Will Holloway: The Government can show it’s serious about levelling up by launching a National Plan for Manufacturing

13 Jul

Will Holloway is the Deputy Director of the think tank Onward and a former Special Adviser.

One of the striking lessons of the last 18 months is that a country’s ability to produce goods has proved invaluable. In the early stages of the pandemic, manufacturers retooled production lines across the country to make ventilators and diagnostic kits – boosting the UK’s initial response to Covid-19 and saving lives. Our ability to make things improved our response in a time of national crisis. And the truth is the benefits of manufacturing are much broader in normal times as well.

Onwards’ new research, published today, shows the difference that manufacturing businesses can make in terms of pay packets and output.

Across the UK, manufacturing workers earn £1 an hour more, on average, than comparable workers in other industries. That pay premium is significantly higher in some parts of the country than it is in others. For example, workers employed in manufacturing firms in the North East and North West earn around £2.50 more per hour than people employed in other industries – worth £95 per week to somebody on a full time contract.

Alongside wages, we also found that productivity is higher in some parts of the UK than others. Outside London, output per hour in manufacturing was a fifth higher than the economy as whole. In growing the economies of areas like the North West, West Midlands and Wales, manufacturing is doing much of the leg work. Between 1997 and 2017, manufacturing made up around 40 per cent of overall productivity growth in those areas.

For these reasons, manufacturing is likely to be particularly important for the levelling up agenda. One way the Government could show it is serious is by launching a National Plan for Manufacturing. This could set out tax incentives for capital investment; take action to reduce industrial electricity costs; introduce greater 5G connectivity for smart factories, and include long-term funding for manufacturing R&D institutions.

The UK has a great history as one of the workshops of the world, but the role that manufacturing plays in our society, our national identity and economy has gradually declined. While many richer countries have de-industrialised since the 1970s, almost none has done so as much as the UK. In 1970 the UK had the sixth largest share of manufacturing in the economy in the G20. Today it is second from bottom.

Countries as diverse as South Korea and Ireland have caught up or overtaken our living standards while growing the share of manufacturing in their economy. Rising countries like India and China have grown their share. Yet today manufacturing is less than 10 per cent of GDP in the UK but about 22.5 per cent in Germany.

Even before the onset of the pandemic, most of the world’s developed economies were doing much more to sustain a vibrant and competitive manufacturing base than the UK has historically done.

In 2011, the Indian government published its National Manufacturing Policy that aimed to increase manufacturing to 25 per cent of GDP by 2025 and increase employment by 100 million. In 2012, the United States launched the National Plan for Advanced Manufacturing to accelerate advanced manufacturing investment and research and development spending.

In 2013, Ireland launched “Making it in Ireland”, which set out an ambition to have 43,000 more people directly employed in manufacturing by 2020. While in 2019, the South Korean government published I-KOREA 4.0, aiming to boost advanced manufacturing and automation.

The Government has already taken steps to support UK manufacturing, through the Made Smarter programme, the High Value Manufacturing catapult and the Super Deduction. But it needs to go much further. If ministers can marshal policies that would promote manufacturing further – as our international competitors are doing – it would pay political dividends.

On average, seats the Conservatives won in 2019 have a much larger share of manufacturing jobs than Labour seats. Just over 12 per cent of workers in newly gained seats by Conservative candidates at the last general election are employed in manufacturing, up from nine per cent of workers in incumbent seats and almost eight per cent in Labour held constituencies.

In an emblematic trend of the broader re-alignment of British politics, there are almost the same number of Conservative seats with 15 per cent or more of the local labour market employed in manufacturing than Labour seats with five per cent or less.

This both presents an opportunity for the Conservatives and a threat. If the Government can boost investment in manufacturing it is likely to disproportionately benefit voters in the party’s new electoral alliance. But if the Conservatives cannot halt the decline of manufacturing in recent decades, workers in Red Wall seats will more likely be at risk.

Recent weeks have seen great successes. From investments in Sunderland to Ellesmere Port to Derby to the banks of the Humber, thousands of manufacturing jobs have been secured and created. The Government should build on these decisions – creating a manufacturing renaissance – and reverse the historic decline in manufacturing in the UK. Doing so would increase earnings and productivity in some of the areas that need it the most, turbo charge levelling-up and maintain public support in the process.

Will Holloway: The challenges awaiting Ministers and MPs as Parliament returns today

11 Jan

Will Holloway is the Deputy Director of the think tank Onward and a former Special Adviser.

This is not the New Year reset that the Government was hoping for. Parliament has returned not to slowing transmission and a gradual reopening of the economy, but to the worst elements of last year: a lockdown, surging infection rates and all the hardship both entail.

But as easy as it is to be depressed with the new start of term, we should recognise that we are entering the final furlong of this crisis. And now that Brexit negotiations will no longer absorb political oxygen, the Government has an opportunity to push ahead not just with vaccinations, but with delivering the promises made on doorsteps in 2019.

As the final months of 2020 have demonstrated, progress can be made at speed. Trade deals are renowned for taking years to negotiate – take for example, the EU-Canada trade deal that took seven years – but the recently agreed EU/UK agreement that covers everything from security to energy bucked the trend, and was finalised in less than a year. 

Even though it can sometimes take more than a decade to develop a new drug, vaccines for Covid were developed within the year. The UK is now fourth globally for doses of vaccine administered per 100 people. We have access to more than 350 million vaccine doses through a range of companies – the first of which have been approved by the independent regulator. Subsequent candidates will be submitted for approval in the near future.

Taken together, this means that enough vaccines have been procured to protect the whole of the UK population several times over. We have been fast to act while other European countries trail behind. Despite not having a major diagnostics manufacturing base in the UK, and at a time when countries around the world were competing for the same products, hundreds of thousands of Covid tests are now conducted every day.

Indeed, since the onset of the pandemic, less than a year ago, over 55 million tests have been carried out, and the UK is now testing more than any other advanced economy per 1,000 people.These are achievements that many would have regarded as impossible at the onset of the pandemic, and show what can be achieved with focus, resolve and urgency. It should be a lesson for the rest of the Parliament.

Already, we are a quarter of the way through this term and time is quickly running away. This year could be make or break for the Government’s new voter coalition. Not only will this year hold the first major test internationally of what the Government stands for globally post-Brexit, with the UK chairing the G7 and hosting of the COP26 climate summit, but it could face its first electoral test since the general election.

Should the elections go ahead, even if later in the year, the campaigns will inevitably be different, but the impact will be no less significant. While commentators are likely to focus on the Scottish Parliamentary elections, and the subsequent implications that they will have for the future of the Union, as well as the London mayoral elections, the results elsewhere may prove to be more of a bellwether for the behaviour of the 2019 general election coalition of Conservative voters.

As Onward’s landmark research before the election and a year on from it showed, the Prime Minister has a historic opportunity to build a new, lasting support base. The research found that Conservative voters – both “southern” and “Red Wall” conservatives – are more likely on balance to lean to the left, albeit marginally, on the economy and to the right on socio-economic issues.

Those who backed the Conservatives at the last general election are economically more interventionist, on balance supporting more regulation rather than less, as well as efforts to retrain workers, while at the same time backing a tough approach to crime and immigration.

With record levels of police recruitment, the launch of the Lifetime Skills Guarantee enabling adults to benefit from hundreds of fully-funded courses, and one of the biggest efforts to protect jobs and livelihoods in peacetime history, the government has a strong record of delivery on voters’ priorities.

But the biggest outstanding promise lies ahead. With Brexit done, the Prime Minister said that the Government’s focus will be to “level up and spread opportunity across the country”. A mission not without challenge, given the recent poll results to suggest that a third of voters had never heard of levelling up.

But terminology aside, increasing opportunities in communities that have for years seen prospects fail to be recognised is one of the great prizes available to the Government. To sustainably and successfully achieve that aim requires bold thinking and ruthless focus. We need to look ahead of the curve.

For example, Onward’s new research on Net Zero found that up to 10 million jobs may be affected as a result of the drive towards decarbonisation over the next 29 years, and the need to plan for and support the shift.  We need to ask challenging questions: what impact do taxes have on different parts of the country? How can innovation be spread beyond the London-Oxford-Cambridge triangle?  And now that we have left the European Union, how can the UK attract more foreign direct investment outside of the usual areas?

Success will involve bending every area of policy to achieve the objective. It is by no means assured. With an unforeseen global pandemic throwing a spanner into the machinery of government, combined with commitments for new infrastructure projects and legislative changes that will take time to come into effect, the pressure is on.

And the stakes are high. It is instructive that only a 4.3 per cent swing to Labour would be needed to generate a hung parliament in 2024. Anything more could deliver an SNP-Labour coalition.  Failure to deliver in the next 12 months may result in the loss of the majority in Parliament, and a return to the stasis and acrimony that succeeded the 2017 result. Success will mean a lasting change, a political realignment across the country, and a consolidated base of support for the future.