Pictured above: Professor David Bailey
A leading economist predicts 2011 will still be a good year for
West Midlands manufacturing despite uncertainties surrounding the
wider economy.
Professor David Bailey, from the Coventry University Business
School, said that 2010 had been a very good year for midlands'
manufacturers compared to 2009, and that while growth will slow
down in 2011, manufacturing will still outperform the wider
economy.
Professor Bailey said:
"2010 was a good year for midlands manufacturing compared to
2009. From peak to trough there was a 15% fall in the UK's
manufacturing output. Firms and workers had to find ways to save
high skilled jobs through pain-sharing measures like part-time
working, wage freezes, overtime cuts and much more. It was a huge
effort by all involved, and one barely noticed by the national
media.
"From from late 2009 and through 2010 we have seen manufacturing
bounce back, albeit from a very low base. By the end of 2010 around
a half of the output fall should have been recovered. Indeed,
in some regions, we've seen something of a two-speed economy with
manufacturing outperforming the wider economy.
But some critical challenges remain, and Professor Bailey said
that he would like to see more support from the Government for
small businesses and manufacturing as a whole:
"Despite the rhetoric from the government of 'rebalancing', they
have not supported manufacturing as much as they could have done,
and I'm still scratching my head wondering whether the new
government actually has an industrial policy that actually adds up
to very much.
"In particular, critical areas where manufacturing still needs
support are over access for finance (especially for very small
firms), the need to better support exports and to diversify our
export markets towards the rapidly growing emerging economies such
as China, and in training and research and development.
"I think one of the key lessons coming out of the financial
crisis is that it is important for the UK to have a more balanced
economy. Manufacturing is an essential part of that and can provide
high quality well paid jobs.
"Manufacturing exporters need to be encouraged to take more
risks in going for new export markets but to do this they need
support - along with a financial system that is better geared
towards helping them."
Professor Bailey also wants the Government to look at the
situation regarding takeovers of companies and learn from the Kraft
takeover of Cadbury:
"We still want companies to invest in the UK and for them to be
successful, but ownership does matter. Cadbury should never have
been in the situation where it was vulnerable to such a takeover
and I believe that the Government needs to look at the rules
regarding takeovers.
"This could involve changes to restrict the ability of
short-term 'investors' to vote in takeover situations, and raising
the bar for approval of a takeover to two-thirds or 75% of
shareholders rather than 50% as at present.
"Beyond that, there needs to be the reinsertion of a broader
public interest test back into UK law, as there used to be before
2002. That would give the government a right to have a say on such
takeovers, something which the last government gave up. Lord
Mandelson, for example, was powerless to stop the Kraft takeover of
Cadbury because of this.
"Overall I think 2011 will see manufacturing continue to perform
well as it enters a new year in good shape and will out-perform the
broader economy. However, there are some dark clouds on the horizon
externally (for example the turbulence in the Eurozone) and the
speed at which the Government is cutting the deficit may also dent
confidence in the economy.
"And despite noises from some at the Bank of England over the
need to raise interest rates at some point, a low interest rate is
needed to keep the economy growing, to help manufacturers invest
and build capacity, and to keep sterling at a competitive level so
that firms can grow exports".
For more information about Coventry University, please visit
their website here: www.coventry.ac.uk