An essential component: The UK Chemical Industry
Let me start by saying how the constructive relationship Steve Elliot and the CIA have built with the Government is central to everything I have to say tonight.
Together, we’ve strengthened the UK’s position as a leading location for investment in this industry. And that partnership remains essential to our future prosperity in this century. So I welcome today’s launch of the CIA’s Manufacturing Strategy.
I also want to echo Steve’s thanks to Bob [Tyler] and Brian [Iddon] for their service over the last few years. And let me wish John [Saul], the very best of luck in his new role as CIA President.
The Building Blocks for Growth
If you go back down the supply chain of just about any manufacturing industry in Britain, and many other parts of our economy too, you’ll find a chemical producer.
We sometimes say that this is the carbon age – it is also the age of chemistry. And the omnipresence of fossil fuels in this industry is, as Steve said, a huge challenge.
What I want to do tonight is acknowledge the strength of the British chemical industry, and sketch out the key ways in which government will back you in facing this and other major challenges ahead.
The Challenges Ahead:
The last two years have obviously been difficult for this industry. Precisely because you are so fundamental to the industrial economy, the collapse in global demand for manufacturers is hurting you. That is why it is so critical that we maintain our fiscal stimulus until our recovery is fully locked in across our economy.
To withdraw that support now would threaten the stability that the Government, this industry and its trade unions have worked so hard to secure.
Because in the long view, this industry remains one of the UK’s great industrial successes. It is a global leader – generating billions for our economy every year, adding value across our manufacturing base and investing heavily in business-related R&D.
But even when global growth returns, this will remain a tough business to be in. You’ll be competing for markets with the chemical industries of the industrialising economies. You’ll remain highly dependent on a strong and consistent supply of trained technicians and scientists.
And of course, you will face the huge challenge of decarbonising industrial chemistry, which remains heavily rooted in fossil fuels. When we think about decarbonising the economy we tend to think about energy, about cars, about planes – but the chemical industry also faces a high and radical reinvention of itself.
That’s a huge demand. But it’s also a very exciting challenge and I’m encouraged by initiatives like those at Runcorn, such as the new Ineos Chlor Plant which are helping reduce the carbon footprint of this sector.
But this is also a massive global opportunity for our advanced manufacturing base. As we’ve heard tonight, your industry will be integral to the development of cost-effective low carbon solutions and services.
And Government is committed to equipping your industry and others to realise our vision for the UK to become a world leader in low-carbon. That includes ensuring secure, competitively priced energy supplies.
The challenge for Government is making sure that the conditions are in place to help this industry continue to make that transition and to prosper. It needs an active, strategic approach to industrial policy that puts public investment behind the capacities that the chemical industry builds on. I want to focus on three during my remarks: the right regulatory environment, the right skilled workforce and the right kind of policies to back industrial innovation.
The Right Regulation
This is always going to be a sector that has to live with health and safety regulation. It provides the reassurance people want and need that chemicals are safe. This industry can’t survive without that transparency and trust. We need to see that regulation as an enabler of innovation and commercial growth, not as a check on it.
But we need to regulate intelligently, not least because for every one big chemicals player, with the budget to handle heavy due diligence burdens, there are ten chemical SMEs who need to carry out the same checks on much smaller budgets. A big part of that challenge is at the EU level, where we need to make sure that big essential regulations like REACH and EU-ETS are proportionate, well-designed and enforced consistently across all Member States of the EU.
The Right Skills
In a laboratory-based industry like this, we also need to ensure the right numbers of skilled technicians and STEM graduates. This has long been recognised as a gap in the British skills market and something that we have addressed in our new strategies for adult skills and higher education.
Both policies retarget marginal funding in the UK higher skills system towards filling strategic skills gaps, especially in industries like chemicals, pharmaceuticals, bio-science and wider advanced manufacturing. And I make no apologies for targeting and fine-tuning at areas of skills and skill needs in this country. I’m not afraid of making those choices.
We will create a modern class of British technicians through 35,000 new advanced apprenticeships for 19-30 year olds, and many of these apprenticeships will be in the chemicals sector.
To get the best out of the skills system we need industries like yours to communicate strategic demand to both trainers and students as clearly and quickly as possible. The best way to do this is often going to be to establish collaborative partnerships with local universities and colleges, in the way that companies like AstraZeneca and Shell already do. We will continue to strongly encourage and support this.
Boosting Research & Innovation:
But it’s not just about leveraging the potential of universities for training. With investment in science topping £6 billion next year, the UK’s science and research base represents a knowledge bank second only to the US. It’s one of the few banks left that can never be too big.
Turning the intellectual resources of our universities into commercial applications is one of the defining challenges for industrial Britain that we face in coming decades. Since 2003, UK universities have spun off almost a thousand companies worth around three and a half billion pounds.
This is a good record, but I am convinced we have the potential for more, especially in new materials, processes, catalysis, nanotechnology and drug development, where the premium is on innovation. And I was pleased that today’s first meeting of the Industrial Biotechnology Leadership Forum was so constructive in identifying future opportunities in the UK.
There are a number of ways Government can back you. Evidence shows that R&D tax credits have certainly helped. The science budget is one of the most powerful public investments we make in this country and I will fight hard to protect it in principle and practice.
In the last year we’ve also taken a more active approach to investing in some of our key capabilities in this area through the new Strategic Investment Fund, especially where the market was failing these perfectly viable developments for whatever reason.
Now, we are funding the Industrial Biotechnology Open Access Demonstrator at the National Industrial Biotechnology Facility at Wilton, and have created a fund to help SMEs access it. And last month we became the enabling investor in the new Welcome Trust drug development incubator at Stevenage alongside GSK.
Conclusion:
For a decade our key concern in Government has been making sure that this country is a good place to invest in pharma and industrial chemistry. That won’t change. That’s not just about the tax and regulatory regime – although those things are of course vital. It’s about access to the right skilled workforce, the right IP regime, the right ecosystem of universities and innovation, including access to finance for innovation.
At this point as a country we are right to be having a serious debate about how we live within our means. But we also need to be thinking about how we invest in and drive the growth that will power recovery and put in place the conditions for our economic success. Because the fastest way – the only way – to get out of debt is to grow the economy, especially through exports. Investing in modern manufacturing in Britain is, in my view, the key investment in our future as an economy and as a country.
A strong chemical and pharmaceutical industry is an essential part of our industrial base. It’s also key to the solutions that will define environmentally sustainable industry in this century.
This next generation of British chemists will be among the most important we have ever produced. A lot of our best and brightest have chosen careers in the City over the last ten years, and from the perspective of 2009 it’s hard not to ask what the opportunity cost of that has been in the research lab and modern manufacturing.
Active outreach by the industry to students is key to changing this, and it’s something we support through Manufacturing Insight.
Actually, I think this year’s CIA’s young ambassador Greg Simmonds from GlaxoSmithKline is here tonight. Greg? No pressure, but our future rests on you. We need more like you.
And we need to be equipped to take advantage as much as possible of new technologies, materials and markets like the emerging economies.
Korea is one such market with an active chemicals sector. As EU Trade Commissioner I initiated the EU-Korea Free Trade Agreement to open up the lucrative Korean market to UK companies. That agreement will come in to force in the mid-2010 and will remove 97% of all tariffs between the EU and Korea within three years, creating a massive new trade opportunity. More UK businesses must seize that chance.
Let me end, as I started by saying again that we are committed to working with the CIA to ensure your industry is equipped for a changing world. I hope you enjoy the rest of your night.
