Investment plea made in Britain heday

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The Independent Online
BACK IN the early 1950s, Quinton Hazell applied to join a rather exclusive professional club in Colwyn Bay, North Wales. He was refused on the grounds that he was "in trade". In fact, he was managing director of the motor components company that bore his name and was rapidly becoming the town's biggest employer.

Traditional British snobbery towards manufacturing had somehow survived two world wars and the most radically socialist government this country has ever seen. He recalled the shocked reaction of his parents when he left Manchester Grammar School in 1936 and opted not for a nice clean job in banking or insurance, but to become an apprentice in the motor trade on 14 bob a week.

Today he is Sir Quinton Hazell, honoured for his services to exports. He is a wealthy man, still working a full week as a consultant for several companies at 75. But behind his 11-bedroom mansion in Warwickshire he keeps a workshop. Apart from anything else, it reminds him of where the wealth came from.

It's a lesson, he feels, that has not yet been fully absorbed by politicians, civil servants or bankers. As chairman of the West Midlands Economic Planning Council 1970-1976, he was told the future lay in selling services rather than products. That trend gathered pace in the 1980s when, he feels, the greatest rewards went to those who made money rather than things.

"The dash for growth in the service industries was further encouraged in 1985," he says, "when Nigel Lawson decided we'd spent enough on machine tools and other equipment, and reduced investment allowances to 25 per cent. The big companies could go for rights issues, but many smaller ones, faced with higher interest rates, couldn't keep their cash flow going and went bust. By 1989 we couldn't pay our way. Yet all that North Sea oil revenue had been sloshing around. Part of it should have been invested in manufacturing."

He feels that lack of investment helps to explain why, 50 years after the war, our economy manufactures only about 40 per cent of German output. "They're making two and a half times more than we are with roughly the same population. Even the Italians are investing heavily in the latest technology. That's what we should be doing."

The first step, he says, should be incremental relief from tax on tooling and plant. "If a company invests pounds 1m one year and pounds 1,500,000 the next, then 50 per cent of that extra pounds 500,000 should be tax-free. And as long as the company spends more year on year, tax relief should increase."

Secondly, he would like to see capital gains tax on the equity of manufacturing companies ended after five years. "I don't think it would do much harm from a fiscal point of view, because this tax costs almost as much to collect as it brings in."

His third proposal concerns the currency. "A lot of slackness has been taken up by allowing the pound to float. As a result, the Deutschmark has gone down from 10 to the pound to 2.2, and the dollar from four to the pound to 1.6. Much of the world's trade is now quoted in dollars, so British manufacturers are paying more for raw materials than our major competitors. A stable pound would help."

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