As a new strategy for developing the region's manufacturing industry is unveiled, Minister for the West Midlands Liam Byrne talks about what it means for the future.
Manufacturing is at the very heart of the West Midlands economy, bringing more and higher value jobs than any other sector to the region, while a number of world class businesses, universities and centres of technological excellence ensure that a tradition of innovation continues to prosper.
The future outlook of manufacturing remains positive for our region, so long as companies are given backing to adapt to changes in current and future markets.
The West Midlands Manufacturing Support Strategy, launched in Birmingham yesterday, is the result of close collaboration with industry and public sector partners.
Mindful of a need to close a productivity gap of £10 billion, no one can underesti-mate the significance of manufacturing in the manufacturing heartland of the UK.
Overall the sector consists of 19,000 firms employing 362,000 people with an annual turnover of £45 billion. Importantly manufacturing supports the region's service industry with an estimated two jobs in services dependant on every job in manufacturing.
Consequently Advantage West Midlands needs no reminder that manufacturing remains a core strength of the region - and this strategy will build on that status.
It is the largest sector providing 27 per cent of Regional Gross Value Added (GVA) - 23 per cent directly and a further four per cent from its supply chains. Its GVA per employee is 30 per cent higher than the regional average. It accounts for approximately 77 per cent for all business R&D, and 54 per cent of all R&D under-taken.
Every year Advantage West Midlands alone spends £45 million on manufacturing support related activities, through organisations such as Manufacturing Advisory Service West Midlands and the Premium Automotive Research and Development Programme.
The agency also invests in the development of individual manufacturing companies via a range of Access To Finance initiatives - such as Selective Finance For Investment In England.
Elsewhere, the National Skills Academy for Manufacturing, which is based in our region and has contributed to the manufacturing support strategy, has joined forces with Advantage West Midlands and regional manufacturing support agencies to identify and accredit the best training - and trainers - to find ways of reversing the issue of a shortage of appropriate skills.
The best manufacturing companies in the West Midlands can lay claim to being truly world-class with the region home to major centres of engineering and product development excellence such as Warwick Manufacturing Group, Ceram and Jaguar-Land Rover.
The region is already home to many global manufacturers, many UK-based and a particularly strong concentration of foreign direct investors, who compete favourably with the very best in the world. But now this global competitiveness must be extended to a greater proportion of the sector.
Regional strengths include an extensive supply chain infrastructure as well as a presence of a number of excellent manufacturing-linked R&D and technology organisations, both private sector and university based. We have seen in recent years how many global companies have successfully launched design and engineering facilities here.
The region has, of course, also forged strong links with businesses from China and India. While these competing nations serve as a threat, these high growth economies offer a great opportunity to outsource elements of production and particularly to export into their growing markets. These countries are increasingly emerging as sources of inward investment.
However, aside from these inherent strengths it is important not to lose sight of a number of weaknesses that must be worked on. Poor skills and skills gaps affect significant parts of the sector. Together, low capital investment and relatively low effectiveness at innovation by businesses result in a lack of competitiveness, especially among SMEs - which account for over 98 per cent of manufacturing businesses in the region.
Recent research has shown that, on average, West Midlands management skills are five to ten percentage points below the rest of the UK. Currently West Midlands manufacturing has 100,000 people at all levels who are under-skilled - around 25 per cent of the region's workforce. Investment in skills both by employers and individuals is increasing but we still lag behind many other regions on the supply, demand and effective use of skills.
The region has the lowest number of people with Level 2 and 3 qualifications and many employers report gaps in the skills necessary to maximise productivity. Some 40 per cent of the manufacturing workforce in our region does not hold a Level 2 qualification which will in future be the minimum required for entry into the sector.
Seventy per cent of the 2020 workforce are already in the workplace today, yet the education and skill system has until now been hugely focused on young people. The development of individuals applies whether they are at the highest levels of leadership and management, supervisory, technical or craft levels or just needing basic skills.
Another key area in which the West Midlands are progressing is in the development and application of advanced manufacturing materials, very much the future of manufacturing.
It aims to become a national leader in the research and application of advanced materials manufacturing. This emerging sector which includes high-technology fields such as ceramics, biomaterials, composites, electronic materials, catalysts and coatings will play a dominant role in the further development of industries from automotive to healthcare. Through the Birmingham Science City initiative - and other channels - Advantage West Midlands is looking to invest £25 million into the launch of a centre for advanced materials. Spearheaded by the universities of Warwick and Birmingham, the centre will undertake internationally leading research and development into the creation of new, advanced materials and sensors.
A shortfall in higher level engineering skills is a particular current issue which is seriously hampering growth in areas where the region is focusing. This could also potentially jeopardise the ongoing presence of some of the region's most important international companies.
By taking stock of these issues so that more knowledge based products and processes can be developed by regional manufacturing companies, by supporting businesses to develop their global marketing skills, and by freeing them to build on existing strengths, there can be a strong future for manufacturing in the West Midlands.
Middle sized enterprises - with a turnover of between £10 million and £250 million - are particularly effective at making good use of improvement opportunities. Their importance has tended to be overlooked by public sector business support and there needs to be greater focus on them.
The world is changing and manufacturing has to change also. While we must not lose sight of the fact there is much to do, we must also be mindful that our region is world-famous for its innovation and manufacturing capabilities, and with easy to access support matched to the needs of business we will assist manufacturing in remaining the dominant contributor to the West Midlands economy. ..SUPL: