UK: Squeezing inflation - a cure more damaging than the complaint. (2 of 2)

UK: Squeezing inflation - a cure more damaging than the complaint. (2 of 2) - Until now the Government's industrial policy has largely been to rely on market forces. Unfortunately market forces imply a competitive clash that leaves losers as well as winn

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Last Updated: 31 Aug 2010

Until now the Government's industrial policy has largely been to rely on market forces. Unfortunately market forces imply a competitive clash that leaves losers as well as winners. Take for example the Sunday Times/P-E International survey of corporate performance among Europe's top 250 companies, excluding financial and property businesses. On the face of it this country's showing looks good, with 50 firms represented. But excluding retailers, oil and construction companies and concentrating on manufacturers reveals a far less encouraging picture. The pharmaceuticals industry is strong but outside BTR, British Steel, Hanson, GEC and ICI few manufacturers make it into the top rank.

There is a dearth of industrial champions. Frighteningly few of this country's industrial sectors can boast British-owned companies competitive on a world scale - nothing, for example, in cars, computers, textiles, consumer appliances and domestic electronics.

Across the board in industry the foreign presence is growing, either as a result of direct industrial investment or by acquisition: taking into account the disposal of STC to Canada's Northern Telecom and its computer arm, ICL, to the Japanese, about half of the takeovers in Britain during 1990 were made by foreign companies. The level of inward investment in recent years, particularly by Japanese car makers like Nissan and Toyota, raises the question of where we would be without them?

I have never been an enthusiastic supporter of calls for an industrial policy. I am unconvinced that its protagonists are not simply calling for some form of subsidy. But if there has to be one, a willingness to face up to market forces should be its bedrock. There is still widespread feeling that there are too few ministers with an understanding of what makes industry tick. But one thing that does make it tick is consistency.

John Major cannot be blamed for the sins of his predecessors but he can be blamed for pushing industry into a recession that erodes its capacity to compete even further on the world market. As Prime Minister now, he should end this damaging squeeze. His watchword has been that if it is not hurting it is not working. Well, it is hurting and it is working - in ways that threaten irreparable damage to an already sorely weakened economy.

(Roger Eglin is managing editor of the Business section of The Sunday Times.)

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