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TUC urges ministers to learn manufacturing lessons from Germany

19 January 2012

If the UK is to end its over reliance on financial services a renaissance in manufacturing needs to take place, and ministers who want to re-balance the economy could learn much from the German approach to industry, says a new report published by the TUC. German Lessons: Developing industrial policy in the UK looks at how government approaches to industry in Germany and the UK have differed since 1945.

The report comes up with a number of suggestions as to how a more strategic, intelligent and active approach to government industrial policy could reap huge dividends for British manufacturing and the UK economy. It says that in the UK there is a great deal of emphasis on large firms and on the very smallest companies, but little thought or support is given over to medium-sized enterprises. Yet in Germany, the 'mittelstand' - a network of thousands of medium companies - is the backbone of the economy and a crucial part of the German supply chain.

The concept of the social market is as dear a principle to the German people as the NHS is to the British public says the report, and an economic system which brings management and workers together and has at its heart a strong positive role for unions and employers gave German firms a very definite advantage as the global economic slowdown began to take hold.

The TUC report also says that talented graduates in the UK are less likely to choose a career in industry than they are in Germany, and this combined with a three-year vocational training programme provides a massive boost to the country's manufacturing firms. Similarly Germany makes much more use of apprenticeships - around 40 per cent of school leavers are taken on by employers for three years, whereas in the UK only 6 per cent of 16-18 year olds were on apprenticeships in 2010, and most of these were for little more than a year.

TUC General Secretary Brendan Barber said: 'The government has got to adopt a smarter, more intelligent approach to the development of its industrial policy. The UK economy is crying out for assistance and a revival in our manufacturing sector - and less of a dependence on the financial sector - will be a crucial factor in delivering growth and creating thousands of much-needed jobs.

'Too much of government policy has amounted to little more than tinkering at the edges, when what we really need to deliver a vibrant industrial sector is a new active, interventionist approach to manufacturing.

'The UK has much to learn from Germany - it is the powerhouse of the European economy and its politicians have never lost sight of the value of their manufacturing sector. But it's not too late for British manufacturing - a new approach to skills, investment and procurement could help bring the UK back to its rightful place as one of the major manufacturing nations of the world.'

German Lessons: Developing industrial policy in the UK makes a number of policy recommendations for ministers, and says that when linked together, they would help deliver renewed manufacturing success:

The creation of a fairer economic model - a UK version of the social market, with a stronger role for unions and employer organisations, to include the introduction of employee representatives on works councils or supervisory boards, as exists in Germany.

There should be a concentration of effort on high skill, high value manufacturing sectors - for example in the field of environmental technology - on those British companies most likely to succeed in the face of global competition.

Urgent action on skills - while skills shortages plague both countries, Germany has many more apprentices and a long-established dual vocational system which puts the country in a much better place than the UK.
Increased support for medium-sized companies in the UK, and new ways to encourage small firms to grow so they can employ more people and supply big industry.

The creation of a strategic investment bank that could raise large sums of money in the commercial markets, backed by a smaller capital base provided by the government.

A smarter approach to procurement - other countries make a much better use of public money to boost their own industries - where every pound of public money in the UK is spent encouraging the development of a modern, highly skilled economy.

A substantial amount of the research in the report is based on in-depth interviews with managers and union officials at German companies or German-owned companies based in the UK. Five companies in Germany are featured in the report - Volkswagen, Siemens, ThyssenKrupp, BASF and Airbus, and four from the UK - Bentley (owned by Volkswagen), Siemens, BMW and Roballo Engineering (ThyssenKrupp).

The report is available here.

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