The British economy is at a crossroads. With growth stagnating and the public finances facing an unprecedented period of retrenchment the imperative of boosting British manufacturing and securing export growth is greater than it has been for decades. But even without the economic downturn of recent years questions would still persist about Britain's ability to survive and thrive in an era of globalisation. Since the end of the 1970s, Britain has moved away from its manufacturing heritage and focused instead on the service industry - financial services in particular. Whatever the benefits of success in these sectors there is concern at the decline of manufacturing, particularly the impact this has had for specific communities and regions. Many decent, well-paid jobs for skilled manufacturing workers have been lost and the economy has faced growing regional and sectoral imbalances.
The TUC believes that a strong manufacturing sector belongs at the heart of the British economy, and has for many years championed the need for the development of a comprehensive and modern industrial policy. So while we have welcomed the government's recognition of manufacturing's importance, we also know this will require a commitment to actively support its growth. This report sets out some ideas about how this might be done.
Our research was aimed at understanding the practical measures the UK could take to rebalance our economy in the years ahead. The search for expertise led to Germany, a powerhouse of the European economy and a country that has never lost sight of the value of its manufacturing sector. Through meetings with senior managers, works council members and trade union officials in leading German companies, including Volkswagen, Siemens and BMW, we tried to see how the UK could learn from German manufacturing successes.
Our conclusions are wide ranging. We call for a new manufacturing eco-system for the UK: a range of policies needed to bring the country back to its rightful place as a major manufacturing nation. Skills, investment, procurement, helping small firms to expand, finance for strategic sectors and the role of government are all identified as priority areas for action. We also recognise the need for a new economic system that brings management and workers together, rather than pushing them apart, and set out the role of modern trade unions and the value of collective bargaining and of minimum standards.
This report challenges the government to recognise the importance of industrial activism. But we know it is not just ministers, but also companies and trade unions that need to consider the role they can play in achieving change. The prize is significant: a manufacturing renaissance in a rebalanced economy, boosting our industrial strength and enhancing social justice.
This paper is published at a crucial time in the history of the British, and the wider European, economies. The UK's Coalition government has embarked on a radical path of deficit reduction that its supporters argue is necessary for economic strength in the long term and its critics - the TUC is one - believe threatens to pull the rug from under our recovery from the worst economic downturn since the 1930s. The crisis in the eurozone could undermine the whole concept of economic union. If the eurozone avoids the worst, it will be in no small part due to the support of the most successful economy in Europe, Germany.
Alongside the short-term need for economic recovery, commentators continue to debate how the Great Recession came about, whether it could have been avoided, and what lessons should be learned. One lesson that seems universally accepted in the UK is that there must be a rebalancing of the economy, away from excessive reliance on financial services, towards other sectors. A renaissance for manufacturing has been discussed in that context. Moreover, even before the economic downturn, the growth of China, India and other new entrants to the world economy were prompting tough questions about how western economies would survive, and thrive, in the 21st century.
The TUC supported a rebalancing of the economy, and a greater role for manufacturing, long before the economic crisis. We have published several papers on this subject and have been keen to learn lessons from other, successful manufacturing nations. As the economic powerhouse of Europe, there were clearly lessons to be learned from Germany.
This paper has been produced in co-operation with Unite, the largest union in UK manufacturing, and IG Metall, which represents manufacturing workers in Germany. It begins by charting the key developments in industrial policy, in Germany and the UK, since 1945. It then describes the state of industrial policy in both those countries today.
Following this, we present evidence from German or German-owned British companies in Germany and the United Kingdom. Interviews have been held with senior managers and trade union officials from five companies based in Germany - Volkswagen, Siemens, ThyssenKrupp, BASF and Airbus - and four in the UK - Bentley (which is owned by Volkswagen), Siemens, BMW and Roballo Engineering (which is owned by ThyssenKrupp). Those senior managers and trade unionists were asked a range of questions about the economic downturn, competition from China, skills, industrial relations, the growth of the 'green' economy and the role of government in industrial policy. An interview was also held with Martin Behrens, Head of the European Industrial Relations Unit at the Hans Bockler Stiftung.
This report tells their stories. The TUC believes that, through their own voices, these managers and trade unionists offer solid evidence and clear arguments for the future of industrial policy in the United Kingdom.
This report also highlights the positive role of trade unions in these companies. This is particularly important in the UK, where so much of the narrative of the media is of a negative, hostile trade unionism. Company and union voices in the pages that follow attest to strong, vibrant, challenging but ultimately positive relationships. Such relationships are valuable at any time, but during an economic crisis the likes of which we have experienced in recent years, they are of tremendous value to both company and workforce.
Following our dialogue with these companies, the TUC calls for a new manufacturing eco-system. Tinkering with policy is no longer enough. What is needed is a radical development of an interventionist manufacturing policy, bringing together a number of individual changes to make a coherent whole. These policy changes include:
The conclusions from this report stem from the interviews undertaken with senior managers and trade union officials, but they must be approached in a wider economic context. Specifically, the TUC believes the imbalance in the world economy, between surplus countries who export more than they import (China, Germany, Japan) and countries which run persistent trade deficits (the US, but also the UK, Spain, Portugal and Italy, among others) must be addressed. Furthermore, Germany's trade surplus has been achieved at least in part on the back of wage depression to subdue domestic demand, which is not a model we advocate that the UK should follow.
This is a commonly held view. Writing in the Financial Times on 27th October 2011, the US President, Barack Obama, said: '...each nation must do its part to ensure that global growth is balanced and sustainable so we avoid slipping into old imbalances. For some countries, this means confronting their own fiscal challenges. For countries with large surpluses, it means taking additional steps to support growth. For export-oriented economies, it means working to boost domestic demand.'
This report is firmly of the view, then, that Germany must take steps to boost domestic demand and must be prepared to import as well as export.
This report also supports IG Metall's call for Germany to introduce a minimum wage. Sixty per cent of German workers are covered by collective agreements, but some workers fall by the wayside of industry negotiations. These workers do not necessarily share in the commitment to fairness and equality that is implicit in the Social Market Economy. Those workers need the support of a minimum wage and UK trade unions would be happy to offer advice and expertise to support its implementation, based on our own experience of this issue.
'A firewall to stop Europe's crisis spreading', Barack Obama, Financial Times, 27 October 2011.
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