Richard Wright: Our traditional strength can meet challenge of modern world

The market is now internationally based – but that doesn't frighten the sector in Yorkshire and Humber because it is a region with very few Original Equipment Manufacturers (OEMs) and survives by trading beyond its borders. There are signs that the world is slowly emerging from recession and the current strength of the pound is encouraging exports.

The region has some critical technological strengths on which to build a competitive position, such as materials technology and engineering, medical devices, bio-refined products, and carbon sequestration in power generation; and the knowledge in our universities, companies and technology organisations that supports them. The region has also committed to the goal of growing manufacturing from about 12 per cent of the region's economy to about 20 per cent over the next two decades.

The fact remains, however, that the path we need to follow is not easy. Never has the business environment been more competitive. The world doesn't owe us a living, we will have to earn it, and that will not be achieved by competing on price and volume, but on knowledge, innovation and skills combined with the right business environment and infrastructure. That is where our manufacturing companies are going to look for the right support over the next few years, whichever government is in power after the election.

Government is the "art" of creating the environment in which companies can thrive and grow so that we can get this country back into balance. We cannot cost control ourselves a future, we must innovate one. If we acknowledge that funding will be much tighter as we address the national debt, where will the manufacturing sector be looking for most help over the next few years?

There are probably five main areas.

1. Take a longer term view.

There has to be a recognition that the path we are on takes long-term commitment and needs sticking with, even when things get tough. There is a tendency to react to "failure" by introducing another body or initiative or piece of legislation, rather than fixing what we have and making it deliver what we need. This leads to complexity, confusion and cost and is one of the major reasons the private sector does not engage.

We must decide where we need to be in 10 or 20 years, put the right things in place to achieve that (remove the rest) and stick with them but make them deliver. It also ensures we will make the right infrastructure, capital and inward investments that will underpin activity levels in many businesses.

2. Support design and innovation.

Business starts with the customer. It must give the customer what it wants and must constantly review its products against a changing world demand. All customers want price competitive products though, and the fact is that the UK is not the cheapest.

Our only answer is to compete on knowledge and we must drive our research and development activity and work much harder at getting the knowledge we have out of academic institutions and into businesses where it can be commercially exploited. We must not cut back on the support in place – we must expand it.

3.Get the legislative environment right.

Many business bodies, like the Chambers of Commerce and the Engineering Employers Federation, will give many examples of this because the requirements of our taxation, health and safety, environmental and labour laws are fundamental to business success.

Our flexible labour laws (compared with much of Europe) are still an advantage but that is being gradually eroded, and the taxation system is still too complex, adds cost, and does not drive the right actions. Research and development allowances, capital investment allowances, capital gains and corporation tax changes will certainly help but why not look at reducing the management cost to businesses by simplifying the system? Take out the cost of administration – even though it might not reduce the amount paid – and it still adds up to a more competitive business.

4. Open up finance.

There are three areas where this is important. Firstly – history will tell us that more companies fail coming out of recession than during a recession because of cash flow issues, not because they have poor products or too few orders. This cannot be allowed to happen if we expect manufacturing to get back to the growth levels of three per cent or more necessary to drive our economy.

Secondly – manufacturers need to invest in both product development and capital to make the new products. Thirdly – more help is needed for technology-led start up companies in the three to five-year period when they need to build prototypes or do the pre-commercial work necessary to gain the approvals and recognition to fully exploit their business opportunity. In none of these areas is the environment supportive

enough to manufacturers. Neither this region, nor the country, will deliver the step change in performance unless that changes.

5. People and skills.

Skilled people are a critical resource to every manufacturer. Billions of pounds have been spent on education and training and most manufacturers are dissatisfied with what is available and find the system too complex to interact with.

We have to back our vision. We have to train the current workforce and

new entrants to the right levels with the right mix of skills. We must stop following the quantity objective and focus more on quality. We must streamline provision and, finally, we must hold people to account for their responsibilities.

Richard Wright is chair of Yorkshire and Humber Manufacturing Steering Group.