Mandelson Says U.K. Should Rebalance Economy to Manufacturing

By Robert Hutton

Feb. 6 (Bloomberg) -- Business Secretary Peter Mandelson said the British economy’s future lies in high-skill manufacturing and science, with less emphasis on financial services than in the past.

“Some rebalancing is required,” Mandelson told the Confederation of British Industry’s manufacturing dinner in Birmingham. “The next decade will be about strengthening manufacturing’s place at the heart of Britain’s economy. And we will probably sell the odd derivative too, and that’s fine.”

Prime Minister Gordon Brown championed the banking industry during his decade as finance minister. He moved from that job just as the credit crunch started and has since promised hundreds of billions of pounds on a series of bail-outs aimed at reviving lending to industry and consumers.

Britain’s economy tipped into recession last year, with consumers reducing spending and businesses struggling to borrow to cover themselves during the slowdown.

Automakers including Honda Motor Co. and its suppliers are shuttering plants across Europe as car markets shrink. Car sales in Britain fell 31 percent in January to 112,087 vehicles from a year earlier, the ninth consecutive monthly decline, the Society of Motor Manufacturers & Traders said yesterday.

Industry Requests

The SMMT urged Mandelson to look at a further rescue package for the industry, which got access to 2.3 billion pounds ($3.4 billion) in government loan guarantees last month. Carmakers want government to subsidize their sales with a German-style “scrappage incentive” to encourage people to buy newer, more environmentally-friendly vehicles.

Mandelson, in his speech last night, said he was looking at such a plan, along with help for carmakers’ finance arms.

David Smith, chief executive officer of Jaguar Land Rover, the luxury car brand owned by Tata Motors Ltd., echoed Mandelson’s words in a speech to the same event.

“What we have seen, and what we are suffering from, is the result of a massive collective failure of leadership of those who run our financial systems,” Smith said in a text of his speech. “It goes beyond the banks and their boards to include their auditors, the rating agencies, the regulators and Treasury Departments across the globe. We have been badly let down.”

Richard Lambert, director-general of the CBI, welcomed Mandelson’s plan to emphasize manufacturing and said business needs government to provide leadership.

“We need a more strategic approach to innovation, skills and tax in order to capture the economic benefits that will follow from the substantial investment in infrastructure over the next two decades,” Lambert said.

To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net