The global manufacturing boomerang – can Labour catch it?

Every single job is precious. Not only for the economy but for the security it can give individuals and families. The Government’s Regional Growth Fund proposals are too little too late. They also do little to prepare us for the rebalancing the global economy faces over the coming years. This rebalancing will mean a shift in some investment from China to the West. Labour needs policies to prepare for this and to offer a more rounded vision of how jobs can be created. Doing this could help the party take the lead on an issue that is central to most people’s comfort and dignity.

The main powerhouse for change in the global economy is China. Its development has influenced our economy in numerous ways, not least in shifting investment and jobs away from Europe. As a result of its success China is experiencing a sustained rise in wages and will likely, over the coming years, see a strengthening of its currency. The sheer size of the Chinese economy means this could have a profound impact on us. A recent report by the Boston Consulting Group found that up to 3 million jobs are expected to transfer from China to the United States by 2015. These will mostly be jobs in which the goods produced are heavy and logistics and shipping take up a high proportion of costs. There are a few sectors where this is expected to be a major force: furniture, cars, electrical appliances, plastics, computers and machinery. On top of this, China is expected to invest $1,000 billion abroad by 2020.

This is a great opportunity for the UK and Labour should have policies ready to take advantage of it. The industries mentioned manufacture valuable products and need well trained graduates and skilled workers. They are fields in which Britain has a strong heritage. Labour should steal a march and start talking about how we can encourage this investment in the UK. A good start would be to commit to reinstating Regional Development Agencies (RDAs) or similar organisations. This was apparent to former Shadow Business Secretary John Denham. In September he said this should be done for the West Midlands’ RDA. It is a promise that should be extended across the country.

The current government’s policies will not go far enough to make Britain an attractive destination for these industries. The current Shadow Business Secretary, Chuka Umunna, has identified that the implementation of the Regional Growth Fund, which is designed to mitigate the impact of abolishing the RDAs, leaves much to be desired. The sort of manufacturing identified above works well with RDA style organisations. Unlike many high-tech industries, which often need to be located near intellectual and financial hubs, these industries look to settle down in areas with low costs. This is particularly hopeful for unemployment blackspots which can offer inexpensive land and reasonable costs. Incentives, such as tax breaks or grants, should be used to lure such industries to the areas that need them most.

Policies for attracting such jobs can only be a part of a wider employment strategy. Nonetheless, successful policies in this area could go at least part of the way to filling gaps in job creation that governments have found hard to fill. This is an issue on which Labour can get ahead of the Conservatives. Recent polling by Lord Ashcroft found that in Labour target seats the Conservatives are behind on the key issue of ‘economy and jobs’. The party needs to maintain, build and spread this advantage. The economy is due for a rocky ride over the coming years. If Labour can convince the electorate it is the party with the ideas and vision to bring jobs into the country it will take major strides towards rebuilding a trust which has been lost with many voters. Credibility on this issue is essential. If the party does not have this it will not be returned to power – and deservedly so.