Mad Management: The government must provide the right conditions for productivity

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Last week’s column ended with the call to businesses to become more demanding customers/shareholders of the government. This is a theme that began two weeks ago under the heading, “Industry Revival needs demanding customers and great management”, which stressed the need for feedback to the businesses we patronised if they were to improve. It also stated that we, in the UK, are particularly bad at giving it, preferring to mutter under our breath instead.

Well, Brexit is now changing all that and business is giving hard feedback to the government on the impact of its indecision and lack of direction. Sky News (my go-to news station, along with Channel 4, in place of the BBC) delivered a stark warning to ministers on the 18th about the extent of discontent among the car manufacturers – the bellwether for industry. Faisal Islam, their canny political editor, laid out the reasons for business frustration, which is the utter lack of clarity on, for example, the customs issue.

At a time of a crisis effective leaders always present the strategy they are putting in place to manage it.

Memos circulating at the Frankfurt Motor Show Officials were described as having “no concrete idea of how to apply [customs] proposals”. The stepping down of the head of the Department for Exiting the European Union shows just what a dire state the Brexit negotiations are in. Green MEP Molly Scott Cato in her blog on the 18th stated that it is “part of a much wider and ongoing discontent within the civil service over Brexit.” Here we have a recipe for disaster: no leadership from the government, uncertainty in business and an increasingly demoralised civil service.

At a time of a crisis effective leaders always present the strategy they are putting in place to manage it. This reassures people. The government is incapable of doing this and is rightly being challenged by business directly. The Sky report says that Jaguar Land Rover boss Ralf Speth was said to have had a “heated” exchange with the Prime Minister at a Number 10 round table over summer, over the lack transition arrangements, i.e. no strategy. In the meantime JLR is putting in place a large facility in Slovakia as a hedge against any deterioration in business climate after Brexit. That’s leadership.

Toyota, BMW, and GM bosses are worried as they try to estimate stock levels to manage smooth component flows. Carlos Tavares, the hard-headed boss of the Peugeot group who now owns Vauxhall, said: "We don't know how Brexit is going to unfold... all this completely changed the business model." This is the situation up and down the country, especially in manufacturing.

Latest figures show overall levels of investment in car manufacturing dropped sharply over the period of the EU referendum and since, and now the government dithering is exacerbating that. But very significantly, the manufacturing businesses perceive that government does not prioritise - and in some cases even understand - its “just-in- time” manufacturing methods and its pan-European “integrated supply chains”. Here we have the nub of the problem. Productivity is down, investment is slowing, infrastructure spending has an on-off button, and our politicians don’t really understand how business works.

A fine example is Boris Johnson who, as Foreign Secretary, clearly has the competence to pronounce on business, recently pronounced that “traditional carmakers would vanish” within the next 20 years, to be replaced by new manufacturers of “automated” cars. This clearly illustrates the key issue, i.e. total lack of understanding of business and confidence in British industry, and, specifically, car production. They are survivors. Jaguar has been going since 1936. Vauxhall began making cars in 1903. GM, who took it over in 1925 has been in business (one way or another) since 1908. They survived wars, fuel shortages, legislation changes on all manner of things, terrible top management in the UK and USA, while introducing front wheel drive, computer-controlled power distribution and production efficiencies that increased productivity by 1000% plus.

Does Boris think they won’t adapt? Does he think our brightest engineers and some really good managers are going to step aside and let Musk et al take their market? What a load of tosh. Honda and Toyota succeeded in war-devastated Japan, Vauxhall was a travelling crane manufacturer in the 1800’s, Jaguar’s beginnings were in motorcycle side cars. These are smart adaptable people working in companies that have invested hugely in research – like so many of our British manufacturers such as Dyson, Forgemasters, and the late and much lamented BREL (British Rail Engineering Ltd that put together that marvellous workhorse, the HS 125 in 1975, which remains the fastest diesel-powered

train ever built, and is still running over 40 years later.)

Right now, with pollution concerns riding high the car industry is responding typically by focusing on electric cars. The biggest selling electric car in the world is the Nissan Leaf, made in Sunderland, with sales of 250,000 in 2016. But all the major manufacturers are gearing up or already producing, from Toyota Prius to Mercedes 350, with both Volvo and JLR giving dates for switching production to electric only. So, what is Boris on about? Of course they will adapt to self drive, IF there is a demand.

Personally, I really enjoy driving. What our government should be attending to is the infrastructure required to make electric cars really successful for the UK, i.e. sufficient charging points powered by renewable energy, special

parking to accommodate refuelling etc. In other words, provide the stable conditions for good businesses to succeed.

Business must demand these basics. If the government can’t deliver, then “vote them off the Board”.