A letter to the Editor of the Daily Telegraph which was published on 19th December 2000.

One wonders when Richard Koller of Zurich (letter, Dec. 14th) last stepped inside a British car factory, or British hotel for that matter. Car making is not the crude “metal-bashing” activity he depicts.

Assembly is mainly robotic and, apart from the engine and gear box (themselves highly sophisticated products), most of the other components are either polymeric or electronic.  In fact, car manufacture sets quality standards for the rest of industry in these vital areas.

As for Britain’s reputation “for excellence in financial services and tourism”, it may be observed that all the major investment banks are now in foreign hands, as are several of the major insurance companies.  The collapse of Barings and the Lloyd’s failures were not exactly advertisements for City financial expertise.

At around £12 billion, 1999 saw the biggest balance of trade deficit ever on tourism.  Given the collapse of our railway system, the atrocious weather and exorbitant big city hotel prices, the figures for 2000 will be worse still.  With manufactures making up 75 per cent of our exports, there is no escape, no shying away from the crucial need to keep and expand our manufacturing industries.

The Government can help by not subsidising our competitors through “foreign aid”.  While labour cost is a factor, many global businesses move production to eastern Europe and newly industrialising countries (NICs) because the factories, laboratories and equipment are provided virtually free, through grants and very soft loans made available by the World Bank, European Investment Bank, UNESCO and other aid agencies.

In effect, some of the taxes of the soon-to-be unemployed Luton car workers, and others, have been used to help put them out of work.  Madness!

Paper presented to the Manchester Statistical Society in October 1999.

S F Bush
 
It was revised and extended and printed as a booklet ISBN 0 85336 155.

To read the text please click on the link “On the importance of Manufacture to the Economy” which will take you to the paper on the Britain Watch website.

A letter to the Editor of the Daily Telegraph which was published on 27th October 1998.

City Comment was wrong to suggest that “four million people making things” contribute about the same to the “national economic cake” as a quarter of a million people in the City (Oct. 22nd).

The numbers and value of manufacturing are vastly understated by economic accounting in this country, because it classifies everyone who is not actually employed by a manufacturing company as being in services.  Over the past 20 years, probably all manufacturing companies have out-sourced as many functions as they possibly can, even including key functions such as design and maintenance.  These out-sourced functions are classified as “services” even though they are actually part of manufacture.

Likewise, it is an accounting fiction that the City “produces” 20 per cent of our national output.  Much of its so-called “output” consists of elaborate financial manipulation directed at attracting a disproportionate share of real output to itself.  City folk don’t spend their money on more insurance policies, bank accounts, derivatives and other financial “products”.  They buy the products of the real economy – cars, clothes, houses.

At a time when Rover is once more under threat, it should be recalled that manufacturers contribute about £110 billion to our exports – about 70 per cent of the total.  Even City Invisibles, the organisation formed to promote the City, doesn’t claim more than £25 billion itself – about 17 per cent of the total.

One of our most buoyant “service” exports – engineering consultancy – is not finance at all.  Financial services and much of the City do not represent output – but are overhead costs on the output of the real economy.

The fact that we have a higher proportion of our labour force engaged in financial services than any other major economy is a weakness, not a strength.  Viewing Britain as an economic enterprise, we should be doing our utmost to reduce, not expand this overhead.