Productivity in British industry lags far behind France and Germany. The Department of Trade and Industry identifies the cause to be lack of investment in skills and technology. Capital investment by manufacturing firms is currently at the same level as 1974 and has actually fallen by 30 per cent since 1998.
We call this the investment strike - a strike for which there was no ballot and, interestingly, no outcry or condemnation from the Government either.
How this strike affects competitiveness is easily demonstrated using the example of the construction of Terminal Five at Heathrow. Owing to a chronic shortage of electricians, plumbers and steel erectors, salaries are now as high as pound;50,000 a year, and still there are not enough being recruited. This is not down to industrial muscle but market forces.
In the engineering sector, where the market for its products are primarily foreign, firms have a tough job to be competitive. The shortage of vital skills in engineering has been caused by the end of apprentice training by firms and a failure by the state sector to fill the gap.
It is a cultural problem as much as an economic one. The absence of a training levy leads even progressive employers to conclude that investment in skills is high-risk. Bad employers are short-termist and always prepared to poach skilled workers from good employers as it is cheaper than training them themselves.
Another factor is the current framework of minimalist employment protection, which gives employers an easy and cheap way to cut costs. At relatively short notice British employers can shed thousands of staff.
Their action pleases the City but stores up trouble for the future as vital skills are lost forever. Amicus surveyed 14,000 people who were made redundant from manufacturing in the past 12 months and found that 60 per cent were still out of work. And of those with jobs, fewer than 10 per cent were still in manufacturing using their vocational skills. Without investment in skills the decline in manufacturing is irreversible.
In France and Germany mass redundancies have to be justified and agreed by workplace representatives. If they fail, they must take the case to a labour court. Redundancy costs are prohibitive, too. As a result, investment in skills-based productivity improvements are high. In Germany 80 per cent of the manufacturing workers possess high or intermediate skill levels, whereas only 43 per cent of the UK workforce can boast the same. It is a similar story for adult literacy.
Employers in Britain complain bitterly about educational standards and skill levels. Digby Jones the Director General of the Confederation for British Industry, says: "It's vital that British companies learn to work smarter, not harder." This is easily said, but he is conveniently ignoring the fact that it is his members who must to pay for this to happen. The CBI's dogmatic resistance to any regulation, even that which would ensure higher investment in skills to benefit the economy and individual companies, is the major cause of the problem.
The Government is terrified of upsetting the business community. And British business, suffering from unenlightened self-interest, is lobbying hard to protect the status quo. So what's the answer? Tinkering around the fringe with incentives for training organisations and encouragement for employers, or even pleading from the DTI, will not solve what is a national crisis.
An increase in skills training will occur only when employers have no choice but to invest in it. French and German managers are no more enlightened than in the UK. They train because there is no alternative. The Government must think long-term and remove the disincentive for employers to invest in skills. It's a simple lesson: strong employment laws and investment equals productivity and jobs.
Derek Simpson is general secretary of the Amicus engineering union