Eva Pascoe | Digital Retailer

November 2nd, 1998
The wrong answer for Rover: The CBI does not represent the real growth engine of the economy – the IT industry

ROVER, ONCE the pride of the British car industry, is in trouble again. Despite having sold out to BMW, the anticipated economic miracle did not happen. Rover remains as uncompetitive as it was before the sale to its German owners. Ready for the knife but still kicking, and with a collection of friends in high places such as the CBI and the Government, Rover will not go quietly.

Rover employs more than 26,000 people, and it is only right to try and find a solution to their looming unemployment. The problem is that the proposed solution (ie, subsidies of pounds 250m), is not just simple, it is simplistic. Subsidies have been applied before for other dying British industries such as coal and steel. Many millions of pounds later, the miners still had to retrain and find new jobs. All the employees really gained were a few short years, and in many cases only months, of agony. There is now talk of pounds 250m going to BMW in exchange for keeping the Rover show on the road. But if subsidies didn’t manage to keep the miners’ jobs why does Labour think they will work this time? It would be churlish of me to suspect that this wasteful insanity is driven by the opportunity for headlines such as “Tony Blair, saviour of the Great British car industry”. Just what the spin-doctors ordered, perhaps, but it won’t solve the problem of Rover and its workers. Also, somewhere behind the scheme is the CBI, which last week published a panicky report indicating the biggest drop in manufacturing output for seven years. What is not mentioned, though, is the fact that in that same time the revenues from IT products and services have risen year on year by almost 23 per cent, and show no signs of stopping.

The present decline in motor manufacturing employment and the concurrent meteoric rise of IT-related jobs simply reflects the successful adaptation of the UK economy to the new global environment. The ability to produce, for example, great software at competitive prices has replaced the skill of making cars at the right price, and this must be recognised as a positive development. Manufacturing output has been going down, but the number of people in employment has been going up. How does that square with the CBI’s gloomy scenario? The answer is simple – it doesn’t. People have simply moved from a dying manufacturing sector to IT, a thriving new area of the UK economy. Workers do not need handouts. They need new skills and careers.

And what a thriving industry IT is. According to a recently published IBM report, the IT industry now employs 1.2 million people. Between computer companies and internal IT staff, those figures are predicted to grow to more than 2 million by 2003. IT staff shortages are still pressing, and the demand for new people is not going to fall off for a number of years to come.

Rover workers, given a choice, would do better to find a new skill set and retrain for new jobs in IT, instead of being sold short for the price of a photo opportunity for Peter Mandelson and a half-promise of few months more in their jobs. It is unlikely that BMW will be able to buck the trend and make the UK car manufacturing industry competitive, even if the subsidies are twice the size of the proposed spend.

The Government is seriously misleading Rover workers, giving them an illusion of hope in an market in which Korean cars are available at a fraction of Rover prices. The CBI must share a significant proportion of the blame for supporting the wrong solution to a problem, which is simply a necessary moment of transition in modern global employment.

But what can you expect? The CBI is a semi-masonic body whose website is accessible only on certain days (I have tried daily for the last week, only twice successfully). And with its average age over 50 and a preoccupation with industries that have bitten the dust, or are on the verge of doing so, it doesn’t come across as being able to tackle modern economic problems. It does not represent IT, which is the real growth engine of the economy.

So what is the correct solution, apart from facing the inevitable and sponsoring a systematic retraining programme for workers at Rover? The obvious answer must be major investment in connectivity, starting with linking Oxford (Rover’s base) to London by a broadband connection. The enormous impact of the Internet on employment opportunities in the UK is proof that bandwidth works as an economic stimulant. Over the last four years we have created in excess of 250,000 jobs in IT, new media, electronic commerce and many other areas directly or indirectly related to the Internet. Providing a new level of bandwidth availability, allowing the Internet to kick into second gear on the cable, satellite or wireless spectrum, is a foolproof way to create demand for new services and thus work for the people needed to provide them.

A good example of economic stimulation resulting from a qualitative jump in bandwidth is SoHo Net, where pounds 15m of investment into connecting local post-production film houses with Hollywood studios has allowed the industry to recuperate the money that went into building SoHo Net many times over. Now British- based video editors can work locally and deliver cutting-edge services, thanks to real-time connections with their clients in the United States.

The impact of increased bandwidth on creating start-ups and new jobs is obvious. The pent-up demand for online services, virtual shopping, video on demand and much more has already created an interest within the television industry, which has some access to broadband connectivity. Unfortunately, the truth is that TV is created by very few people, and little new work will be created from the walled garden of the few-to-many broadcasting model. However, developing a new, broadband Internet would allow many skilled workers to produce services for a huge customer base, creating wider employment opportunities than closed, proprietary interactive TV. Bandwidth needs to be cheap and available to content creators to allow truly significant employment growth.

Investing in “Internet 2” has the potential to quadruple the number of existing Internet jobs. Taxpayers’ money should not be wasted subsidising tired old industries. Instead, creating an enterprise zone in Oxford and developing a wide-bandwidth connection between Oxford, London and key European cities would encourage investment and stimulate the local economy far more than the proposed Rover handout. The IT industry must assert itself and persuade the Government to put the money where the growth is – reskilling Britain for the real future.


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