We are importing our lives

In the shops last week-end I looked at the labels of the merchandise. Some clothes shops were full of garments from China, interspersed with items from Malaysia, Viet Nam and India. They had nothing from the UK, nor from the countries of Europe that used to pride themselves on fashion and style. The electrical and household goods departments told a similar story, awash with imports.

It is the case we still have some good retailers. Some of the shops are owned by UK shareholders. They may be financed by UK banks. The truth is, the longer we run such a large balance of payments deficit, the more UK businesses will have to be sold to overseas buyers to pay the bills for our enjoyment of so many foreign products.

Some people say we cannot make things successfully in the UK any more, because wages are so much lower in Asia than here. They do not understand modern manufacturing.

The keys to success in modern manufacturing are quality and automation. The direct labour cost in many modern products is low. Materials costs are higher and rising, as China scours the world for ever more commodities. The costs of design, management, machinery and the supply chain are important. Employing fewer well trained people per unit of output is often the key to success. Because labour is cheap in Asia, Asian manufacturers often use it badly.

It is quite possible to make things in Britain, make them well and make a profit. The fact that so few do these days tells us something else. For all the fine politicans words about manufacturing, government often does not want industry. Planning controls, regulations and tax regimes are hardly encouraging. Nor is our culture any longer proposing we be the workshop of the world. In schools discussion is likely to be of pollution and industry’s large contribution to global warming, rather than to the importance and the rewards of making things for ourselves.

The UK seems to be happy to import its lifestyle from China and borrow the money. It has the added moral luxury that we can then blame China for the pollution she creates for us, and can enjoy the benefits of low wage labour intensive production. That does not require us to be mean to our UK neighbours over how much they are paid. We borrow the money to pay the benefits bill instead.

The gnawing worry I have is how much longer will China go on working so hard and lending us the money to live at such a higher standard than they enjoy? Isn’t it high time government turned fine words into less government action to thwart or put off would be manufacturers and investors who could start to get Britain working again? China doesn’t have the high corporation and income taxes we have, and it does not take months or years to get a planning permission.

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60 Comments

  1. Norman
    Posted February 16, 2010 at 8:10 am | Permalink

    Your last sentence summed the whole thing up for me. Any multinational thinking of opening a new manufacturing plant in the UK / Europe would have to be completely batty.

    To top it all off and make things even less competetive we now collectively have an obsession with carbon dioxide which must have the developing worlds leaders rolling in laughter while we bicker amongst ourselves about it watching more and more industry flowing eastwards.

    We can always learn mandarin and open up call centres in 15 years time!

  2. Johnny Norfolk
    Posted February 16, 2010 at 8:34 am | Permalink

    With the weak pound these imports are going to be much more expensive. Perhaps these firms could start to consider bringing some work back home.
    If we have no recovery people will have no money to spend no matter where things are made.

  3. Tony E
    Posted February 16, 2010 at 8:35 am | Permalink

    But also, how long can China manipulate its currency to remain falsely competitive against western economies?

    In the past, the west would have created huge trade tariffs to balance out the artificial devaluation that China has created in its own currency.

  4. Mark M
    Posted February 16, 2010 at 9:03 am | Permalink

    You're absolutely right John. China isn't special in it's ability to manufacture clothes and we have seen from Fairtrade that UK consumers are prepared to pay a slight premium for good working conditions. UK produced clothes would have guaranteed better conditions.

    If the government would allow a company to operate free of so much of the burdensome tax and regulation that they create to justify their existence then perhaps we might see some UK clothes in UK stores.

    Slight change of topic, there's quite a correlation between the extending powers of the EU (in the form of Maastricht, Amsterdam and Nice) and the size of the UK current account deficit. Causality? Who knows, but the current account deficit was ok before Tony Blair started signing all those documents.

  5. DBC Reed
    Posted February 16, 2010 at 9:27 am | Permalink

    The problem is that organised British labour (organised in what used to be called "factories" "making things") cannot afford the product of their compatriots' efforts.This is because young workers are saddled with a debt of an average one hundred thousands pounds for just living here, for the land beneath their homes,owned or rented.There is no way that the over mortgaged masses can afford anything other than cheap imports, not least graduates who are also saddled with compulsory college debts.
    Reed's Law: international industry which can choose where to locate ends up where residential land prices are low,so the residents can work cheaply. Answer: apply land value tax ,nationally or internationally,to get land and property prices down so that workers can compete equally.
    It is not as if the Conservative party has done much to CONSERVE traditional industry. I seem to remember some traditional workers fighting with their bare hands against a national muster of police with shields, batons and crash helmets to be allowed to continue their traditional way of life and work under atrocious conditions while a much admired PM bigged up the City and the Financial Services industry.No crocodile tears please.

  6. Colin D.
    Posted February 16, 2010 at 9:32 am | Permalink

    It seems the present government has taken pride in the fact that we are a 'service economy' and has encouraged, without limit, the import of both goods and labour. By talking of 50% going to university they have rendered apprenticeships and entering manufacturing industry straight from school as unworthy objectives.
    I doubt if EU legislation permits a government driven 'buy British' campaign and anyway 'Made in Britain' seems to mean little more than 'assembled in Britain'. If you want to get a sense of what we have all lost, then go into a kitchen shop in Italy where everything seems to be locally manufactured and delightfully different.
    You have correctly flagged up the problem, but where is the official Conservative strategy to reverse the tide?

  7. waramess
    Posted February 16, 2010 at 9:44 am | Permalink

    Successive governments, including your own under Margaret Thatcherr had decided that manufacturing in Britain was dead and we had to find other ways to survive.

    We had oil in spades, gas and a deregulated financial services. What more could we need?

    Well, as usual, when politicians of all colours make decisions for us they get it badly wrong. Far better to have used the oil and gas to create a market of great opportunity for the entrepreneurs by slashing taxes and regulation.

    What do we need now? Low taxes and less regulation; ah, there's the rub.

    Pay for it with smaller government but above all please don't try to fix the problem. Stitch Camerons mouth and pockets up and present him with a mandate to reduce the size of government, taxes and regulation.

    No bright ideas please, we have many entrepreneurs out there willing to risk their own fortunes on new ideas that will create employment and rewards for all, without the need for politicians to try out their own pet project using our money.

    All entrepreneurs need to know is that the other side of risk there is worthwhile net after tax profit.

    Or am I asking too much of David Camerons pink party?

  8. Christian A. Wittke
    Posted February 16, 2010 at 9:54 am | Permalink

    This lifestyle reduced to service and financial enterprises is all but sustainable; it is a huge draft on our future while giving up competence and the rest of any competitiveness.

    China is moving fast.

  9. Simon D
    Posted February 16, 2010 at 9:54 am | Permalink

    I agree. Yes we should. But it won't happen. The British are no longer interested in manufacturing or in working in it. In particular, it is completely inimical to the Left-liberal culture or to that of the monied South of England middle class and its equivalents round the country. The last thing we want for our children is for them to be stuck in some dump of a widget factory north of Watford, probably living near to an equally unattractive manufacturing town. Just think of the shame of it when we had to confess the nature of our children's job at a dinner party. ("My dear, we tried to persuade her to apply to the BBC or one of the big banks but she insisted on joining some ghastly manufacturing outfit somewhere in Lancashire")

    Even Mr. Mandelson, who has a good nose for a decent sound bite, does not go down this route.

    Far better, if you must go into trade (as opposed to serious work like casino banking, law, accountancy, journalism, PR, politics, the BBC or a safe, well-paid job in the public sector) is to run something respectable like a company selling mobile phones or connected with designer catering or selling Chinese-made goods on the internet.

    However, there are four bottom lines: (1) the present configuration of our economy is unsustainable and (2) our level of indebtedness is unsustainable and (3) the way we borrow money from foreigners to fund our excesses is unsustainable and (4) the elites of all three parties do not know what to do about it.

    The fun will start when the next Government (of whatever party or parties) discovers that the necessary 'cuts' are politically undeliverable and the markets then turn against us. No comfortable Euro bouncy-castle will be available for us to jump on.

    • david b
      Posted February 17, 2010 at 6:40 am | Permalink

      Now that is a sensible comment. I work in the remnants of industry. Most discussion I read is in the abstract. It is always a lament through a rose tinted pair of spectacles. Of course we need to manufacture, but not us personally. We need an office job.

      The workshops of the world are where the worker can starve or work a widget machine all day. They prefer the widget machine. We are no longer there. Our people do not want to make widgets. Look around the remaining factories of the land. That's where the immigrants work. Not just here either, but across the whole union.

      No. The loss of manufacturing to cheap economies is merely displacement of immigration. Once the infrastructure is in place to support large scale manufacturing it is socially and politically desirable to move the factories to where the cheap workers are. I am not advocating this, merely suggesting it as a hypothesis to explain a phenomenon. In the original industrialisation of the UK and of the USA it was the poor landless masses who moved to the industrial cities to be exploited.

      The model we should look to is not that of a China. We have already been there. It is places like Singapore or Hong Kong that offer us a better model. They too used to manufacture, but now don't. They thrive by providing "services" to their neighbours some of which do manufacture still.

      But the difference between these former colonies and the old country are ones that we don't want to admit to. We have a huge and burdensome underclass of unemployable people with no intention of ever working. Content to milk every system put in place for the benefit of those truely in need. Welfare exploitation runs deep here now. We have lost the drive and enterprise which sent people out to found colonies in the first place. Many people here have life too easy.

      The main article alludes to the ease with which people will borrow to fund an imported lifestyle. We have forgotten that to spend it we have to earn it. I suspect the medicine required to fix this mess is too strong for our soft society. So I won't be holding my breath waiting for the brave new world. Better to just enjoy yourselves while you can. The future belongs to those who want to work for it, and I expect they will mostly be Mandarin speakers.

  10. Kevin Peat
    Posted February 16, 2010 at 10:03 am | Permalink

    I was hoping that the Credit Crunch would awaken us to this fact. Alas no. Not until we feel its full effects anyway.

    Some day we may be in a position to recover. Not in my lifetime, I fear.

    One thing which needs to be firmly in place for it to happen: the productive class needs to feel more secure, more valued and more respected than the lumpen proletariat.

  11. botogol
    Posted February 16, 2010 at 10:14 am | Permalink

    "Nor is our culture any longer proposing we be the workshop of the world. In schools discussion is likely to be of pollution and industry’s large contribution to global warming, rather than to the importance and the rewards of making things for ourselves"

    Very perceptive, and on the money.

  12. Hawkeye
    Posted February 16, 2010 at 10:34 am | Permalink

    The problem is John, that the general populace has been told over and over and over again that UK plc cannot make or manufacture anything. A lot of people now believe this lie.

    It is hard to get anything done when the population is demotivated before you start. What we need are high profile science and engineering backed by plenty of funding.

    In the 50s, 60s and 70s giant computers, the space program, aero technologies, rocketry and big, "far-out" projects motivated lots of (then) small boys to get interested in science and engineering. Very few of them wound up building rockets or planes but the rest became generally available to society as a whole.

    Engineers need to be grown, like any other crop. Without the push into science and engineering, the technical side of the economy will wither and die. That includes manufacturing.

    • Adrian Peirson
      Posted February 17, 2010 at 2:28 am | Permalink

      Totally agree, Worker -ed)s need Positive encouragement, just as much as children do.

      • Hawkeye
        Posted February 17, 2010 at 10:22 pm | Permalink

        There was a car company – one of the german ones I think – that allowed its engineers time to do something completely off-the-wall, real blue-sky stuff. It was a reward for good performance in their "normal" jobs. The resources of the company were put at their disposal for a week. The team choose their own project.

        The engineering teams knew of this prize and they competed to get it. Engineers love challenges and the more challenging something is the more they love it. They *want* to solve problems and they will do the mundane stuff if there is a possibility of being involved in something exciting.

  13. no one
    Posted February 16, 2010 at 10:34 am | Permalink

    and the stuff made in the UK is made by foreign nationals here on work visas

  14. MikeSC
    Posted February 16, 2010 at 10:34 am | Permalink

    And whose lot presiding over the de-industrialisation of Britain? Who set out to undermine working people and does so with every scrap of power they get?

    The knawing worry I have is for the people who have to do this work now without a labour movement to back them up like we had (and you killed off). Did you read that UN report about child slavery on the Ivory Coast? About how the chocolate we consume from the big names comes quite significantly from pre-teens working 70-100 hours a week?

  15. gac
    Posted February 16, 2010 at 10:42 am | Permalink

    Our balance of trade deficit with the rest of the EU is massive yet nobody seems at all concerned about this. If nothing it should at least give us a bigger bang for our buck than we currently exercise?

    It wasn't too long ago that a balance of trade deficit was big, bad news.

    It is obviously an indicator of our declining manufacturing base but why are our political leaders and the 'financial' media apparently sanguine about this?

    • Alan Wheatley
      Posted February 16, 2010 at 3:15 pm | Permalink

      Agreed.

      The Bloodhound SSC is the sort of project that should be an inspiration for any small boy. And, indeed, the project team are trying to exploit the educational benefits.

      The fact that project leader Richard Noble has not been knighted for his earlier land speed record achievements is a good indicator as to what the powers that be think of engineering.

      • Alan Wheatley
        Posted February 16, 2010 at 9:13 pm | Permalink

        Whoops! Seems I miss-clicked. This is a reply to Hawkeye (above) not gac.

  16. Javelin
    Posted February 16, 2010 at 10:46 am | Permalink

    John,

    I would argue that

    (1) on the whole people do not let standards of living fall in a linear fashion – wages are not allowed to drop month by month, and when inflation reduces standards of living an economic theory pops up to reduce inflation.

    I would also argue along with you,

    (2) that standards of living ARE going to fall, and keep falling. We will be competing with the Far East for jobs and profit and we are losing.

    So how then do I reconcile these two positions.

    I would argue that standards of living fall when we go through "employment shifts". This could be moving into employment for the first time, changing jobs, being made redundant or retiring. Its just that the change becomes a relative fall. I would argue that these "employment down-shifts" are what characterises the success of a Government.

    For example young people now take up employment with a large debt from University. Perhaps they can't find work (a million can't). Perhaps they start work on lower wages than their parents. The point is that it's NOT OBVIOUS to them. Their standard of living has raised but not as much as their parents. It's a temporal shift down.

    Equally when people change jobs because they may be due a raise but cant get promoted (as much as their parents) or they take a new job with more money – but it's less than their parents.

    Similarly when people retired, they expect to have less cash. But they have less than their parents.

    So I agree with you that standards of living will fall, but I equally think it's going to happen without people realising it.

  17. Brian Tomkinson
    Posted February 16, 2010 at 10:47 am | Permalink

    Why should the Chinese government want to be so benevolent and make us so dependent on them? The expression "when you have them by the balls, their hearts and minds will follow" springs to mind.

  18. alan jutson
    Posted February 16, 2010 at 10:51 am | Permalink

    John

    It is not just the cost of Labour.
    Rental or purchase cost of factories/offices are higher, we have Business Rates, we have Health and Safety Regulation, we have Employment laws, we have maternity leave, we have sick pay, we have longer holidays, we have working hour directives, we have insurance costs, We have higher utility bills, we have the minimum wage, We have higher taxes, We have manditory pension/insurance (state contributions).

    All of these things add to the cost of a product or service.

    Yes if you are at the forefront of technology, if you are at the very top end of quality or design, then you avoid competition for a while, but not for long.

    No I am not suggesting we go backwards and do not have SOME of the above things, but if you want them all, plus more added cost benefits, then you automatically become less competitive.

    Whilst I understand your point about new machinery being more efficient and it is, plus it is more reliable. As far as engineering terms go, you can only cut metal up to a certain speed, even with the latest tipped tools, and this speed has not changed much in the last 50 years. You are thus limited by the material, NOT the machinery.

    Yes CNC machines can do more complex operations than perhaps old ones, but they cost huge amounts of money. Given the paltry rates which you can charge out per hour for such machines and be competitive, they take decades to pay for themselves, let alone make a reasonable profit.

    Thus my reason for getting out of engineering many years ago, as indeed have many of my contacts since.

    We simply cannot compete with world the wide availability and purchase of mass produced items, which very often come into this Country at massive discounts to home produced products.

    Quality may be the goal for many, but Price is very often King.

  19. Lola
    Posted February 16, 2010 at 10:54 am | Permalink

    Two points. One, we have priced ourselves out of the market, mainly due to the Socialist policies since 1945. Plus wage rates for state (non) 'workers' have bid up rates for real workers adding real value and have made us uncompetitive. This is why there is structural unemployment in areas like Northern Ireland and Newcastle where 60% of the local 'economy' depends on State spending. Being less costly would not necessarily mean lower living standards, as the key concept of purchasing power parity will tell you. Plus we cannot ever be competitive if we carry a state overhead cost of over 50% of revenue. This is even before we get to all the bonkers reg-yew-lay-shun.

    In regards to Chinese clothing imports it is often that the clothes are designed and the production financed from the UK and made in the Far East and then sold all around the world. This trading is what we do very well. Therefore we still export clothing. And many of the Far Easter factories are now very well run, although I grant you that they benefit from rediculously lax loan financing by local, well Banks are not what they are, more direct State subsidy payers.

    This latter mercantilist policy by China is essentially a beggar my customer policy (Germany does the same thing) and will eventually end in tears. (German tears are the forced refinancing of Greece by German taxpayers.)

  20. Iain
    Posted February 16, 2010 at 11:04 am | Permalink

    This was the heart of the problem that caused the banking collapse. China was lending us the money to buy their products, and the mechanism that should have corrected the trade imbalance, the exchange rate, was comprised by China fixing its exchange rate against the dollar. So the US and UK consumers carried on bingeing against an inflated property market, China carried on hollowing out our economies, and the strain was taken by our banks, whose balance sheets eventually cracked. Unfortunately our political class sat there and watched. George Bush, all be it very late in the day, saw the problem and demanded China revalue their currency, but it was too little and too late, our idiot Prime Minister went to China and said they could buy any asset they wanted, and not a peep from the rest of the political class. Boy George Osborne is still blaming the bankers.

    So yes we can make more things, but only if the lawyers that stuff the House of Commons put industry and trade as a top priority, wake up to the need for us to have a competitive exchange rate, and don't sit on their backsides and watch as our economy is hollowed out by Asian countries fixing their exchange rate to give themselves a competitive advantage. You might have thought they would have learnt in what Japan did, but it seems not, for China is doing exactly the same.

  21. Michael Lewis
    Posted February 16, 2010 at 11:05 am | Permalink

    I hope Mervyn King is happy.

  22. Matthew Reynolds
    Posted February 16, 2010 at 11:50 am | Permalink

    Matters relating to credit scarcity, a vast skills gap, a decaying transport system and fears about the energy shortages that could happen coupled with a flawed approach towards financial regulation & monetary policy all need sorting out.If all those things where addressed and the regulatory burden on manufacturing sorted out then as a country we could 'start making things again.'If all those matters plus the fiscal deficit & excess public spending where all sorted out then business would have the confidence to invest thus sowing the seeds of sound future prosperity.

    If business knew that the taxation regime was going to gradually become lower and simpler (and thus more stable) then they would be more likely to invest.

    It ain't rocket science really is it ?

  23. alan jutson
    Posted February 16, 2010 at 11:51 am | Permalink

    Anyone see Dispatches last night on Channel 5 about the standard of Maths in Junior Schools.

    Maths Test for 11 year olds, taken by 155 teachers, only one got all the questions right, only 55% got more than half right.

    Schools Minister and his Shadow did not want to take part.

    And John YOU WONDER WHY WE CANNOT COMPETE IN THE WORLD.

    The attempted teaching of Maths in the School featured was an absolute disgrace, whilst I understood it was a failing School, the Teachers were also failing as they clearly did not understand Simple Maths themselves.

    Thus the pupils were failing BECAUSE OF the Teachers. Proved when an outside and exciting and knowledgeable teacher came into the class and got up some interest from the pupils.

    The standard required by teachers to teach Maths at a Primary School was suggested by the programme as "C" pass at GCSE level. Given that it would appear you can get a "C" pass with only a 50% mark, are we really being serious about education.

    Second part on Next monday 8.00pm worth viewing if only to underline what a good basic education we all got 50 years ago.

    • Citizen Responsible
      Posted February 17, 2010 at 1:03 am | Permalink

      I also watched this programme. I was struck by 3 BASIC failures in the Maths teaching the children had received:

      1) The children did not understand what the mathematical symbols such as + meant

      2) The children had not been given counting aids to help them such as the “beans” I remember using as a young child. The outside teacher gave them cups to use for this purpose.

      3) The children were not used to “repetition”. The outside teacher kept repeating the exercises till the children found them easy.

      Makes me despair.

  24. alan jutson
    Posted February 16, 2010 at 12:02 pm | Permalink

    OOPs sorry Channel 4.

  25. AJC
    Posted February 16, 2010 at 12:16 pm | Permalink

    From The Times February 15, 2010

    The ripping yarn of a cloth maker’s rescue http://business.timesonline.co.uk/tol/business/in

  26. Andrew Duffin
    Posted February 16, 2010 at 12:23 pm | Permalink

    "China doesn’t have the high corporation and income taxes we have, and it does not take months or years to get [a] planning permission."

    Indeed.

    And neither does China have endless ElfinSafety, or the Disability Discrimination Act, or bolshie unions, or national wage agreements, or the minimum wage, or the CDM regulations, or any EU rules.

    This it not to say, of course, that all of those are "bad things" – but it explains how the Chinese can be so amazingly competitive.

    The other day in Asda I saw toasters for sale for less than £10. I daresay they were rubbish, but I'm sure that (a) people were buying them and (b) no British manufacturer could produce at that price and still make money.

  27. John Bowman
    Posted February 16, 2010 at 12:29 pm | Permalink

    Wages are not the only consideration for a company relocating its production, at the top of the list is regulation and taxation, flexibility of the labour force, payroll expenses such as social costs.

    The UK used to be a lightly regulated business environment with flexible labour market and low payroll expenses: that was before the EU and before 13 years of Socialism-the-step-to-Communism.

  28. TimC
    Posted February 16, 2010 at 12:31 pm | Permalink

    " how much longer will China go on working so hard and lending us the money "
    When China's villagers get tired of being exploited as cheap labour, dictated to by village tyrants, having their houses seized by developers, their second babies aborted.. One could go on but the list is so long that there will surely come a time when the regime breaks up in chaos and we have no more Ipods or shoes for a couple of years.

  29. moulin à paro
    Posted February 16, 2010 at 12:48 pm | Permalink

    People are up to their ears in debt but their homes are stuffed full of imported lifestyle rubbish, so much so that one part of the economy doing rather well is "self-storage", where you rent a unit in a warehouse to store the older imported lifestyle rubbish, now supplanted in your home by the latest imported lifestyle rubbish, all "paid for" (?) on credit (i.e. debt), as is your holiday, your wedding, your car, etc, etc. Can this "culture" (!) be changed?

  30. Cedric Talbot
    Posted February 16, 2010 at 1:04 pm | Permalink

    Governments used to think they could control our once-great manufacturing industry and their blundering interventions have led only to its collapse or sale to foreign ownership. Having failed with that and having handed much of our sovereignty to the EU, politicians now stick to argy-bargy about what they can actually control, which is how tax money is going to be spent on welfare, NHS, etc.
    Looking at the UK's political debates from the outside you would think the entire population was at death's door or incapable of doing a proper day's work. Maybe those are just the Labour voters for whose benefit the country is now run.

    The main parties steer clear of any discussion about invention, discovery, science, engineering or making anything real that might allow the country to pay its import bills in the 21st century. There seems to be no pride in, or spirit of excitement about, technological achievements as there was in the 50s and 60s unless it is labelled 'green' and subsidised by levies.

    Where are the British high speed trains, hydrogen cars, robotics, nanotechnology, nuclear engineering, space programmes? Where are the great imaginative construction projects other than the Olympics?

  31. D K MCGREGOR
    Posted February 16, 2010 at 1:32 pm | Permalink

    John , you hold out the optimistic hope that somehow this basket case we call Britain can be somehow saved and turned into a modern manufacturing economy able to pay its people and way in the world. Anything short of world war which would throw all the bones in the air is not going to change for Britain what is inevitable. We, as a country ,have lost the work ethic and as long as we can avoid it ,will do so, even to the point of voting Labour when all they offer is a financial never never land. Only when the people of Britain realise that the world does not owe them a living can this change.Who has the guts to tell them?

  32. Lindsay McDougall
    Posted February 16, 2010 at 1:36 pm | Permalink

    The answer is that the Chinese won't carry on lending us money indefinitely, nor should we want them to. They also don't spend £200 billion per annum on social protection, which is more than the UK's entire annual deficit and just under 30% of total government expenditure. The UK government is currently spending £4 for every £3 it raises in taxation etc.

    But cheer up. Given sterling's fall, our falling living standards, our indebtdness, our pool of unemployed and our balance of payments deficit, there is massive scope for import substitution.

    The greatest difficulties may lie in our education policy and, as John Redwood says, our taxation levels. Unless our best brains are encouraged to be leaders of men, we will not realise our full potential. What has happened is in line with our acceptance of managed decline. Since WW2, the UK has been well governed only from 1951 to 1957, and from 1979 to 1987. That's 14 years out of 64; not enough.

    • alan jutson
      Posted February 16, 2010 at 4:07 pm | Permalink

      Lidsay McDougal

      "The greatest difficulties may lie in our education policies".

      Agreed its one of the problems.

      See my comment today at 10.51

  33. DennisA
    Posted February 16, 2010 at 1:59 pm | Permalink

    I even saw toothpaste from China in Tesco the other day, at 55p a tube. I drew the line at that, in view of the various adulterations of things like baby milk that have happened there.

  34. PayDirt
    Posted February 16, 2010 at 2:34 pm | Permalink

    "the more UK businesses will have to be sold to overseas buyers to pay the bills for our enjoyment of so many foreign products": is this really what is happening? Does anyone keep a check on this, is there an index of foreign-owned UK businesses, and/or is there a balance of foreign assets owned by UK vs UK assets owned by foreigners with changes in the balance reported regularly and at current valuations? Can you get HM Govt to report statistics which describe these changes in who owns what?

  35. A Griffin
    Posted February 16, 2010 at 2:40 pm | Permalink

    It is not easy for the ordinary shopper to choose a product made in the UK. Things have got better recently with food. The farm tractor logo and drive for locally sourced produce, with site of production information, has made it easier to support our own in the food industry and may have saved a few farmers as well. If I buy a chicken or egg in the supermarket I'm often shown which farmer produced it on the packaging. I know these are usually premium products but I use the information to choose a chicken that I know will taste good. If I buy a shirt or Gortex jacket then the chances are that it will have no information at all about country of manufacture. It might have a small bit of print underneath the washing instructions label if you hunt for it. I do respect M&S for always putting country of origin on clothes labels ( you must have been looking there!) but alas there is never 'made in UK' any more. Government policy has encouraged people to take on debt to support a lifestyle of consumption based on foreign made goods ( lots of tax take from wicked VAT). Give them a clear logo to choose and they will respond. You need to look at further education as well as schools. Dumbing down and politicization of education extends all the way up.

  36. Alan Wheatley
    Posted February 16, 2010 at 3:06 pm | Permalink

    Here Here!

    We need to work smarter, not harder for lower wages.

    In the old car parts remanufacture world where I operate I hear that some SME companies that have switched to China because of their low prices have switched back to UK because of dubious quality. You might get a cheap price, but what do you do when you unpack the crate and find the goods are not to the quality you specified. You can hardly jump in your car and go and bang on the MD's desk demanding he sort it out. And if you have already paid is can be money down the drain.

    It will be interesting to see what happens with India. On the face of it India is a much better prospect for international manufacturing collaboration.

  37. Ian Jones
    Posted February 16, 2010 at 3:24 pm | Permalink

    Capital is tied up in housing and chasing paper in the City of London. Asset prices are being artificially increased by the Bank of England using QE (see inflation letter to Darling) thus sucking more money into the City & housing to chase up prices.

    Our economic policies are set up to destroy industry. There is no point investing in it.

  38. TCD
    Posted February 16, 2010 at 3:40 pm | Permalink

    Dear John,
    There are so many aspects to this problem.
    First of all, as you say, there is education which has
    become socialised instead of concentrating on imparting
    knowledge and skills. This includes independent critical thinking, which
    has been replaced by reciting popular dogma.
    But there is also remuneration. Top engineers do not command
    anything like the salaries that top bankers (or for example football players) get.
    Service providers are apparently more appreciated by society.
    Intuitively, I also feel that it would be desirable to have more
    manufacturing, but is it really lucrative? Perhaps there is a reason why
    engineers do not earn so much. Germany has much more manufacturing,
    but its economy is still struggling.
    And suppose one wanted to start a new car manufacturing company, say.
    How would one go about it? This would require huge investment in order
    to automate the production as you mention. But who is going to provide this
    investment if one has not already a proven record of setting up such a business?
    Once manufacturing expertise is lost, it seems to me that it is difficult to
    get it back. This is also true for the energy industry, for example, where
    we rely more and more on French and German expertise.

  39. Iain
    Posted February 16, 2010 at 4:02 pm | Permalink

    "We need to work smarter, not harder for lower wages."

    Haven't the employers been let off the hook with mass immigration? For rather than investing in producing higher value added products have found it easier to bend the ear of the Government for a few million more immigrants. Of course this added demand drives up the cost of living here, making labour more expensive, the most significant part of that cost being housing costs, which is not surprising seeing we are one of the most over populated countries in Europe.

    It seems to me that to turn around our fortunes as a trading country we need to tackle problems on several fronts. We have to stop countries hollowing out our economy by allowing them to fix themselves an advantageous exchange rate, as China is doing. We can no longer afford to have our Governments sit by and not careless about British industry being flogged off just because the short termist City can churn and burn them for some fat fees. And we have to get our cost of living undercontrol and that means we have to have a population policy.

  40. Robert K, Oxford
    Posted February 16, 2010 at 4:13 pm | Permalink

    You are right. Labour costs in China gradually will start to rise as the domestic economy expands. But that doesn't mean manufacturing capacity will return to the West unless governments here understand that the best thing they can do to encourage investment is to get out of the way of the private sector. A pound taxed is a pound wasted; a pound not taxed is a pound saved or invested.

  41. Phil C
    Posted February 16, 2010 at 4:31 pm | Permalink

    'The keys to success in modern manufacturing are quality and automation'

    But this implies there would be very few new jobs for local workers.

    You don't seem to acknowledge that while China and India can use cheap labour inefficiently, we will never be able to pay the wages our population requires if it is to maintain the standard of living it is used to. So keeping the majority of workers on benefit (unemployment or part-timers on tax credits) would still be the result of any resurgence in manufacturing.

    It is not manufacturing which will supply work, though it would improve the trade balance, but only services delivered face-to-face. Apart from tourism, these have limited effect on trade, but personal care, education, healthcare are such sectors, yet while they are predominantly tax funded they are more likely to be squeezed than expanded.

    Improve the funding of the personal public services out of disposable income, by encouraging 'top-ups' in a fair and affordable way, if you want to improve employment. But certainly don't expect it from the 'financial' services, which creates almost nothing of value.

  42. no one
    Posted February 16, 2010 at 5:51 pm | Permalink

    a first world country can only compete by being on the leading edge and having the best IP

    as it is we are outsourcing so much to the 3rd world and the IP goes with it

    if the 1st world nations dont do more to protect their IP and their workforces from the 3rd world then we are going to be a wasteland pretty soon

    we can only compete by coming up with the best ideas and protecting that IP

    current company centric IP protection laws need replacing by country centric IP laws, and do on

  43. Neil Craig
    Posted February 16, 2010 at 6:01 pm | Permalink

    And China has 3 times as much electricity available to produce every $ worth of output.

  44. Andrew Johnson
    Posted February 16, 2010 at 6:31 pm | Permalink

    Another blog right on the button. Unfortunately for us, Mr Redwood, politicians of your calibre and prescience are few and far between.
    You could have added, agriculture, aerospace, housing, domestic appliances, computing, telecommunications, fishing (huge stocks fished to near extinction under the regulation (sic) of the EU for over 30 years), ship and boat manufacturing, coal mining (500 years reserve) steel making, atomic energy, and manufacture of all kinds of heavy machinery and plant, car, van, lorries, trains, buses, the buy back of a major Government share in the utilities, gas, water, oil, electricity and Government investment (not interference) in strategic commodities.
    The repair and expansion of our road systems, the building of brdiges and far greater use of our sea ports, rivers, canals and railways, for containerisation and transportation of goods.

    Many people are rightly concerned about the desperate financial mess Britain is in, but running parallel to this is just as pressing a problem – Jobs.
    A lot of people think unemployment is higher than ONS statistics. Much higher if you include those who want to work full time but are in part time unemployment and so not counted as unemployed and all the statistical fiddles politicians have used over the years to pretend unemployment is less than it is.

    As far as I can determine, none of the three major political parties appears to have any long term strategy for Great Britain.
    It's become all about managing the immediate, getting the soundbite right, being reactive rather than proactive.

    So my question is this:- "Where are the millions of productive jobs the UK so desperately and urgently needs going to come from?" We can sack and hack and slash and burn, but what do we replace those unproductive jobs with?
    Unless this issue is addressed, I think we're heading for truly perilous times. Maybe even serious civil unrest coupled with very high emigration by those with skills and get up and go.
    What do others think?

    • alan jutson
      Posted February 18, 2010 at 10:33 am | Permalink

      Andrew Johnson

      "What do others think"

      Much the same as you.

      Many of us have been trained as engineers, or similar, completed a PROPER indentured Apprenticeship, with proper and relevent qualifications, and after a few years working, simply gave up because there was little money in being very skilled and technically very competent, either in design or manufacture, unless you were one of the very few involved with a Company at the very leading edge of technology where interest counts more than salary.

      It is a sad state of affairs.

  45. backofanenvelope
    Posted February 16, 2010 at 6:51 pm | Permalink

    I have just bought a replacement games console – £99.99 with no delivery charge. Made in China. There is no way we can compete with that – we just have to find other things to do.

    I understand that 10% of our national income comes from financial services, including banking. Rather than nagging and hobbling the City, lets ask them how we double the income they earn. What would they like us to do?

    The only Tory who defends the City is Boris the Mayor.

  46. Syd Partridge
    Posted February 17, 2010 at 12:08 am | Permalink

    You are absolutely right Government does not want manufacturing.
    You are also correct in stating that wages play a small part in automated manufacture.
    It is the cost of energy, legislative controls, pollution abatement equipment, licences for this that and the other – the list goes on.
    The Chinese have none of these controls and subsidise their manufacturing.
    The EU won't allow us to that but the Germans and French seem to get away with it.
    Perhaps you ought to join UKIP.

  47. no one
    Posted February 17, 2010 at 12:21 am | Permalink

    i was in one of the big part publically owned banks today as a consultant (dont laugh)

    a complete mess, where the senior execs are putting out success stories while the few decent worker bees run round fire fighting, work outsourced to indian vendors – and I quote one example "of the 100 staff we are paying for we can remotely monitor and see only 6 of them are doing any work" but then the worker bees cannot speak up or they will be out the door

    so much status concious grand standing from the execs

    and so little understanding of how to organise and prioritise their work

    projects failing all around them

  48. Adrian Peirson
    Posted February 17, 2010 at 2:31 am | Permalink

    It's another lie that we cannot compete, if we coined our money rather than borrowing it there would be no need for income tax, wages wouldn't need to be as high, therefore manufacturing costs would be lower.
    Half the stuff I buy nowadays has to be taken back as faulty, the public have now become the quality control dept.

    • alan jutson
      Posted February 18, 2010 at 10:51 am | Permalink

      Adrian

      You are absolutely correct about quality, many items now purchased, even some expensive ones, are of poor quality and design.

      Many items I purchase for use in my own business are likewise poorly designed and manufactured, but trying to get better products is like trying to find a needle in a haystack on occassions.

      The problem is the general public demand cheap prices, and lower and lower costs, they say they want quality, BUT THEY WILL NOT PAY FOR IT.

      I now work in the Construction Industry/Design and Build/Home improvements, (qualified engineer by profession) the design of some products on offer begger belief, indeed so poor are some products, you can actually forecast that they will fail and how they will fail, you inform the customer of a better product (at an increased cost), and they simply do not belive you, they just purchase the cheap one.

      As a company we refuse to fit certain items and thus lose work because of it. So we retain our reputation, but lose business and revenue.

      The use of cheap labour (much of it unqualified) and cheap proucts, poorly fitted seems to be more and more the norm these days. PRICE IS KING is a fact of life. So people on many occassions get what they pay for.

      Pleased to be retiring soon.

  49. OurSally
    Posted February 17, 2010 at 8:46 am | Permalink

    Is it that bad? I confess I have bought the odd bit of Chinese clothing, but it didn't quite fit and died after 10 washes. So I never buy Chinese clothing (it says on the label). In fact I stick to European-made as far as I can. Same for electronics. Like most people I have bought the cheap kettle, but it gave up working and was in fact a fire hazard. You can find German kettles, but not in the discounter. You have to go into a real electric shop and demand "not made in China". (It cheers them up no end.) Of course it costs more. But you get a quality product and keep Europeans in jobs. Ditto Chinese food, like dried mushrooms or soy sauce – these people poison their own baby milk, what are they sending to us?

    Weird experience. Last time we were in the UK we were looking at plates. I saw some gorgeous Willow Pattern variations from an English pottery. I was just planning how to get them in my hand luggage when I turned one over and saw they were made in China. The Chinese originally invented Willow Pattern for the English market. How ironic.

  50. Albert Hall
    Posted February 17, 2010 at 9:50 am | Permalink

    My brother works in engineering which is almost unique nowadays. His company used to make moulds for injection moulding machines, this mould making is now outsourced to China. They now have a thriving business putting right the defects in the Chinese moulds.

  51. esure home insurance
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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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