Not Rebalanced, But Unbalanced

Tony Burke writes:

The coalition faced a triple whammy just two days into 2015 with bad news on three fronts – poor manufacturing growth figures, a low take-up of the government’s apprenticeships scheme and surging consumer spending floating on a bed of unsecured credit.

Osborne and Cameron’s promised rebalancing of the economy in favour of manufacturing has long disappeared in the rear view mirror.

The pound hit a 16 month low after the reliable Markit/CIPS UK Manufacturing Purchasing Managers’ Index, fell to a three month low at the end of 2014.

The manufacturing PMI fell to 52.5 from November’s 53.3, somewhat short of predictions of 53.7.

For the fourth quarter, the PMI showed the weakest growth in eighteen months pointing to more bad news ahead when manufacturing data is collated for the end of 2014.

“The ‘March Of The Makers’ remains empty rhetoric”, said Professor of Industry at Aston University David Bailey.

James Knightley, economist at ING said:

“The long hoped-for economic rebalancing story is not playing out as envisaged. With employment and real household disposable income set to rise robustly in 2015 consumer spending looks set to become the UK’s main growth engine once again.”

The government’s flagship apprenticeship scheme was also badly dented by the figures, which showed that the number of people starting government backed apprenticeships fell by 70,000 in 2014, the lowest number since the scheme was launched.

Figures for new apprenticeship starts for 16 to 24-year-olds dropped by 6,000.

Unions and many employers have long been critical of the government scheme.

It will not, in the long run, provide the decent Gold Standard apprenticeships and jobs that will be needed to fill the growing skills gap.

Estimates show that the UK needs around 780,000 more engineers over the next five years to meet industry demands – this equates to 156,000 per year.

Currently the UK is training less than half that – leaving the country with a shortfall of more than 400,000 engineers by 2020.

Recently Ed Miliband committed Labour to “put the UK back at the forefront of invention, technology and engineering with a national mission to create an extra 400,000 engineers by 2020”.

Bank Of England figures showed lending to consumer spending surging at its fastest rate in nearly a decade from September to November last year, with consumer borrowing rising at an annualised 8.3 per cent – “a pace last seen in October 2005”, according to Reuters.

“We’ve seen little to boost capital expenditure or getting genuine lending to SMEs, or anything like real efforts to rebuild the UKs fractured manufacturing supply chains,” said Reuters journalist David Bailey.

“Instead, we have seen consumption buoyed by a run down in savings and more borrowing with George Osborne eager to pump up the housing market through wheezes such as ‘Help To Buy.”

This sense of déjà vu should be used by Labour to demolish the ‘smoke and mirrors’ campaign of deficit cutting and ‘record job creation’ (predominantly low paid, low skill, insecure jobs) being perpetrated by Tories, Lib Dems and the right-wing media.

Labour needs to be clear that it will introduce a robust, interventionist manufacturing strategy, based on decent jobs and with decent employment rights as the only viable option to a looming credit-fuelled economy that is bound to burst – again.