Germany 'shows path to industrial recovery'

Britain's recession-hit manufacturing industry should look to Scotland and Germany for possible paths to recovery, according to a group of experts appointed by the Prince of Wales.

The Prince's Working Group on Innovation yesterday recommended breaking up the Department of Trade and Industry's centralised programme for helping British industry. Instead, responsibility for economic development should be devolved to powerful agencies in the English regions, modelled on the Scottish Development Agency (SDA).

The group also put forward a network of German technology research centres, the Fraunhofer Institutes, as the best model for bridging the chasm between universities and companies. The Government should set aside more than pounds 170m over five years to set up a new 'Faraday Programme' to provide a flow of ideas between industry and academe.

Although many members of the working group have impeccable Thatcherite credentials - it is chaired by the former Chief Scientific Adviser to the Government, Sir John Fairclough - they believe that only this sort of intervention in the workings of the market will permit small and medium sized companies to be innovative and profitable.

Their model, the SDA, is a relic of socialist planning: it was set up in 1975 by the last Labour government to develop the Scottish economy and improve the environment. Following its merger in 1990 with the Training Agency for Scotland to form Scottish Enterprise, it spends about pounds 450m of government money each year on developing 'a high output, high income and low unemployment economy in Scotland which is sustainable both in economic and environmental terms'.

The working group's report has been forwarded by the Prince of Wales to the appropriate government departments and it is expected that a formal response will come in the White Paper on Science and Technology being prepared by William Waldegrave, the minister responsible for science and technology.

Existing initiatives to promote innovation are 'a patchwork quilt' and 'suffer from lack of resources and sustained commitment, particularly from central government', the report says.

Sir John said there was a lot of money going into the regions, but it was fragmented and diffuse. The group saw the regional development agencies as 'an integrating force at the community level'.

But the report foresees problems in establishing sufficiently powerful regional development agencies in England. In contrast to Scotland, where the SDA deals directly with the Scottish Office, setting up the English regional agencies 'would require collaboration between three departments: Trade and Industry, Employment, and Environment.

The Working Group on Innovation - Final Report; Centre for the Exploitation of Science and Technology, 5 Berners Road, London N1 0PW.

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