The text of the press release, 599/89, issued by Conservative Central Office on Friday 21 April 1989, covering the speech made by Mr Major at a Conservative Association Dinner in Macclesfield. The press release was entitled “The Manufacturing Renaissance”.
CHIEF SECRETARY TO THE TREASURY:
1988 was an excellent year for manufacturing industry. It provided clear evidence of the strength of the underlying improvements in productivity and profitability over the past 10 years. As a result the prospects for the future are soundly based.
Manufacturing is no longer the Cinderella of the British economy. It is now seeing a remarkable and welcome renaissance. That is good news for the economy and for jobs. And it is vitally important for the regions, where the bulk of manufacturing industry is located.
Manufacturing output is now at a record level, above its previous peak in the second quarter of 1974. In 1988 alone it grew by 7 per cent. That is a remarkable achievement by manufacturers.
Manufacturing productivity is up too. None of our major competitors can match the impressive growth in manufacturing productivity that has taken place in the 1980s. Not the USA, nor Germany, nor even Japan. Our record recently is in striking contrast with the previous two decades when the UK was right at the bottom of the league.
The current account deficit of recent months has not been caused by a failure of British companies to export. Exports are growing and manufacturing exports are leading the way. We expect that to continue with exports of manufactures rising further by 7.5 per cent this year.
The increased output and productivity that manufacturers have obtained have now fed through to higher profitability – now at the highest level since the 1960s. And those profits are funding further capital investment to improve future efficiency and competitiveness.
So we are seeing a renaissance in British manufacturing. It is leaner. It is fitter. And it is making better products. The challenge now is for manufacturers to compete with imports, just as they compete against other UK based firms. But our manufacturers know they have to compete, and win, in the market place. There can be no feather-bedding. But they will win if they make products that British people and British companies want to buy, and they meet the high level of service required by distributors. The investment boom that is under way in this country’s manufacturing sector, shows that they are prepared to take on that challenge. That is why manufacturing investment grew very strongly last year and, on the CBI’s forecasts, is expected to grow by over 12 per cent this year.
Overall, business investment in Britain is now at record levels, higher, as a percentage of national income, than in any year since records began in the mid-1950s. And companies are investing for one simple reason. They know that investing in Britain makes sense, not for tub-thumping patriotic reasons, but because the UK in the late-1980s and 1990s offers excellent investment prospects for manufacturing as well as service industries. Investing in this country not only makes sense – it makes profits too.
And it is not just British firms who are investing here. We have just seen a series of very large investment decisions by Toyota, Fujitsu and Bosch. Three in the last month. All testifying to the excellent climate for investment, the favourable tax regime and first rate skills in this country. This investment is a clear vote of confidence in the UK’s long term future and in the future of the regions.
Of course higher interest rates are painful. But, despite Opposition scaremongering, businesses know, just as homeowners know, that temporary higher interest rates are infinitely preferable to a serious resurgence of inflation. The pick-up in inflation and the disappointing trade figures have arisen largely because total spending has grown so rapidly – much faster than anybody predicted earlier in 1988. Higher interest rates are already beginning to curb excessive demand, and will curb inflation too.
In time the trade deficit will come down. Fully three quarters of manufacturing imports last year were not consumer goods but goods for investment and production. These will add to industry’s capacity to supply home and export markets in the future. The steps we are taking now must be set against the long-term and lasting improvements in the economy: greater profitability, greater productivity, greater investment, greater output, and radically reduced unemployment.
Early last year, in the wake of the stock market crash, there were many voices of despair. They were wrong. Because the British economy is now resilient and dynamic and growing. And so it will remain. And manufacturing will lead the way.