§ Dr. Ashok Kumar (Middlesbrough, South and Cleveland, East)
I am extremely pleased to be able to speak on behalf of my constituents in the communities that are dependent on the well-being of Teesside and its chemical industry. Teesside has a unique position as a centre for chemical production, engineering and innovation.
Before I entered the House, I was a practising chemical engineer in industry and a member of the Institution of Chemical Engineers. I am currently a member of the Select Committee on Science and Technology and secretary of the all-party chemical industry group.
The chemical industry is one of the key catalysts of wealth creation for our country in this century. I want to highlight a number of distinct but interlinking issues: changes in the Teesside chemical industry, its present state, how it can adapt to the business needs of today's global market, and how cluster designation can better encourage innovation and help to create a new business ethos and operating philosophy. However, those issues must be put in context.
The Teesside chemical industry is not a dying smokestack industry. The clothes that we wear, the food that we eat and the materials that furnish our homes, workplaces and cars are products of the chemical industry. In fact, many of the fixtures and fittings in this Room are chemical industry products. The chemical industry is the building block for pharmaceuticals, paints, coatings and advanced materials used in the motor industry and aerospace industry. It is an industry of the future.
We cannot envisage the applications of, and the products that will be developed through, maturing biotechnology, nanotechnology and genetic technology. However, we know that they will be earth shattering and will profoundly affect the world in which our children and grandchildren will live. Research is being undertaken on "intelligent materials" with industrial and medical applications, and on molecular technology.
Although Teesside is surrounded by a skyline consisting of distillation towers, catalytic converters and tank farms, the age of bulk processing may last only another decade or two. Dramatic changes, many of which were unimaginable just a few years ago, have reshaped the Teesside chemical industry. The industry has emerged from a past dominated by a single employer—ICI—into a new pattern of ownership and control. Plants on Teesside are now owned not by a single employer, but many large corporations, for which Teesside represents their largest UK stake.
Teesside is home to some of the world's largest chemical players: ICI, Dupont, Enron, BP, Amoco, Union Carbide, Terra and Huntsman, among others. Their presence underpins the industry's importance to Teesside in terms of finance and employment. At present, 11,000 people are directly employed by the industry, and 25,000 indirectly employed. They contribute to an annual cash turnover of between £3.5 billion and £4 billion, which sustains many more thousands of jobs and defines the social pattern of the towns of Teesside.
32WH The new world players are investing in our future. Teesside's new chemical industry will be as much concerned with small-scale batches of fine chemicals as with processing millions of tonnes of hydrocarbons. It will be a high-value-added industry, which will rely far more on the scientific and technological knowledge and expertise of its work force than the capital asset register of large-scale plants.
As recently as last week, the Minister assured us that the Government's interest in the manufacturing sector is genuine, and that they are committed to ensuring growth and innovation. I hope that that remains the case. Central to that commitment is the need to ensure that this country can win out in respect of high-quality goods and services, and skills and reliability. Of course, that cannot be delivered by the Government, or the private sector, alone. There must be a structured partnership that involves all key players—the Government, academia, the network of regional development agencies and the industry.
We on Teesside are well on our way to forming those partnerships. The chemical industry has led the way by setting up the Teesside chemical initiative, a group consisting of the major industrial players and supporting agencies. The initiative gained national recognition and has conducted many studies for the Department of Trade and Industry. I am told that the Department is using one of its reports as a benchmark for the industry's future. A critical part of that benchmarking process involves analysing the way in which Teesside chemical companies manage their human resource potential. Nowhere is that more important than in the chemical industry. To put the matter simply, the industry is becoming much more people-oriented—it values its work force and undertakes programmes for up-skilling and lifelong training. The work force's knowledge and technology skills will become more important than they are or have been.
New entrants to the industry will work in a global environment. They will be the mobile ambassadors for new technologies and new processes. The increasing reliance on human capital means that a young chemical process engineer may spend part of his or her career in Turin, Turku or Tulsa, although Teesside still is one of the industry's great centres, and it is essential that it remains so.
The infrastructure of the Teesside chemical industry consists of several crucial features, which contribute to the industry's character and strengths and which make an essential case for a new cluster. Teesside has a direct supply of North sea gas feedstocks; a major effluent-treatment facility that makes it one of the cleanest complexes in western Europe—that is demonstrated by the fact that, if one looks into the River Tees, one can see salmon and seals; a direct link to the ethylene pipeline network; a well developed logistic capacity, including a deep-water port whose operators have experience of handling many different chemicals and chemical products; the best water supply in the United Kingdom, which is based on the largest man-made reservoir in western Europe; a good supply of new sites for the industry that are already hooked into services and capable of producing cost and time savings for incoming producers; a mature support network of suppliers, process engineers, specialist services and a public and 33WH professional sector that is used to dealing with the chemical industry; and, above all, a skilled, fully trained and adaptable work force. For those reasons, Teesside is well poised to benefit from the structural changes that are occurring in the chemical industry.
Some may regret the loss of ICI's historical dominance, but the fact that all of the world's major companies have functioning plants on Teesside means that the area will become increasingly important in the eyes of those companies' decision makers. Teesside has the firms, a skilled work force and the tremendous physical assets of a network of research and development institutions and the university of Teesside. That is not to suggest that we have no weaknesses. Although major companies are present, their operations are international, and only limited decision making takes place on Teesside. Also, many of the older sites have a poor physical environment.
The continued strength of the pound is still an issue for companies that are based in and trade with the European Community. However, where there are threats, there are also opportunities. They are: the opportunity to market the Teesside area as a focus for the chemical industry's growth and diversification; the opportunity to restructure the grant mechanisms that are currently on offer from local and central Government, which should make capital investment easier; the opportunity to build links between the various research and development units and, crucially, to ensure the future of the Wilton centre for research and development under the new pattern of dispersed ownership; the opportunity to identify and plug future skill shortages; the opportunity to begin an action-oriented research programme to establish the needs of small and medium chemical enterprises that may be attracted to Teesside; the opportunity to further the programme for site clearance and development on former bulk chemical sites; the opportunity to press for the building of another olefin complex to exploit feedstock strengths; and the opportunity to develop the network of feedstock pipelines from the North sea and, potentially, from mainland Europe. It is an ambitious programme, but an essential one if the industry on Teesside is to continue to display the vigour and spirit of innovation that have characterised it over the past 90 years.
Perhaps the key issue that a designated cluster can influence is the need to ensure a good research and development base. Earlier I mentioned the Wilton research and technical centre. It was established in the mid-1970s by ICI, under the direction of the charismatic John Harvey Jones, to establish a research and development base for all the activities that it managed on Teesside. My right hon. Friend the Chancellor visited the centre about 10 years ago when I was a parliamentary candidate, so he is fully aware of it.
In the new pattern of ownership there is a danger that that unit, which brings together the biggest concentration of scientists and engineers with PhDs in the United Kingdom, could atrophy. That could lead to the human talent and potential housed in that complex moving to fresh pastures in other parts of the UK, and indeed to other parts of the world. No one wants that to happen, and a key issue for any new cluster must be to boost the Wilton centre as a core research and development unit serving all the partners in the cluster.
34WH A group made up of the European process industries competitiveness centre, Redcar and Cleveland borough council, the Teesside chemical initiative, the Tees Valley development company and the north-east regional development agency is developing those plans. This agenda fits well with the views of the Science and Technology Committee, which were debated last week in this Chamber. Its second report dealt with innovation based on engineering and science.
For a cluster to flower, companies must be dedicated to the concepts of partnership, financial access, a business incubator and academic input, and they must have sympathetic local planning and development support. The Select Committee highlighted the cluster of medical device manufacturers sited in and around the Massachusetts Institute of Technology campus. MIT's active involvement made the crucial difference. What was once a simple agglomeration of companies has become a formal cluster. Called Massmedic, this group combined to develop its own products. Critically, it has helped to influence state and federal policy and build effective relationships with other academic institutions and teaching hospitals. I believe that the physical assets that the Select Committee cited and observed in Boston exist on Teesside.
I am also grateful to the Royal Society of Chemistry for drawing my attention to the report on international catalysis clusters, which links a variety of interested organisations—ICI, Johnson Matthey, Solway, BP Chemicals and Shell Chemicals. Many academics are also involved in setting up clusters, another example of the way in which things can be done.
The Minister was very positive last week about the Select Committee report. I know that the Government want to promote technology clusters, but, as the report stressed, they cannot create them: the building blocks must be there. I believe that the building blocks exist on Teesside—good academic support, a network of skilled technologists, many of whom have known one another for many years and have worked on previous collaborations, and an open and responsive planning system based on good working relationships with the industry over many years. Although I am asking the Government formally to designate cluster status for the Teesside chemical industry, that simply recognises what is already in being. Such designation would make the Teesside chemical industry the motor force in the north-east's regional and economic strategy.
The Government's response to the Select Committee report acknowledged that Lord Sainsbury would oversee a cluster steering group. I ask that group to use the Teesside chemical industry cluster as its first case study. It will find much to encourage it. It will find that the cluster will succeed; it will be marked by good relationships between the key players, local managers and agencies; it will be marked by collaborative action to tackle common problems; it will be marked by a common desire to move up the knowledge-based industry league table; it will recognise the need to place R and D at its core, for the common good of the industry and the community; and it will be marked by a common enthusiasm to improve human potential within the industry.
In his Budget speech, my right hon. Friend the Chancellor talked about Britain's need tosucceed in the new economy and to lead in the new century—[Official Report, 9 March 1999; Vol. 327, c. 173.]35WH Change is sweeping across Teesside and it is crucial that we benchmark our strengths, analyse our weaknesses dispassionately and identify and capitalise on our opportunities. Formal designation of cluster status for the Teesside chemical industry will be a crucial weapon for ensuring that the industry helps the north-east and its economy to prosper and helps Britain to succeed.
§ The Minister for Small Business and E-Commerce (Ms Patricia Hewitt)
I congratulate my hon. Friend the Member for Middlesbrough, South and Cleveland, East (Dr. Kumar) on securing a debate on a subject that is important not only to Teesside and the north-east, but to the whole country, as he rightly said. As on so many previous occasions, he spoke with a deep personal knowledge of the industry in which he served with such great distinction for many years. I am happy to endorse what he said about the importance of manufacturing industry, in general, and about the chemicals industry, in particular.
The chemicals industry is our second largest manufacturing sector. It represents more than 10 per cent. of manufacturing gross value added; it has a turnover of £46 billion; and it employs 250,000 people directly and many times that number indirectly. It contributes £23 billion to our export earnings.
There is, however, more to the industry than its sheer size. Quality is as much a part of it as quantity. The chemicals sector has formed the bedrock of the United Kingdom's traditional manufacturing base for many generations. However, as my hon. Friend has said, it is not a dying smokestack or sunset industry. It is a modern, highly skilled, innovative, technology-based and research and development-intensive sector.
The phrase so often used today—the new economy—is, increasingly, misleading, in terms of what is happening in the United Kingdom and in the global economy. The phrase implies that there is also an old economy, and that manufacturing is irredeemably part of that old economy, destined to decline and die. That is nonsense, as my right hon. Friend the Prime Minister will stress in his speech to the Confederation of British Industry this evening.
New technologies in materials, in chemistry and in information and communications are transforming every sector. They are transforming every part of the production process and the provision of all goods and services. The chemicals industry, which is a fundamentally science-based industry, is meeting enormous environmental challenges by investing in new production processes and products. The industry is part of the knowledge-driven economy. It is and, with the right support, will continue to be a central part of the high-tech manufacturing base that we need if we are to be among the leaders in the 21st century's global knowledge-driven economy.
Government and the public sector have a role to play. We do not run or own the industry, but we can play a part in creating not only the right macro-economic conditions—the stability that the sector, like all others, requires—but the right education and training regime, a 36WH supportive framework for scientific and technological advance and a balanced regulatory environment. We take those responsibilities seriously. My right hon. Friend the Minister for Energy and Competitiveness in Europe has a regular dialogue with the chemicals industry, so that we can work together on the issues that most affect the sector, many of which my hon. Friend the Member for Middlesbrough, South and Cleveland, East eloquently outlined this morning. As part of that process, my right hon. Friend will visit the chemicals community on Teesside on 15 June and I shall ensure that this debate is brought to her attention before that visit.
There is also a challenge for the industry constantly to improve and upgrade itself and to make the necessary investments to remain a world-class, competitive and highly productive sector.
My hon. Friend referred to the importance of building on the cluster of chemicals industries on Teesside. We are not discussing a new or even an emerging cluster; it is well established. As part of the preparation for this debate I took the opportunity of looking at the map of chemicals manufacturing and storage sites on Teesside and it is clear that there is a well-established and dense cluster there. As my hon. Friend said, an important part of the process of building on the existing cluster is the Teesside chemicals initiative, which offers a mechanism whereby the private sector, the public sector and some not-for-profit institutions can come together to take collective action to create the conditions that individual companies need to succeed—skills, maintenance, logistics, upgrading the quality of sites, links with higher education and research institutions, relationships with local communities, disseminating and sharing best practice, and promoting new inward investment by chemicals companies into the area.
My hon. Friend spoke realistically about the challenges that face the members of that cluster, as well as their strengths, which they want to exploit. My Department and the Government Office for the North East are working closely with the Teesside chemicals initiative and with the regional development agency, One North East, to achieve the aim of developing Teesside as an international centre of excellence in chemicals production.
My noble Friend Lord Sainsbury, the Minister for Science, is chairing a steering group on clusters policy to assess how we can more effectively build and develop clusters throughout the United Kingdom. That group will help us to identify and recommend new policy initiatives to ensure the sustainable development of clusters and industrial networks. I shall ensure that his work is informed by the Teesside experience and what my hon. Friend said.
As my hon. Friend will be aware, my right hon. Friend the Secretary of State for Trade and Industry announced on 27 March a £50 million package to provide support for the development of business clusters in the English regions. That is in addition to the funding that has already been announced for the general strategic work and goals of the RDAs. That capital fund is available to the agencies to facilitate the establishment of innovative sectoral and geographical networks to support industrial excellence.
37WH I am very pleased that the Teesside chemicals initiative is talking to One North East about how that new resource can be applied to the chemicals companies and industry cluster in the north-east. I can assure my hon. Friend that we shall continue to support Teesside in maintaining and strengthening its place as a world-class chemicals industry cluster.
My hon. Friend said, rightly, that most successful clusters have a strong academic partnership, as well as strong industrial companies. In the chemicals sector, the application of leading-edge science and technology will be crucial, and my hon. Friend rightly made a powerful plea for the development of the former ICI research and development facility at Wilton. That world-class centre offers valuable work and services to chemicals companies, not just on Teesside but further afield. We support the current review by the RDA, with other partners, to consider how the centre's future might be shaped and how its work could be strengthened as part of that cluster development.
I draw my hon. Friend's attention to the fact that we are consulting on the possibility of creating regional centres for manufacturing excellence. We are talking to the RDAs and to trade associations in the chemical sector about how regional centres of excellence might support chemicals firms. My hon. Friend will, I am sure, want the interests and expertise of the Wilton centre to be reflected in that consultation and in any initiative suggested along those lines. When my right hon. Friend the Minister for Energy and Competitiveness in Europe visits Teesside next month, she will want to discuss the Wilton centre as well as the broader industry.
My hon. Friend rightly stressed the increasing importance of people to the industry's future competitiveness. It is increasingly true that almost all manufacturing industry is a people business; it is not simply about science, hardware and products. As a chemical engineer by profession, my hon. Friend is better placed than most to understand the chemical industry's skills and training needs. The Government share his concern to ensure that we have the right skills, 38WH and the education and training infrastructure necessary to keep supplying those skills, to ensure the continuing growth and innovative development of the industry.
Nationally, we work closely with the industry and the Department for Education and Employment. At the suggestion of my right hon. Friend the Minister for Energy and Competitiveness in Europe, the Government have formed a working group; with the industry and the trade unions, we can examine the key constraints on the development of the chemicals industry and recommend sensible future courses of action. Again, I invite my hon. Friend to contribute practical suggestions to that group.
Locally, the Teesside chemical initiative has been particularly active on the skills front. With support from the Department of Trade and Industry, it has undertaken specific initiatives on behalf of the local chemicals industry in developing ideas for degree programmes that more closely reflect the needs of local industry. Chemistry degrees will thus not only provide the right sort of scientific education, taking account of the practical needs of the industry as well as the excitement of the research laboratory. They will also complement that scientific excellence with an awareness of business and commercial realities and the skills needed to operate in a commercial environment. The chemicals initiative has also helped to deal with skills shortages among the contractors who maintain and overhaul the chemical plants.
My hon. Friend has rightly stressed the strengths of the chemicals industry on Teesside, and the challenges that face it. He has highlighted the concerns of his constituents, and the challenges and opportunities that face the industry in which so many of them are employed. I hope that I have been able to reassure him, during this relatively short debate, that we share his commitment to a world-class knowledge-based chemicals industry, and that we are already working closely with the industry and the people who work in it to ensure that the potential of that important sector is realised, particularly on Teesside.