Only manufacturing industry can make New Labour’s day

High-profile figureheads from the service sector are backing Labour, but real hope for the future lies in manufacturing and export. George Pitcher is chief executive of issue management consultancy Luther Pendragon

I think I’m right in saying that both Anita Roddick of The Body Shop and Sir Terence Conran of Habitat and Storehouse fame have both appeared in television commercials for American Express. I don’t think that Gerry Robinson, chairman of Granada has, as yet, done so.

But last week’s Labour Party election broadcast, in which all three appeared, was very much in the Amex mould – lots of handheld camera shots in monochrome, very staccato and impressionistic. And it was appropriate that it should be so. The likes of Roddick and Conran did very well out of the consumer boom of the Eighties and I dare say that Robinson didn’t do so badly either. These are creatures of the credit-led economy and it is apt that any political statements that they have to make should echo their appreciation of plastic money.

Yes, I know that Amex does not market credit cards – they are charge cards and there is a difference. But in terms of fuelling consumer demand, they have a common purpose to get us out there spending. When it comes to organising runaway consumption, as the Thatcher Government did in the Eighties, that will do nicely.

Now it appears that some of those beneficiaries of the years of conspicuous consumption, not to mention the promoters of the Amex way of life, won’t leave home without the Labour Party. Roddick spoke passionately of Tony Blair’s commitment and his air of exhaustion; Conran banged on about the right policies for British business. Robinson spoke as a man who would try anything once.

And, actually, I don’t doubt the sincerity of any of them. It takes guts to stand up, or sit down, in front of a camera and be counted in the ranks of a political party that, for all its efforts, is not associated with being the proponent of unleashed capitalism. This is especially true of those, such as Roddick and Robinson, who have cold-eyed institutional shareholders to satisfy.

They are all children of the new industrial revolution; they are all from service industries that, for right or wrong, owe their phenomenal growth to the Conservative years. They all have either an entirely, or a substantial, retail base. And that offers some implications that are worth exploring.

The first is that service industries are reliant, much more so than manufacturing, on what is euphemistically called a “flexible” workforce. This was always going to play into the hands of the Tories in the wake of Labour’s election broadcast. Conran was duly accused in the weekend press of employing staff at poverty rates of pay, in the teeth of Labour’s national minimum wage.

No mention, of course, of the casual labour culture that has been created over the past decade, partly as a result of youth unemployment, partly as a result of the hegemony of service industries such as catering. Nor, for that matter, any mention of the fact that the likes of Conran must have been driven to a pretty pass politically to bite the hand that apparently feeds him with cheap labour. Or maybe it’s simply that Conran must be seen as bigger than his business interests if he is prepared to argue for an end to such cheap labour. I might add, it is perfectly reasonable for him not to abandon such practices unilaterally, but to push for legislation that would pull his reluctant rivals into the minimum-wage fold.

That brings me to the next implication of Labour’s election broadcast. If these business people prospered under Tory economics, and some of their ability to prosper were to be reined in by New Labour, there must be more than just an appreciation of Blair’s “exhausted” look that is driving them. I would aver that retailers and caterers such as Roddick, Conran and Robinson have concluded that the depths of the recessions of the early Eighties and Nineties are too high a price to pay for the booms in between.

And that, in turn, brings me to the most significant implication of service industries backing New Labour. Who now remembers the monetarist experiment of the early Eighties? Exchange and credit controls were abandoned in the early Thatcher years, because control of the money supply would alone bear down on inflation. In fact, inflation was depressed by the new high exchange rate and the related growth in unemployment, while money supply fuelled a burgeoning service sector that increasingly fed off its own boom.

At the height of that Eighties boom, manufacturing investment represented some five per cent of GDP, while investment in services and construction rose to 12 per cent of GDP. It couldn’t last. Any pretence that monetarism was an effective control on inflation was abandoned after the fall of Thatcher, in favour of a new form of exchange control: the Exchange Rate Mechanism. The rest, including Black Wednesday, is history.

With consumption at a post-war high, consumers cannot push a recovery forward; only a recovery in manufacturing investment and exports can do that. It may be a truth that Roddick, Conran and Robinson acknowledge. But it would have been good to have heard the message last week from the likes of Chris Haskins, chairman of Northern Foods and another famous Labour supporter, rather than from the service sector which, in economic terms, can deliver no more.

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