Slimmer, smarter, sexier: making things in Britain

The Government wants to help manufacturing. But is it a case of too little, too late? Sean O'Grady reports

Can Britain make it? Lord Mandelson, the Business Secretary, certainly believes so. At yesterday's launch of the Government's £150m investment in advanced manufacturing, he declared: "At the heart of Britain's knowledge economy is our manufacturing base. High-value, highly skilled and internationally successful businesses that have worked hard to secure a lead in hi-tech global supply chains. This practical package will help equip British manufacturers to take advantage of the advanced technologies and new market opportunities now shaping our low-carbon industrial future."

A £151.5m "UK innovation investment fund" is designed to leverage some £1bn of private-sector investment – "over time" – into aerospace, nuclear power and green technologies.

The biggest winner is Rolls-Royce, offered £45m for new manufacturing sites, including one devoted to the nuclear industry. Others will make fan blades for the Joint Strike Fighter aircraft, advanced-alloy disks for engine turbines and single-crystal blades for high temperature aero engines. The Government committed itself to "repayable launch investment" for the wing development work on the new Airbus A350 aircraft at Filton near Bristol, regarded as crucial. Some £40m will be spent on aerospace technologies and £12m will go to a Printable Electronics Centre in Sedgefield – making visual displays.

All very "White Heat", and there is a distinctly 1960s flavour to the bewildering alphabet soup of quangoes and strategies being run from Lord Mandelson's department, including the Manufacturing Advisory Service, the Network for Manufacturing Technology Centres, the Low Carbon Industrial Strategy, the SAMULET (Strategic Affordable Manufacturing in the UK with Leading Environmental Technology), UKCES (UK Commission for Employment and Skills), the Technology Strategy Board, the Biotechnology and Biological Sciences Research Council, and even the Space Innovation and Growth Team, who will "define a 20-year vision for space in the UK".

But will the £150m make much difference? And isn't the nation that once led the world in textiles, ships and motorbikes now better off relying on the City to earn a crust?

The financial crisis suggests not. What Winston Churchill termed "proud finance" has been humbled, and leaders from the Governor of the Bank of England, Mervyn King, to the director-general of the CBI, Richard Lambert, have called for a "rebalancing" of the economy: less consumption and credit, more investment and exports. That means more manufacturing.

On one level, the £150m is small beer. Even in its current depressed condition total investment in British manufacturing is running at about £14,000m a year, so it's no revolution. On the other hand, it does match the £154m fall in manufacturing investment between the last quarter of 2008 and the first three months of this year.

It will help because manufacturing has taken one hell of a beating; the largest contraction in output since the 1930s, with the loss of 200,000 jobs in a year. Manufacturing employment stands at 2.7 million, a record low.

And yet manufacturing still matters, and offers an economy opportunities that other activities can't. It makes a disproportionately strong contribution to our overseas trade; creates high-skilled jobs throughout the country and thus helps regeneration and fosters social cohesion. Some 15 per cent of GDP is accounted for it, and its output is increasingly hi-tech. Slimmed down in successive recessions, productivity in the sector has risen by 50 per cent since 1997, outstripping the rest of the economy. It adds over £150bn to the economy annually and accounts for half of our exports.

So, much as many in the City might wish to ignore it and starve it of finance for its capital-intensive risky investment projects (and have largely succeeded in doing so since Edwardian times), manufacturing does matter.

And there are success stories in this varied sector, encompassing everything from chocolate to the girders for the new Olympics stadium, especially where the edges of manufacturing and services become blurred, and where UK concerns plug into global supply chains – like the factory in the Midlands which supplies all four cylinder engines for BMW cars worldwide.

Take this paper; the statisticians count The Independent's production run as manufacturing, but your £1 is buying more (one hopes) than just newsprint. Intellectual content in Rolls-Royce's aero engines is also obvious, and the firm makes more from servicing its equipment than it does from selling it. Swindon-based Ubiquisys makes femtocells – base stations for mobile telephony. Their value lies not in the assembly of a few bits of plastic and metal, but again in that embedded intellectual value.

Or take a traditionally low-tech product such as the tyre. In the shadow of the magnificent 1917 Fort Dunlop in Birmingham, they are still making rubber for cars – but now a smaller volume of high-value, hand-made specialist tyres for Le Mans Touring Car racers. Design is part of that success, as it is with our sexy new Mini and Jaguar cars, and the eye-popping products of our fashionistas.

Britain's reign as "the workshop of the world" was surprisingly short: Critics have been warning about decline since the 1870s. Industry has always had to adjust, usually by getting smarter and without much help from the politicians and the financiers. In their own small way, Lord Mandelson's policies fit perfectly into that long narrative.