Thanks to its world­-class science base the UK is very good at developing ideas. But we still don’t invest enough public money into developing early stage technologies, says Dr Kieron Flanagan.

Does the UK have a future in manufacturing? Does the North West or the Greater Manchester city region have a future in manufacturing for that matter?

These were the questions debated at a panel discussion I took part in during a recent event at Manchester Business School where the keynote lecture was given by Peter Marsh, a former manufacturing editor of the Financial Times and author of ‘The New Industrial Revolution: Consumers, Globalisation and the End of Mass Production‘.

‘Reindustrialisation’ is now back on the agenda after the global crash, according to Marsh, who also explored the impact that developing technology and the spread of innovation and collaboration are increasingly having on the pace of manufacturing. And yet, as our speaker reflected, manufacturing today only accounts for 16 per cent of global GDP (10 per cent in the UK) – although it does employ 300 million people, a third of whom are in China.

For Marsh his ‘new industrial revolution’ is a mix of ideas that are kicking in at the same time. Blended technology, mass customisation, a focus on specialisation, environmental stewardship, a strong service dimension to manufacturing operations, and cluster dynamics are all playing their part in creating this new global environment.

Marsh said the significance for policymakers was to identify and be aware of the value of today’s manufacturing companies, and then support that innovation where they can.

In recent decades the UK has eschewed sector or technology­ specific policies in favour of generic business support and innovation policies.

But is this framework fit for the 21st century? Can one size really fit all?

Much recent UK innovation policy has been about trying to commercialise scientific discoveries by pulling potentially valuable technologies, kicking and screaming, out of university labs. Of course, scientists and engineers working in our research universities do often develop commercialisable technologies. But universities are mainly about teaching and fundamental research, rather than about innovation, and can never compensate for an absence of innovation elsewhere in the economy.

Rather than trying to squeeze ever more innovation out of institutions poorly placed to deliver, we should look again at the wider role of government in de-risking early stage technologies.

Some would argue that setting the basic framework and putting in place essential infrastructure is all that can be asked of governments. Let the free market decide who the industrial winners should be. If this ever really happened anywhere, it is not happening anywhere that we would recognise as a major international competitor or comparator. Our competitors have tailored policies targeted at specific sectors and technologies, even if in some cases those policies are hidden.

Even here in the North West, those sectors traditionally known for high levels of investment in innovation are those that have been on the receiving end of hidden industrial policies. Think the pharmaceutical, aerospace and nuclear industries.

What about the parts of manufacturing that haven’t benefited from tailored policy support? Further tax breaks or deregulation are unlikely to transform the prospects of such firms. And there is an issue of critical mass. The UK remains at the very high end in many areas of manufacturing, but it is mostly small, highly specialised, niche companies that are thriving. Such firms, alone, can never be the basis of significant employment unless they grow.

But most will not. For large scale employment we probably need to look to the service sector, and it is very strange we are not having a national conversation about innovation and industrial policies for this sector. As for the small manufacturers, they are unlikely to ever be in a position to invest enough in R&D to close the UK’s technology gap with its leading competitors.

So if we want to remain a major player in industrial technologies in the future, the state will need to step in. Here our record is poor. The UK has been reducing its investment in new technology both in terms of public and private investment. If we don’t play a major part at the leading edge of technological development we will find ourselves increasingly unable to keep up with technological developments coming from elsewhere.

At the moment small, niche manufacturers may have the expertise to import and use the latest German process technology. But over time our lack of critical mass in public or private investment in technology may erode our national capacity to absorb and use new technologies.

There are tantalising signs that the UK government may be waking up to these challenges. For the first time in decades, attention is being paid to supporting technological development and not just excellent science. The development of the Technology Strategy Board and its Fraunhofer-­inspired Catapult centres are a step in the right direction, though the scale of the effort so far probably remains sub­critical.

And why is there no Catapult in Manchester? It remains unclear (to me, anyway) what criteria are used to decide what major investments to make and where to make them. Getting a good geographical spread of these investments must surely be a major public policy goal; it is disingenuous to say that such decisions can ever truly be geography ­blind.