Would buying British get us out of the economic crisis?

The Birmingham Made Me Design Expo showcases the very best in Birmingham and Midlands design. Now in it’s second year, Birmingham City University-led event promotes and celebrates the iconic brands and products made across the region.

Dr Steve McCabe, from Birmingham City University’s Business School, analyses whether buying British products will help better the UK economy.

Steve McCabe

On bank holiday Monday the BBC Radio Four Series You and Yours broadcast a programme ‘Made in Britain: Does it still make sense to manufacture in the UK?’ which made interesting listening.

What listeners will have gleaned from listening to this programme is that whilst much still made in Britain, a great deal of what we consume is made abroad.

What is especially annoying is that even though any goods we buy may have imprimatur – usually a union flag – this does not guarantee that they were entirely produced with British-made components or that British workers were employed in the attendant processes.

Interestingly among the makers of goods there were mixed views on whether there is merit in still manufacturing in this country. It will come as no surprise that some choose to have their goods made abroad, especially in the Far East, where the costs of the components and, of course, labour are far cheaper.

One of the conclusions to the programme was that just because something purports to be British does not automatically mean that it is particularly good as anyone who bought a British Leyland car produced at Longbridge in the 1970s will attest; my dad had two allegros one of which virtually rotted away!

What did emerge, however, was that in this country we still possess incredible ingenuity, creativity and design and engineering expertise. What we cannot compete against are the wage levels that make goods produced in this country much higher than others.

Additionally, what this programme explained was that we import a great deal more than we did in, say the 1970s. The consequence of this is that whilst our exports are cheaper because of the decline in the pound in recent years we need to pay more for the goods and components we import.

Small wonder therefore that our balance of payments look so dreadful and show a deficit of £57.7 billion for last year compared to a deficit of £20 billion in 2011. That this deficit represents 3.7% of GDP is a worry and is the biggest since 1989.

The answer seems deceptively simple; make more goods that we can sell abroad.

But as Phil Shaw who is a fund manager at Investec acknowledges, we make less of everything that can be exported and, besides, much of what we do produce is now in the hands of foreign owners.

This is a double-edge ‘sword’.

Foreign owners reap the rewards of success in their investment which is fair. Indeed, as one of the commentators on You and Yours explained, many of British companies making what are widely acknowledged to be world class products, are doing so because of both the huge investment and ability of the new owners to radically alter ways of working and create innovative cultures that have ensured vast improvements in quality.

However, overseas owners owe no allegiance to Britain and are entirely free to shift production in whatever way they see fit or which produces maximum shareholder value.

A good case in point is the potential decision to build the latest model of the Bentley range; a car that is emblematic of British excellence and luxury.

Apparently there is doubt as to whether its new sports utility vehicle due to go into production in 2015 will be built in Crewe which is Bentley’s traditional home for manufacturing.

Instead, according to Wolkswagen chairman and chief executive Wolfgang Schreiber, it could be made in Bratislava which is the capital of Slovakia where they already produce other cars such as the Touareg.

The motivation for any decision to assemble this car in Bratislava would be cost reduction as labour rates are lower there; Schreiber did moot that many of the parts would still be made in Crewe and shipped to Solvakia.

Schreiber accepted that such a decision would not be welcome by workers in Crewe.

However, he indicated that this would be unimportant to the potential purchasers who would perceive this car to be part of a range that is characterised by British design expertise and excellence; a view backed by Kevin Rose, Bentley’s British director of sales and marketing.

Rose also recognised that Bentley could not claim that any assembled in Bratislava could claim to be made in Britain.

Therefore, such a decision will not assist in remedying the balance of payments crisis.

Like any other great British company that is now foreign-owned there is nothing that can be done. Bentley, we should remember, has been owned by German company Volkswagen since 1998.

Additionally we should at least consider Bentley to be special case in that it is a manufacturer of a relatively small number of high value luxury cars in which there is a high degree of bespoke parts that can only be made by the extremely skilled crafts men and women employed by Bentley in Crewe.

What is worrying is that if a luxury manufacturer is willing to contemplate moving production on this way, what is to stop any manufacturer doing the same?

The answer is, of course, nothing.

Cars are pretty similar to most other products you assemble; simply an amalgam of standardised components that can be made anywhere in the world; usually where labour and materials are cheapest.

As some of the industrialists interviewed on You and Yours made plain, part of the difficulty of manufacturing in Britain is the fact that there no longer exists the extensive supply-chain of components suppliers that there used to be.

As I have pointed out before, this is not the case in Germany where the Mittelstandexists to provide a network of highly innovative private companies where the emphasis is on constant innovation and the development of components and ideas that will be sold onto the larger manufacturers of world class products.

Creating a network such as the Mittelstand requires training, education and a financial infrastructure to sustain and support it.

However, the level of expertise and skill is extremely difficult to emulate and, as a result, cannot be moved around as the end assembly processes currently can.

Coming back to the question posed in the title of this blog, should we buy British and would doing so get us out of the current economic crisis?

The simple answer is that whilst we should – like we were exhorted to do in the buy British campaign ‘I’m Backing Britain’ of the late 1960s – the difficulty we experience is in finding sufficient choice of British-made goods.

I recall reading about someone who did try this and found it very difficult particularly when it came to purchasing electronic goods – most especially when they needed to replace their mobile phone.

What is more important is that there is the creation of conditions that will support a renaissance in manufacturing in this country based on novel and ingenious ideas that are emerging from the design, art and engineering students we produce each year.

The Design Council show that the ability of British designers are sought after and that even in the current economic climate, which is far from easy, jobs in this occupation have increased.

If you get a chance, have a look at their website as it is inspirational and extremely informative about the potential of design-led thinking.

The thing is, Bentley and many other examples, most notably Dyson, demonstrate the tendency for design and innovation to stay in this country but that actual production goes abroad.

Critically, like the Germans, we need to do everything we can to ensure that jobs both those who create the great ideas and those who make the goods remain in this country

The challenge, of course, is how?

It would be easy to say that we need more subsidies and grants; something chancellor George Osborne will say we cannot afford.

However, is this not an essential way to spend money?

As well as encouraging the creation of jobs it would increase the number of products that are genuinely made in Britain which would then be likely to be purchased by domestic consumers and exported to markets abroad.

This would vastly increase our chances of getting out of the current economic crisis.