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Speech to UKIP 2018 Conference

Stephen Bush’s Speech to the UKIP Annual Conference[1]

This took place at 3 pm 22nd September 2018 at the International Convention Centre, Birmingham.

Good Afternoon, Ladies and Gentlemen

Many people, both lay and professional throughout the land have bemoaned the decline of British manufacturing industry.

While some politicians are keen to talk up the industry – and indeed there are some bright points – the figures bear out what most people see all around them, shops, particularly the chain stores, crammed with imports, rarely a British manufactured product on their shelves.
 
I can already sense some people thinking it’s a so-called global world and therefore we should expect foreign goods to buy. And they are quite right of course. But the issue is that for Britain it has become something of a one-way street for foreign goods.
 
Looking at the share of our own UK market obtained by foreign manufacturers (what is called market penetration) is rarely done or commented on, indeed the Office of National Statistics gave up providing data on this 8 years ago. However, I have made estimates of this for the major goods categories – food, textiles, furniture, electronics, medical equipment, vehicles, and so on, which I would like to share with you in a moment.
 
Before I do this, I need to dwell for a moment on the one import-export trade which many if not everyone in this hall will be well aware of and it’s this: in the 25 years of the EU Single Market, the UK goods deficit with the EU has grown remorselessly from £5 billion in 1992 to £96 billion in 2016.
 
The UK goods deficit with the whole world totalled £134 billion in 2016, which as a fraction of our GDP is 6.5%, the largest of any of the 34 industrial countries, about equal to the cost of the NHS, or, expressed another way, for every 2 products foreign customers buy from us, we buy three from them – in the EU it’s 3 to 5.
 
Incidentally, after March 29th, the EU’s own trade data will change dramatically. Its trade with the USA will no longer include the UK’s exports and imports to that country. As a result, on 2016 figures, the UK will become the EU’s biggest goods market and its second biggest supplier after China, overtaking the USA in both cases.
 
There is no requirement for any country’s goods trade to be exactly balanced year by year, but in Britain’s case the imbalance is due to the extraordinary increase in imports, particularly from the EU.
 
Over the 5 years to 2016, EU goods imports increased by 15% or £30 billion, nearly half of which was accounted for by imports in a single category: motor vehicles from the EU increasing by over 52% or £13 billion . Only about 1 in 8 of the UK car market is home-supplied as a walk round any car park will confirm.
 
This is a particular case of a little-known fact: on average, across 23 categories of goods, UK manufacture supplies only 12% of the UK market for manufactured products, with food at 60% and furniture at 48% leading the pack, while electronic, optical kit and medical equipment are down at a dismal 6%. This level of manufacturing capacity is dangerous for both economic stability and national security.
 
No other major economy has allowed this penetration of its own home market to occur. The incredibly low (6%) figure for home-produced IT equipment is particularly dangerous, ensuring that virtually everything we make is at the mercy of foreign suppliers.
 
If the £ continues to go down, in response to the huge goods deficit, then the price of imports will rise as the MOD has found with their contract to equip the Queen Elizabeth carrier, where the original 2015 order for 48 F35 fighters has ballooned in cost from £4.3 billion (then) to nearly £5 billion (now).
 
WHAT DO THESE FIGURES MEAN FOR THE BRITISH PEOPLE, NOT JUST OVERALL, BUT IN PARTICULAR DISTRICTS FOR OUR COUNTRY?
 
For modern manufacture, £1 billion of goods value per annum, say 5-10% of our vehicles supplied by someone else, represents 5 to 10 thousand skilled jobs not done by our people.
 
While exporting is very important, when you are down to supplying only 12% of your own home market of around £500 billion, the most urgent thing is to supply more of it.
 
How do we set about doing this? First, we must adopt attainable targets for a national endeavour lasting at least 20 years:

  1. Halving our goods trade deficit from its 2016 dangerously high level of 134 billion to around a manageable £65 billion, which would be covered by our surplus on services.
  2. Halving the persistent 30% disparity between the productivity of the top six regions of the UK and the bottom six.

 
To reduce the goods deficit to around £65 billion would mean an increase of manufacturing output of around £70 billion split roughly 50 : 50 between home and export sales, which, with constantly improving productivity, would require an increase of around 350,000 skilled manufacturing jobs, and a roughly equal number of jobs in the service sector, over a period of 20 years.
 
UK Manufacturing Productivity is an apparent paradoxOver the 2012-2016 period, Britain’s manufacturing productivity expressed as value added per year per person employed in manufacturing was comparable, if not actually higher than that of Germany (depending on the € : £ exchange rate chosen).
 
This means that the products which are actually made in the UK are (in general) made pretty efficiently.
 
The problem of the UK balance of payments is a problem of availability: a huge range of products are simply not made in Britain, and the demand is supplied by imports.
 
What we most urgently need is a long-term programme of industrial expansion to create a larger RANGE of products, particularly everyday products, so trade deals lead to our products streaming out to foreign markets, and not foreign goods streaming into our markets, which they already command to the extent of nearly 90%.
 
Markets must decide when designing and establishing new products, whilst adhering to the three Rs of recuperation: REUSABILITY, REPAIRABILITY, RECYCLABILITY. Here the outstanding opportunity is to take advantage of the new emphasis on sustainability, not just in Britain, but across the whole Western World. In goods terms this means requiring in post-Brexit Britain that all goods for sale, whether produced at home or imported, must be recuperable as a fundamental aspect of their design. Public procurement would be required to enforce this principle.
 
Britain has lost world market share at home and abroad fundamentally because, while what industry it has is good on average, and some in aero-engines and pharmaceuticals is very good, there has simply not been enough investment, over the last 60 years, in new productive assets across the board. Britain’s industrial army, like the British army, is just too small for the demands placed upon it.
 
Two new forms of financing and manufacturing organisation will be needed to rectify this for virtually all 23 product sectors, using both public and private investment:

  1. Existing companies prepared to expand and collaborate in so-called Leopard consortia, while retaining their independent state. We established a prototype for this in the 90s in the North West.
  2. New grant-aided Leopard companies set up on the co-ownership principle.

 
Much of the public investment will go on recruiting and training high-grade design and marketing staff for the consortia and existing and new companies. A STEP CHANGE in numbers and expertise will be needed in most of the 23 manufacturing sectors so that talented individuals are diverted in large numbers from financial engineering into directly producing things for sale.
 
For Leopard companies set up with publicly guaranteed loan capital, the intention is to harness the enthusiasm for getting control of one’s destiny by requiring each company to have its equity (voting) capital in the hands of the employees on the highly successful Mondragon principle where all workers receive shares in their company.
 
Two possible examples of Leopards to get going are:

  1. New trawler building programme to exploit our post-Brexit fishing entitlements.
  2. Factory-built modular homes for which there is a ready demand.

 
To sum up:

  1. We have a massive need to expand British manufacture in making innovative everyday products under efficient, sustainable principles.
  2. On the scale required, this can only be done by the establishment of new forms of company organisation, using ten-year loan capital from the government to pay, among other things, for a 20,000 strong army of design and marketing specialists, recruited over a ten-year period.
  3. Diverting the £56 billion cash earmarked for HS2 to industrial expansion based on the Leopard concepts would meet with general approval, particularly in those districts in Wales, the North of England, and the Clyde region which have been heavily hit by the closures of heavy industry.

 

References

[1] This copy dated 21st September 2018 is an extract from a forthcoming paper entitled “New Forms of Industrial Organisation: the Leopard Concept” and is copyright to Professor S F Bush. It is not to be copied further without his permission.

[2] Total British car exports to the EU in the five-year period increased by £4 billion from £10 billion and to the rest of the world by £2 billion from £17 billion.

[3] These companies will be animated by their acronym LEOPARD: LEaping on Opportunities Presented by Advances in Recuperative Design.

[4] The €12 billion conglomerate was established at Mondragon in the Basque Region of Spain in 1956 by 5 talented engineers with about £100,000 capital lent by the Church.

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