David Prosser: Manufacturers recover but they desperately need more help
Thursday 09 December 2010
Outlook An apology. In common with all other media,
The Independent may previously have inadvertently given the impression that Britain's manufacturing sector had all but disappeared, with the odd success story hidden amongst the weeds of an industrial wasteland. We now realise manufacturing is a thriving source of export growth that represents the country's best hope for a sustainable economic recovery.
Actually, to dispense with the sarcasm, the point about the return to form of manufacturers – underlined again yesterday by another robust industrial trends survey from the CBI – is that we should not get too carried away. It's good news that industry is growing once more, but let's not forget the low base from which it is building.
Run your finger down a list of FTSE 100 companies – which account for around 80 per cent of the entire stock market by value – and you will find only a tiny handful of manufacturers, mostly focused on defence. Just one – Rolls-Royce – stands out as an undisputed world leader.
In addition, of course, Britain boasts some large privately-owned manufacturers, as well as many small and medium-sized firms. We should also be careful about defining manufacturing too narrowly. Stereotypes are misleading: companies ranging from Arm Holdings to GlaxoSmithKline would nottraditionally be thought of as manufacturers, but do tremendously well from making things that are sold all over the world.
Even so, manufacturing now accounts for just 13 per cent of the UK's total gross domestic product. That's down from 20 per cent as recently as 2002 – the demise of industry is not only a story of the Thatcher years – and 30 per cent in 1979. A decline of that speed is going to be tough to arrest.
The good news is that government appears, finally, to be alive to the issue. The last government's decision to protect the motor industry, for example, through the scrappage scheme represented a determination not to let another branch of industry just wither and die without a fight. The current administration has continued that approach, offering some manufacturers greater support, sometimes even with financial help.
What we still lack, however, is the initiative that the CBI called for earlier this week: a comprehensive vision of how we might reverse the decline of manufacturing rather than simply arresting it. With a Government strategy paper due any day now, it is crucial that the good form of manufacturers of late does not make for complacency. Returning their share of the economy to, say, the level of 1979 will be a Herculean task.
WikiLeaks supporters versus big business?
This is not the place to debate the rights and wrongs of the WikiLeaks affair, but the decisions taken by Visa, Mastercard, Amazon and Paypal make for a fascinating debate about business ethics.
The easy option is to accuse these businesses of a cravendisregard for freedom of speech – of giving into political pressure for the basest of motives: profit. The reality is a little more nuanced.
For one thing, no business can simply disregard the views of the government of the biggest economy in the world. For another, while these companies' decisions to sever links with WikiLeaks has caused outrage amongst supporters of the right to free speech and an open internet, there is another large constituency that is furious about what WikiLeaks has done.
In the end, all businesses are judged by their customers. A very sizeable number of those customers will take the view that these companies have crossed the line. If so, they should stop dealing with them – and if enough people do that, they'll get the message.
For now, Visa, Mastercard, Amazon and Paypal appear to take the view that the risk of such a boycott – and of the cyber-attacks they have faced – is outweighed by the potential damage of not taking action, both from the American government and from customers who want WikiLeaks silenced.
Time will tell whether that judgement is correct. But the power to punish those companies that have turned their backs on WikiLeaks still lies with their customers.
A fudge on pensions that serves no one
It must have seemed a delightfully simple idea back in the summer. Shortly after the Government downgraded the increases made each year to public sector pensions – via a switch from the RPI to the CPI measure of inflation – it announced plans for a similar reform in the private sector, saving employers £75bn at a stroke.
The reform has since proved anything but simple. The pension industry expected the switch to be compulsory, even for those schemes that have RPI-linked increases written into their rules, which would have caused all sorts of problems. Yesterday, much to people's surprise, Steve Webb, the pensions minister, announced a more measured reform, with such schemes protected.
One might expect employers to be heartened by this change of direction, which will at least protect them from the difficulties associated with compulsion. Far from it. Not only will they now miss out on a chunk of the savings promised, putting them at a disadvantage to the public sector, but there will be different sets of rules for different employers, and even for different groups of workers at the same employer, depending on when they joined the pension plan.
This is public policy at its worst. The Government made an eye-catching promise, only to discover that keeping it would be much harder than anticipated. But rather than braving those difficulties, it has chosen to hand them back to the private sector, which will now have to find a way through the thicket with little in the way of statutory backing.
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