BAE job losses highlight the weaknesses of the coalition’s growth strategy

The job losses at BAE Systems represent a local disaster for the people of Warton and Brough. There may be clear and specific reasons for the job losses but they will devastate the economies of yet more small Northern towns and dampenthe optimism for a revival in British manufacturing. Alongside the local tragedy though, they highlight four more fundamental problems with the Coalition Government’s approach to economic recovery and growth.

The public sector has not displaced private sector job growth, it has supported it. Ed Balls has been afforded a lot of credit for predicting that cutting too deep and too fast would damage economic recovery but he has not been a lone voice as many at the Labour Party Conference this week like to suggest. PricewaterhouseCoopers conducted research in 2010 which estimated not only the job losses that would be caused by public sector cuts but also those in associated private sector supply chains. IPPR North reckoned this multiplier effect would cost the North of England nearly four per cent of its workforce. Far from picking up the slack, as BAe Systems clearly demonstrate, in the short term private sector jobs are adversely affected by falling public sector demand.

Economic policy-making has become spatially blind. Despite all the rhetoric around ‘rebalancing the economy’ – a phrase initially used by David Cameron on a visit to the North East – in recent times it has come to mean a rebalancing between public and private investment, between manufacturing and service sectors and between imports and exports. Rarely is it now used in the context of North and South. This is rooted in HM Treasury’s deeply held antipathy towards old-style regional policy and the neo-liberal commitment to allowing capital to flow freely and agglomerate around the hubs of economic growth. The skilled workers of Warton and Brough may ultimately get on their bikes (in the absence of any better local transport infrastructure!) but the wider local economy and ‘sense of place’ will be devastated.

Whilst very few hold out any hope of a ‘bail-out’, even damage limitation is being hindered by the lack of institutional infrastructure available to facilitate any kind of strategy for job transition or worker support. This was once clearly in the ambit of the Regional Development Agencies and – whether or not they all made a good job of it – in many cases they helped to manage the impact of such tough decisions. After their abolition, many RDA functions were returned to Whitehall and it is unsurprising then that the BAE announcements caught Cable on the hop but it also raises questions as to whether Local Enterprise Partnerships – the only local economic intermediaries now -have the clout or the scope to deal with such situations. Ironically, the LEPs for Lancashire and East Riding were the last to form in the North after much wrangling as to their composition.

These job losses demonstrate once again a lack of vision for the economy. Very few would advocate a return to picking winners or initiating expensive bail-outs (other than for banks!), but there is a stark difference between a centrally-planned economy and an active industrial strategy. If it is clear that the defence industry is changing then government must work industry and other local players to adapt. Questions must be asked about the kind of economy we are moving towards and the kind of economy we want, comparative advantages must be identified and strengthened and skills and infrastructure built to facilitate development. This is both a science and an art but without vision neither will flourish. The demise of BAe’s fighter jet production represents a ‘swords-to-ploughshares’ moment that needs prophetic imagination not simply the wringing of hands.

Ed Cox is Director of IPPR North, IPPR’s dedicated think tank for the North of England.

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• http://twitter.com/LeClosdesGuyons Le Clos des Guyons

  One of the problems I have always had with ecomomic policy is with the feeling that whatever pain the country suffers will be for the ultimate good.  Thus coal mines and steel works were closed in the last frenzy of conservative economic orthodoxy and, as we can see now, the same thing is happening in our remaining industry.  But my question is this:  When you talk about, “for the benefit of the country”, doesn’t that mean the people who are in it, after all how else do you define a country.  For example the devastation which hit Welsh Mining Communities after the pit closures wrecked many, many lives, and for what? – “The benefit of the country” – but not, apparently, for the benefit of the ordinary people who live, work and make up that country.

• David Warriet Edwards

  The defence industry is more or less wholly dependent on public money, these are essentially public sector job losses – there will be many more as the government cuts spending. 
  The pretence that the private sector will magically create jobs is as hollow as most of the other economic policies unless you count the onshore return of call centres

• QasimSalimi

  I have mixed feelings – I do recognise the economic effect on these communities from the loss of skilled jobs, but surely we should rejoice if global demand for armamaments is down, and that arms companies are doing badly. Most people who want to buy military systems are not particualrly nice.

  What really needs to be done is re-balance the economy away from such an immoral industry. If other British manufacturing industries had been similarly supported by successive governments, we would not now be in the position where such a significant proportion of skilled manufacting jobs were dependent the arms trade.

  For the sake of humanity, I have to hope another 30,000 go soon.

• Guest

  According to the FT in an article Manufacturing fades under Labour, Dec. 2nd 2009, manufacturing accounted for more than 20pc of the economy in 1997 when Labour came to power. By 2007, that share had declined to 12.4pc.

  The Guardian, 2 March 2009, reported the Engineering Employers Federation as estimating that more than 140,000 manufacturing jobs would be lost in 2009 alone. Between 1997 and 2007, over one million manufacturing jobs had already been lost. Some estimates put the job losses as high as 1.7 million.

  So it is disingenuous of Ed Cox to be wringing his hands, 16 months into the Coalition government, accusing that government of spatially-blind economic policy making, suggesting that the BAE job losses demonstrate a lack of vision for the economy, and implying that if the Regional Development Agencies were still in existence, they could have managed the impact of the job losses. What, if that was the case, were the RDAs up to while manufacturing jobs were haemorrhaging during Gordon Brown’s decade of unprecedented economic growth?

  The problem facing the Coalition government is that manufacturing’s share of the economy declined almost three times faster under Tony Blair and Gordon Brown than it did when Margaret Thatcher was in power in the 1980s and early 1990s. Damage on that scale will take more than a year or two to repair.

• argospete

  R U aware, the Japanese have been awarded licences etc to build/maintain/modify bits and pieces with their Typhoon contract, while this acting coalition allows BAE to make redundancies. 
  More kickbacks I think?