On Thursday morning last week Mark Prisk, the Business minister, hosted a roundtable for about 35 people including MPs of all parties, businesspeople and journalists to debate how to show that manufacturing has moved from the smoke-stacked factories of the past to the exciting, high-tech innovative industries of today.
For Dragons' Den star Deborah Meaden, the most crucial change is to show the young the many careers that lie behind manufacturing. And crockery maker Emma Bridgewater said industry itself must do more to lure the brightest away from banking and into making again.
If there was a conclusion, it was that the Government must keep banging the drum and work more with the small and medium-sized enterprises (SMEs) to improve the supply chain, encourage more apprenticeships, reform procurement policy and extend its clever campaign See Inside Manufacturing – which has arranged for hundreds of schoolchildren and their teachers to see inside car factories like McLaren – to other industry sectors.
The meeting was held by the Associate Parliamentary Manufacturing Group (APMG), which is working with the Make It in Britain campaign – launched last year – to help revitalise the economy.
It was an uplifting affair – but then came the reality check. Within minutes of leaving the House of Commons, I heard the news that two of the UK's most prestigious brands – and big employers – were in trouble. First, the Aquascutum raincoat maker closed its Corby factory, with the loss of 115 jobs. Then, another shocker, as Lotus Cars look to be heading for another MG-Rover-type situation. Sources say their new Malaysian owner, DRB-Hicom, is considering selling or even closing the Norfolk car company that employs 1,200 workers at Hethel.
So were those fine words being aired in the Westminster Hall just hot air? What is going wrong if two of the UK's top brands can't make it? Without knowing all the financial details of the two companies, it's dangerous to speculate about how they got into such a mess. But it does seem shocking that such a quality mac maker as Aquascutum – one worn by both Winston Churchill and Humphrey Bogart – hasn't been able to prosper, when luxury brands are rocketing.
As for Lotus, there are buyers such as Genii Capital, a Luxembourg-based financial advisory group, waiting to bite if the company is for sale. It doesn't matter if the potential buyers are from overseas – most of the UK's automotive industry is foreign-owned.
By far the more pertinent question we must ask is: If there were British buyers for either of these two companies, would they be able to raise the finance? And, if not, why not?
Bank lending to SMEs is the elephant in the room; as much a key to regenerating our manufacturing base as modernising its image. New research warns that our small companies face £191bn lending gap of finance over the next five years if they are to grow. The Federation of Small Businesses claims that 40 per cent of all small companies have had requests for finance turned down last year, often being charged 11 per cent or higher on their loans and overdrafts.
Only 2 per cent of the UK banks' balance sheets is lent to SMEs. Just consider that fact: it's extraordinary. While attempts to ease credit have been worthy – Project Merlin, the National Loan Guarantee Scheme and QE – they have failed.
What we need now is direct lending; long term and at low interest rates. Getting finance flowing again into our SMEs – which employ 14 million people – is what will put blood back into the economy and get the country growing. This Tuesday, the APMG meets again; on the agenda is a "Bank for Industry". Time to look again at breaking up banks like Royal Bank of Scotland.
Trends in the States for cutting back executive pay may go global
Depending on your view, it's either been a good or bad week for high pay – and not just for bankers, but a number of top American industrialists.
In the US, a majority of shareholders in Citigroup voted against the bank's executive pay plan, and landed a blow on its boss, Vikram Pandit, who had been hoping for a rise to $14.8m (£9.2m).
Just 45 per cent of Citigroup's shareholders backed the plan, and the board is now going back to them for further discussions.
Here in the UK, the Barclays board is hoping to head off a revolt at this week's annual meeting by investors with an offer to cut Bob Diamond's bonus by putting in new performance targets for him and other senior executives. Barclays has agreed that half of Diamond's £2.7m bonus for last year – which pays out over three years – will be subject to new criteria that means it will only be paid if the bank's return on equity exceeds its cost of equity.
Barclays may have gone some way to heading off a full investor rebellion, but it's still not clear if the new terms will meet with all shareholders' agreement. So far the Association of British Insurers is keeping its amber alert on Barclays while the National Association of Pension Funds says it hopes Barclays will talk in more depth to investors after the meeting about more fundamental concerns. That sounds like a slap on the wrist.
It's not just bankers who are feeling the wrath of investors. Game Technology, the US casino equipment maker, also got the thumbs down for pay increases last week, as did executives at IGT and Actuant. US Analysts are warning that executives at Janus Capital Group and US Steel also face a show-down with investors. If executive pay is being scrutinised like this in the US, then we could be on the cusp of some big changes in mood.
The defence put up by boards is that they have to pay the global rate. But if the US rate is dropping, so will the rest. Or maybe. As the old proverb goes, one swallow does not a summer make. We can but hope.Reuse content