By Paul Everitt
Europe is facing major political, social and economic challenges. The aftershocks of the 2008 financial crisis continue to reverberate around national governments and European institutions. There is uncertainty in financial markets, increasing public discontent at the squeeze on living standards and concern for the future of the growing number of unemployed, particularly amongst the young.
Seeking to manage aggressive deficit reduction plans, whilst simultaneously encouraging private sector investment and growth is proving difficult and politically damaging for governments around Europe. The results of recent elections in France, Greece and the UK suggest there is some reassessment of strategy and a change of emphasis, but not direction.
We are seeing a stronger focus on the search for models, mechanisms and policies that can help deliver growth, jobs and prosperity. Europe must now plot a different future for its businesses and citizens. National governments are already grappling with these problems, but the European Union, its Commission and other EU institutions have an essential role to play in developing and implementing a new industrial agenda.
The automotive industry in Europe is experiencing extremely mixed fortunes. Those companies able to exploit the strong growth in the BRIC economies and faster recovering US market are doing reasonably well. Those companies who are more reliant on Europe are finding life much more difficult with falling demand and a fixed cost base.
The UK motor industry is enjoying one of its better periods. Output is steadily recovering and global vehicle manufacturers have committed more than £4billion to new model programmes, facilities, R&D and jobs at their UK facilities during the last 18 months. These investments will open up opportunities for companies in the UK supply base and provide some welcome stability.
The UK has clearly articulated a desire to re-balance the economy, boost domesticate manufacturing and gain a greater slice of key export markets. The motor industry has been at the leading edge of this change. At the tail end of the Labour government, Lord Mandelson recognised the strategic importance of the sector to the UK economy. The coalition, with strong support from Vince Cable MP, Secretary of State for Business, has helped build a genuine partnership with industry and persuaded colleagues across government to support measures to attract investment and rebuild the country’s industrial capability.
This process is far from complete, but it provides some important lessons that might help frame a broader European approach. A new industrial policy for Europe must help to both generate stronger domestic demand and ensure products designed, developed and manufactured here can win a significant share of faster growing global markets. A new industrial policy must recognise that Europe must be a manufacturer of products, not just a provider of ideas and services.
It is important for everyone to recognise that public finances will remain under intense pressure for years to come, so our priority must be the smarter use of the resources we have, rather than a struggle for more. A smarter and more targeted approach will require some tough choices and a more disciplined approach. If we are successful public funds can be used to unlock and leverage significant private sector investment.
A new industrial agenda for Europe must look closely at how to stimulate greater investment in R&D, skills and capital equipment; it must take a fundamental look at the role of regulation, rethink the approach to free trade agreements and find a route to improving the access to and affordability of finance.
Despite the high levels of unemployment across Europe the most frequent complaints from many businesses is about an inability to recruit suitably qualified staff. Slow industrial decline has damaged the pipeline of skilled workers. Mobilising resources at national and European level to train the young and upskill the existing labour force should be a priority.
On R&D there are a range of programmes and support mechanisms that might be better co-ordinated and aligned to industry priorities. Europe should lead the development and industrialisation of low carbon products and energy generation, delivering long-term competitive advantage.
Regulation remains a concern for many businesses. The Commission should carefully review its programmes to ensure that existing plans do not add unnecessary cost or administrative burdens. All new initiatives should be subject to a competitive analysis and detailed scrutiny before being accepted.
The European Commission must also take a fresh look at its trade policy to ensure that any free trade agreements deliver equitable benefits to all parties. Access to the European market must be reciprocated by trading partners with specific attention paid to the impact on non-tariff barriers.
Raising the level of investment in the European industrial base will require new sources of finance and a leading role for European Investment Bank. The search is on for new sources of finance and a better deal for smaller companies and the supply chains of major industrial customers.
European economies need growth, employment and a brighter future for their citizens. A new focus on the strength and resilience of high value manufacturing can make a difference, but it will require innovation and some risk taking by politicians and officials, both nationally and at a European level.
Paul Everitt is Chief Executive of the Society of Motor Manufacturers and Traders. He writes for Nucleus in a personal capacity.