11.536
| 1,537 | 3,297
| 1.6 | 0.2
| 0.5 | 234
| 31 | 67
|
| Wales | 136 |
49 | 155
| 0.4 | 0.1
| 0.5 | 47
| 17 | 53
|
| Scotland | 512
| 226 | 510
| 0.7 | 0.3
| 0.7 | 101
| 45 | 101
|
| Northern Ireland | 166
| 16 | 73
| 0.8 | 0.1
| 0.4 | 89
| 9 | 43
|
|
1 See Notes and Definitions.
2 Figures include estimates of NHS and local authorities' research and development and estimates for those areas in Central Government not available from the Government Survey and local authorties.
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R&D tends to be concentrated in a few industrial sectors,
so lower levels of business R&D probably reflect differences
in the industry mix between regions and nations.
R&D is crucial if companies are to move up the value
chain and innovation is central to the Government's Manufacturing
Strategy. We have extended the R&D tax credit regime, which
is already providing £600 million of assistance, so that
more manufacturing companies benefit from it. 4,300 SMEs gained
£204 million tax credits for R&D in 2002-03.
SR 2004 provided extra £515 million new money to boost
Science and innovation. This means we have more than doubled the
Science Budget since 1997 to £3.3 billion by 2007-08. Increasing
resources for knowledge and technology transfer, so that manufacturers
throughout the UK can capitalise on it. This includes £320
million for the Technology Strategy Programme, available in form
of grants, administered through bi-annual competitions to support
R&D in areas identified by the Technology Strategy Board.
Research in Wales has benefited from a major cash injection
with Welsh universities and colleges to receive £46.7 million
over the two years 2004-05 and 2005-06 to invest in state of the
art equipment and facilities for research.
The funding is being made available through the Science Research
Investment Fund (SRIF), a UK-wide scheme run jointly by the Office
of Science and Technology (OST) and the UK higher education funding
bodies. Of the £46.7 million for Wales, £25.2 million
is coming from the OST and £21.5 million from the Higher
Education Funding Council for Wales (IJEFCW), drawing on capital
funds made available by the Welsh Assembly Government.
Additionally, we have provided £8m from the Strategic
Research Rationalisation Fund (SSRF) to support the merging of
Cardiff University and the University of Wales College of Medicine
(UWCM). The funded proposal—Functional and Structural Magnetic
Resonance—is concerned with the establishment of integrated
state-of-the art facilities for brain imaging research at Cardiff
University (merged institution). The funding will be used for
the purchase of both Functional Magnetic Resonance Imaging (IMRI)
and Magnetoencephalography (MEG) equipment. As a result of this
investment, Cardiff University (merged institution) will be one
of the few institutions in the UK to have combined fI\4R1 and
MEG equipment devoted solely to the purposes of research.
8. How does DII respond to regions (such as Wales) which
may find little opportunities within the framework of the knowledge
economy, innovation etc when such activities are sorely lacking
within their regions. Are not those blessed with existing centres
and competencies (for example Cambridge) simply going to continue
to get relatively richer?
The Government's approach to bringing all regions up to the
level of the best is to support and strengthen regional leadership,
bringing together business, the public sector, universities and
local communities. Regional Development Agencies and Devolved
Administrations have the responsibility to work closely with local
stakeholders to develop their own strategies solutions to suit
the needs local needs.
The Assembly's Innovation Wales Strategy with the Technium
concept at its heart will help to move Welsh economy higher up
the value added chain and provide an attractive base for R&D
projects. I understand recent success includes: the launch of
the China UK International Business Incubation programme and the
news that a Chinese company is to establish an R&D operation
in Technium Swansea. The announcements were made at the signing
of a strategic alliance between Shanghai Fudan Science Park—one
of the most successful in China—and Technium, the pan-Wales
business incubation network. The new inward investment company,
Golden Prosperity (UK), will be researching and developing electronic
materials for high-end technical applications, creating up to
five high value jobs.
POWER
9. In evidence to us the Welsh Assembly Government argued
in favour of amending energy legislation to allow for an increase
in power production in Wales. How are those negotiations progressing
and what are the main obstacles to granting the Welsh Assembly
Governments wish?
The Assembly have bid for DTI's powers under the Electricity
Act 1989 to consent to power stations, and associated overhead
lines, in Wales. Whilst recognising strong feelings exist over
DTI handling such decisions, it is important this is looked at
in a considered way. A working group of officials chaired by Wales
Office and involving the Welsh Assembly Government and DTI was
set up in the summer 2003 to look at the bid. The Wales Office
have been taking soundings of key stakeholders before reporting
back to the working group. Once those soundings completed would
expect the working group to get on with producing their report
for Ministers to consider.
REGIONAL DEVELOPMENT
AGENCIES
10. How does the DII view the decision of the Welsh Assembly
Government to take the WDA and the WII "in house"? How
do you think that this will affect their relationship with other
Regional Development Agencies?
Devolution allows Wales to develop policies and structures
that it believes best meets local needs and so this decision is
essentially a matter for the Assembly Government. I understand
that the initiative is designed to overcome problems of fragmentation
and duplication of services to the business community. If streamlining
structures and processes improves local accountability and makes
public services more flexible and responsive to needs of business
community then these are objectives few people would quarrel with.
The UK Government supports the objective to deliver efficient
public services.
24 November 2004
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