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Cameron should ask Sarkozy how to make UK industry stronger
There was a convenient political and economic symmetry to David Cameron's summit with Nicolas Sarkozy last week. Lauding a balanced relationship that has wobbled in recent months, the PM cited an Anglo-French business agreement that provided further proof that Britain's economy was tilting back towards manufacturing. Rolls-Royce, one of our industrial jewels, will earn up to £400m by helping France's Areva build four nuclear reactors on British soil for its compatriot EDF.
But the deal looks about as balanced as Monsieur Hulot on a unicycling holiday. Where Rolls-Royce stands to make about £100m per power station, Areva could make around £1bn, underlining the financial benefit of having a world leader in the field of nuclear technology – or indeed any field. Areva is making the stations' steam supply systems – the beating heart of the plants – while Rolls is "supporting" its French partner by providing parts and engineering and technical services.
Rolls is a world-leading manufacturer of aircraft engines that fly millions of passengers around the world every year. But given Britain's aim of reducing carbon dioxide emissions by 80% by 2050, shouldn't we have a world-leading maker of nuclear power stations too?
Areva has built 104 in countries including Finland and China, demonstrating the export boost that comes from having domestic industrial giants. Nurtured by the French state's commitment to nuclear power, Areva and its 48,000 employees sell expertise around the globe. Repeated here, that scenario could help to chip away at our £100bn trade deficit.
It is perhaps unfair to pick on nuclear power because in France alone, there are export giants in multiple sectors. We could also single out many other areas where the UK lacks indigenous champions – civil aerospace, motoring and renewable energy. Cameron and Nick Clegg proudly showed off a union-flagged Mini in Paris, but the marque is owned by Germany's BMW.
It's worth dwelling on the French theme. When Sarkozy and Cameron paid tribute to each other's strengths last week, the British PM failed to mention that despite being a fellow rightwinger, his counterpart is a dirigiste, like his predecessors. The presence of Areva, Alstom, Peugeot-Citroen and GDF Suez alone on the world stage is a ringing endorsement of a politically aggressive industrial strategy. Britain's industrial policy, by contrast, consists of throwing bit-part government contracts at a Victorian train factory in Derby owned by a Canadian multinational.
There is a compelling trickle-down logic to fostering national champions, particularly if manufacturing, at 10% of GDP, is to make a meaningful dent in the 75% of the economy that is commanded by services.
Lee Hopley, chief economist at UK manufacturers' organisation the EEF, believes there is a genuine rationale to the idea of creating our own industrial big hitters, if only for what follows in their slipstream. "It is important for every economy to enable companies to grow into large ones. That is not just because they are dominant and can produce things that economies need and governments buy, like defence or energy infrastructure. They also support growth in important supply-chain businesses, which in turn can help smaller companies to do things they otherwise would not be able to do, like targeting export markets," he says. "We have a gap at the top."
Hopley stresses that non-UK manufacturers have brought good things to these shores, including competition. But because of that gap at the top, exemplified by a laissez-faire approach that lets the market shape our industrial sector, British manufacturing is a sclerotic mix of world-class outfits like Rolls-Royce and much smaller firms. As much as this government trumpets the "march of the makers", it simultaneously disavows "picking winners".
Cameron could ask Sarkozy for a steer on how to make UK industry stronger | Business | The Observer
There was a convenient political and economic symmetry to David Cameron's summit with Nicolas Sarkozy last week. Lauding a balanced relationship that has wobbled in recent months, the PM cited an Anglo-French business agreement that provided further proof that Britain's economy was tilting back towards manufacturing. Rolls-Royce, one of our industrial jewels, will earn up to £400m by helping France's Areva build four nuclear reactors on British soil for its compatriot EDF.
But the deal looks about as balanced as Monsieur Hulot on a unicycling holiday. Where Rolls-Royce stands to make about £100m per power station, Areva could make around £1bn, underlining the financial benefit of having a world leader in the field of nuclear technology – or indeed any field. Areva is making the stations' steam supply systems – the beating heart of the plants – while Rolls is "supporting" its French partner by providing parts and engineering and technical services.
Rolls is a world-leading manufacturer of aircraft engines that fly millions of passengers around the world every year. But given Britain's aim of reducing carbon dioxide emissions by 80% by 2050, shouldn't we have a world-leading maker of nuclear power stations too?
Areva has built 104 in countries including Finland and China, demonstrating the export boost that comes from having domestic industrial giants. Nurtured by the French state's commitment to nuclear power, Areva and its 48,000 employees sell expertise around the globe. Repeated here, that scenario could help to chip away at our £100bn trade deficit.
It is perhaps unfair to pick on nuclear power because in France alone, there are export giants in multiple sectors. We could also single out many other areas where the UK lacks indigenous champions – civil aerospace, motoring and renewable energy. Cameron and Nick Clegg proudly showed off a union-flagged Mini in Paris, but the marque is owned by Germany's BMW.
It's worth dwelling on the French theme. When Sarkozy and Cameron paid tribute to each other's strengths last week, the British PM failed to mention that despite being a fellow rightwinger, his counterpart is a dirigiste, like his predecessors. The presence of Areva, Alstom, Peugeot-Citroen and GDF Suez alone on the world stage is a ringing endorsement of a politically aggressive industrial strategy. Britain's industrial policy, by contrast, consists of throwing bit-part government contracts at a Victorian train factory in Derby owned by a Canadian multinational.
There is a compelling trickle-down logic to fostering national champions, particularly if manufacturing, at 10% of GDP, is to make a meaningful dent in the 75% of the economy that is commanded by services.
Lee Hopley, chief economist at UK manufacturers' organisation the EEF, believes there is a genuine rationale to the idea of creating our own industrial big hitters, if only for what follows in their slipstream. "It is important for every economy to enable companies to grow into large ones. That is not just because they are dominant and can produce things that economies need and governments buy, like defence or energy infrastructure. They also support growth in important supply-chain businesses, which in turn can help smaller companies to do things they otherwise would not be able to do, like targeting export markets," he says. "We have a gap at the top."
Hopley stresses that non-UK manufacturers have brought good things to these shores, including competition. But because of that gap at the top, exemplified by a laissez-faire approach that lets the market shape our industrial sector, British manufacturing is a sclerotic mix of world-class outfits like Rolls-Royce and much smaller firms. As much as this government trumpets the "march of the makers", it simultaneously disavows "picking winners".
Cameron could ask Sarkozy for a steer on how to make UK industry stronger | Business | The Observer
