Stop putting all your economic eggs in one basket, says industrialist

Manufacturer calls for a revival in the industry <em> – News</em>

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Friday 7 December 2007
By Colin Smith

The UK should stop putting all its economic eggs in one basket and support more high tech manufacturing said one of the country’s leading industrialists at a lecture at Imperial College last month (15 November).

Sir John Rose, Chief Executive of Rolls Royce, spoke at College’s annual Gabor Lecture on ‘Why Manufacturing Matters’. He said the UK’s over reliance on the service sector represents a risk, not an opportunity for the economy. He called for the creation of a diverse economy in which ‘high value’ manufacturing acts as a successful counter balance to an equally thriving high value service sector.

Sir John, who heads one of the world’s leading engine manufacturing companies with annual sales totalling £7.4 billion per year, said manufacturing now only accounts for 14 per cent of the economy. He said the country has a staggering £70 billion yearly trade deficit in manufactured goods.

“Since 1965 there has been a steady loss of 6 million manufacturing jobs and an associated loss of brands, intellectual property and routes for products to get to market,” he said.

He told 200 guests that the decline in manufacturing could affect Britain’s ability to sustain world class education and research. He said manufacturing supports approximately three quarters of all research in the UK, ensuring that a diverse set of skills are maintained and developed.

“The less manufacturing we have, the more skills will be lost, the less capability we will have to innovate and create products, and more limited options we will have as a country,” he explained.

He said the UK economy is increasingly biased towards services, particularly financial services.

“No one doubts that the sector makes a huge contribution to the economy. It generates nearly 1 million well paid jobs, significant tax revenues and makes a positive contribution to the balance of payments of some £20 billion. Unfortunately, this does not offset the £70 billion deficit in trade in manufactured goods,” he explained.

Sir John said more high value manufacturing would deliver more wealth, especially to middle income earners and that the UK’s decline in manufacturing does not have to continue. He cited economies like Germany and Northern Italy - both of which have significant trade surpluses in manufactured goods - as examples of where strongly branded, export orientated manufacturing in developed economies can continue to succeed in world markets.

He said France’s ‘World Competitive Cluster’, in Toulouse, was a great example of industry and academia and Government working together to create world class products. He said the cluster supports 94,000 well-paid, highly skilled jobs in 1,200 companies generating a turnover of 10 billion Euros. Sir John said the UK needed to emulate this type of project. However, the Government needed to develop a much clearer sense of direction and improved policies in order for it to work in the UK, he added.

“What I believe we need is a framework, or business route map, to create context, drive, focus and prioritise public and private sector investment,” he said.

He concluded by saying the UK’s future should be a diverse economy with a thriving, hi tech manufacturing sector underpinned by scientific excellence in universities.

“When this goal is achieved in the UK we will then have a successful counterbalance to an equally thriving high value services sector that itself benefits from the same pool of excellent, diversely qualified, numerate graduates and students that are vital for manufacturing”.

The Annual Gabor Lecture, 'Why Manufacturing Matters', was chaired by Imperial College’s Rector, Sir Richard Sykes. Professor John Wood, Principal of the Faculty of Engineering, gave a vote of thanks to Sir John for his speech. A post lecture drinks reception was served in the foyer of the Sir Alexander Fleming Building (15 November 2007).

The prestigious Annual Gabor lecture is named in honour after Professor Dennis Gabor who was awarded the Nobel Prize in Physics in 1971 for his invention and development of holography.