UK: The struggle to stay in the European league.

UK: The struggle to stay in the European league. - Peter Wilsher considers the implications of a report which suggests that the UK is barely capable of surviving as an industrial nation.

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Last Updated: 31 Aug 2010

Peter Wilsher considers the implications of a report which suggests that the UK is barely capable of surviving as an industrial nation.

On the maps prepared by the economic geographers, Britain still appears as a fully paid-up member of the European Community. London and the South-east stand at one vertex of the Golden Triangle which (with Frankfurt and Paris) embraces the greater part of the region's financial and information-handling expertise. The Blue Banana, beloved of French conceptualists, sweeps from Birmingham and the West Midlands, across to the Benelux countries, down the Rhine Valley, through south-west Germany and into northern Italy, incorporating a mighty powerhouse of industrial strength.

Kent is occasionally linked with its near neighbour Nord-Pas-de-Calais, just across the Channel, as a possible partner in some future, bilingual Channel tunnel superstate. And although no one pretends that any part of the UK possesses those assets of sun, scenery and relaxed lifestyle which are turning parts of Europe into Golden Crescents of high technology out on their own, there are still those optimists who believe that it is possible for our older manufacturing concentrations, like Wales and the North-east, to find ways of fighting back - even if an uncomfortably large proportion of their renewal does seem to be financed with Japanese money.

The worrying question, though, is whether the UK still retains the necessary production skills, not to mention the managerial and entrepreneurial drive, to hold its place in these senior leagues. As Europe evolves ever more rapidly towards the condition of a single marketplace, the doctrine of "competitive advantage" will increasingly determine the winners and losers on this particular playing field. The discouraging truth is that Britain's advantages are starting to look pretty thin on the ground.

Viewed from the continent, the consensus is that the Anglo-Saxons are still pretty good at pharmaceuticals, food processing and the developing of precision instruments, particularly in the medical field. There are also substantial pockets of excellence in chemicals and the electrical and electronic categories, with a fair-sized residue left over from our former dominance in aerospace and data processing. But once financial services have been added in, and the considerable expertise developed in the process of exploring and then exploiting the North Sea oil and gas fields, the list becomes somewhat sparse. And too many of its constituents occupy only small, highly specialised niches in the global market.

The weaknesses, on the other hand, are almost too numerous to catalogue. Textiles have almost vanished from their former north-western heartland, and maintain only a beleaguered existence elsewhere. Whole suburbs could be ransacked before finding a single item of consumer equipment that had not helped to swell the balance-of-payments deficit. Mechanical engineering is everywhere under threat from its better organised, more heavily capitalised international rivals. And machine tools, the core of a healthy manufacturing sector, have been a sad joke for decades.

The bleak analysis just produced by the House of Lords Science and Technology Committee goes so far as to suggest that Britain is barely capable any longer of surviving as an industrial nation. Only a high, sustained level of foreign investment, it argues, is keeping us from joining the Third World lotus eaters. And with our traditional partner, the United States, drastically tightening its belt and its purse strings, that means responsibility for new jobs and creative innovation falling more and more on Germany and Japan.

With Germany now heavily preoccupied with unification, the fostering of Japan's continued self-interest becomes even more crucial. But although the overall picture remains tolerably rosy, a hard look at the statistics indicates the need for a fair measure of caution.

The EC currently gets about a quarter of Japan's direct investment, and of this copious outflow ($67 billion in 1989) substantially the largest share, around 38%, goes to Britain. But the way in which it has been spent up to now is probably not commensurately advantageous. Over three quarters of the money that came here went into services rather than manufacturing, and of that almost two thirds found its way into banking and finance. Despite all of the publicity, transport - including the automobile industry - received only 3.2% of the total and even electronics only benefited to the tune of 4.3%.

These figures are not trivial, but they need to be kept in perspective, and set alongside the reasons why Britain has been relatively favoured. These are often because outlying parts of the UK offer a docile, low-paid, under-trained workforce which is happy to busy itself with routine assembly work. It hardly sounds the most promising guarantee that we shall remain in the Blue Banana.

(Peter Wilsher is assistant editor of the Sunday Express.)

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