Episode 1 Made in Britain

'In a high security compound in north-west England

'is a machine that mankind has only been able to dream about.

'And I'm being allowed to see it.

'The building I'm going to is anonymous.

'Inside is a project extraordinary,

'intriguing and extremely hi-tech.

'Many of us think that Britain had a great industrial past, but today we make nothing.

'But behind this door is something that disproves all that

'and it's made in Britain.'

What...

'This is called the Mantis, the world's first autonomous aircraft.

'It isn't a drone.

'There's no-one on the ground controlling it. It thinks for itself, decides for itself

'and flies itself.'

I was expecting something that was a kind of oversized model aeroplane, but...

It's just miles, miles bigger than I had pictured it.

'It paves the way for a science fiction future of pilotless airliners

'and driverless cars.

'But will technology like this finance Britain's future?

'For years, we thought the City could keep our economy growing

'and that borrowing and spending was more important than making things.

'Then came the Crash.

'Britain emerged burdened with debt

'and unsure how to rebuild its economy.

'Now at this critical moment in Britain's story,

'it's time to ask what should we be doing to pay our way in the world.'

People understand the importance of manufacturing and that making things is good for the economy.

'Although we invented mass production,

'are we now being beaten at our own game by countries like China?

'I've travelled to the heart of their economy and I'll challenge assumptions and myths,

'such as we're losing out to the Chinese manufacturing giant.'

-Could you have survived if you hadn't moved to China?

-Absolutely no, no, no.

'Nations often define their economic success by the things they make.

'In Britain, we're better at it than you might think.

'You might be surprised to learn we're the seventh biggest manufacturer in the world,

'but to pay for all our imports, we need manufacturing to get bigger still.

'The stakes are high.'

-You must be a bit scared. I mean, it's...

-Scared?

I'm an entrepreneur. Why would I be scared?

'In this series, I'll bust the myth that we make little or nothing and show you how industrious we are.

'I'll be looking at the three great engines that power our economy,

'how they're connected and the challenges they face.

'The knowledge sector - what we invent,

'services - what we run

'and first, manufacturing - what we make.'

At difficult times like these, it's easy to be overcome by economic gloom.

After all, we've lots of problems to resolve.

But there are plenty of reasons to be confident

in our abilities and in our future.

So what is it we do well? What do we do wrong? And how do we pay our way in the world?

'Who says we don't make anything any more?

'Love it or hate it, this Typhoon shows that when we put our minds to it,

'we can do engineering as well as anyone.

'At £75 million each, they're expensive,

'but the Typhoon is arguably the best military jet in the world.

'It's the product of a four-nation consortium, but BAE Systems in Britain is assembling about 200

'and makes some of the most complex parts.

'In the global businesses of aeroplanes and defence,

'or arms if you prefer, Britain punches above its weight in the world.

'I've been invited to join a test flight. Like a lot of British industry right now,

'BAE is working hard to sell more overseas and that means constant refinement of the plane.'

The second test point is Item 7 which is air-to-air gun attack.

Nat, if you can monitor the director gunsight

and assess the aiming pipper, its stability and accuracy about the target position...

'Nat Makepeace is the company's chief test pilot.'

-First thing, what frequency are we working?

-36.

-36, perfect.

'Everything about the Typhoon has been designed to be hi-tech and high value.

'It's a quarter of a million pounds just for the helmet.'

So what do we want from manufacturing?

You want speed, agility, sophistication, ambition.

Is this the single object that encapsulates them all?

-Grab the handle round here and just...

-That then goes in.

'BAE Systems is the second biggest defence contractor in the world,

'employing 33,000 people in this country and trading with 8,000 other British companies as suppliers.'

See you guys later. Thanks a lot.

'Only a fifth of its business comes from the British government. The rest comes from overseas.

'Britain is very dependent on BAE Systems and other manufacturers to generate those export revenues.'

-Climbing to flight level eight-zero, to flight level one-eight-zero.

-'Two-six departure.'

Oh, my God! Oh! God!

Ohhh!

Whoa!

God!

That's Blackpool Airport on the right there. You can see the tower.

ENGINE ROARS

Now, obviously, you can't go and buy one of these at a showroom on your high street.

And perhaps because you don't get to see it very often, perhaps because it's quite controversial,

it's just one of those under-recognised manufacturing and engineering achievements.

'But how much of an industrial force are we?

'To answer that, you need an overview of our entire economy.

'Well, right across Britain and all advanced nations,

'it's services that dominate.

'That's everything from banking to retailing

'to distribution.

'Services now account for three-quarters of the entire economy.

'Manufacturing is 12% of the economy, a vitally important sector.

'It's bigger than financial services and accounts for most of our exports.

'We have a lot of engineering and food and drink manufacturing.

'We're also big in chemicals and pharmaceuticals,

'but we have let a lot of our factories go.

'While we do sell enough overseas to pay for the vast bulk of our imports,

'there is still a gap and we've been relying on borrowing to help plug it.

'That can't go on.'

It's not just me having a white knuckle ride. Our economy has had a white knuckle ride as well.

Right now we need to start paying off debts, we need to export more, we need to import less.

That means we're going to be relying more and more on our manufacturing sector.

But are manufacturers capable of exporting us out of trouble?

It won't be easy, but I think they are.

The very forces which made us an industrial power in the first place will carry us through now.

We're in a period of economic soul-searching, regretting the loss of our industrial past.

But Derbyshire's Derwent Valley, birthplace of the Industrial Revolution,

provides clues for our industrial future.

It was here that we British invented mass production

and laid the foundations of the wealth we enjoy today.

It was probably our greatest contribution to mankind.

What drove the economy to such great things back then were the same forces that drive it today.

Three principles in particular determine our economic direction of travel.

Now, the first rule of successful nations

is always to move into the highest value activities they can find.

And that means specialising in things they're particularly good at,

hopefully, things that other people can't do so well.

And with some great technological innovations around the time of the Industrial Revolution,

that's exactly what they did here.

Because it was more profitable than agriculture,

it was towards more industry that our economy moved.

Those early cotton industrialists also followed a second rule of successful economies -

use the resources at hand.

What you had here was that phenomenal water resource for the power

and as well you've got the people.

You've got lead mining at Cromford, you've got nail-making at Belper.

Those are two industries where you have men working, but you don't tend to have women and children.

And the mills were able to take the women and children and use them.

It was a brutal business, but we developed those factories on the back of cheap labour and energy.

And that allowed Britain to become a manufacturing giant.

When this mill was built in the early 20th century,

we made two-thirds of the world's cotton and over half the world's ships.

But there is a vital third principle too

that has governed our economy since the Industrial Revolution.

You hardly need me to tell you that with all the wealth created around here,

Britain comfortably became top nation.

But there is a very important lesson.

The world changes, others catch up and you can't cling on.

Successful nations have to be flexible and adaptable.

Ever since the Industrial Revolution,

we've got rich by changing as the world changes.

We've let our economy evolve, moving on to higher value activities

and letting go of lower value industries.

Leeds, for example, once grew prosperous from the rise of textiles and clothing,

then saw it all vanish.

It's been a traumatic process,

but the economy benefited from the higher value enterprise that followed.

One family firm which tells the story of how good can come out of bad is Berwin & Berwin,

a suit manufacturing company founded in Leeds a century ago.

It's like stepping back into the 1950s.

The Chairman is Malcolm Berwin.

So what was the heyday of textiles and clothing in Leeds?

I would say probably the 1950s was the peak when there were 30,000 people working in clothing in Leeds.

-In Leeds alone?

-In Leeds alone. The street outside where we are now,

you could go up and down there and on right and left were clothing factories.

But all over the city, the centre of the city, some of the outskirts of the city, were clothing factories.

'But by the '80s and '90s, the clothing industry had changed.

'It was time to move on.

'Britain was more affluent and expensive.

'Poorer countries could now produce clothes effectively and cheaply.

'They were using the resources they had to hand - low-cost labour - to supply shops in Britain.

'As high street prices tumbled, British clothing manufacturers were hit hard.

'It was the simple expression of the rule that you constantly need to adapt,

'but suit-maker Simon Berwin tried to resist, despite the difficulties.'

You noticed the profits were diminishing because you had to squeeze the margin

-to compete against the lower priced competition?

-To keep orders we had, we had to keep reducing the price.

Because we were under pressure, we couldn't invest in new machinery, so we couldn't move the product forward.

It was a double-edged sword. Maybe wrongly we felt proud that we were surviving, but survival isn't enough.

The change was painful for workers too.

Angie Butler had been travelling across the city to work in Berwins' factory

and had already been made redundant by another clothing company.

Over three decades, we lost almost three million manufacturing jobs.

As factories closed, whole communities were affected.

You'd seen all the tailoring firms just slowly declining and going down

and you think, "What if it happens here, what are you going to do?"

She was right to fear the worst.

At the start of the new century, the Berwin factory joined thousands of others and finally closed.

A very emotional and difficult period,

my father saying goodbye to people who he had known for 30 and 40 years,

and many people not really knowing what the future held.

What about the day they came and told you?

The day... Quite a shock.

Quite a shock.

Are people bitter about it, do you think?

I think one or two would be, do you know what I mean?

Because you gave your heart and soul and worked hard for a firm.

The upsetting thing was seeing the headlines in the newspapers the following day,

when it spelt out that we were the last clothing factory to close in Leeds.

-You were the last?

-Absolutely the last.

Yeah, it was sad.

It hasn't just been textiles and clothes falling victim to foreign competition.

Shipbuilding, televisions, shoemaking, toys -

the roll call of British industrial decline seems endless.

Great British industries have risen and have fallen by those three simple rules -

that you use the resources at your disposal, put them in the highest value activities you can find

and you constantly adapt as the world changes around you.

As things do change, it can be extremely painful, but was it all bad that industries moved abroad?

I don't think so. In many respects, it strengthened the UK economy and made a lot of people richer.

'This is where much of our manufacturing has come -

'China.

'By taking on low value work, China has benefited and it's been good for us too.

'The same principles apply here as to us.

'They're using the one great resource to hand - the people.

'Shanghai - a megacity of 20 million people.

'It's the hub of China's Industrial Revolution.

'This region has been so successful, it's already richer than parts of the UK.

'And it's becoming more expensive to manufacture here.

'But outside Shanghai, it's a different story.

'Every year, some 20 new cities crammed with factories and workers

'are being constructed all over this vast country.

'Their growth is often based on foreign technology and know-how.'

Just a few more steps.

'Longkou is just one of them and I've been told of an unmissable view.'

OK, so there's not much of a view. This is the afternoon mist.

It takes over from the morning mist each lunchtime.

'This ancient Buddha is a whole ten years old.

'In fact, everything is new around here.

'35 years ago, this was just a small rural community.

'Longkou is now a sprawling metropolis of 800,000 people

'which few of us will ever have heard of.'

China's whole industrial development has been astonishingly fast.

What they've done in two decades, it took Britain two centuries to achieve. Why?

They've got this very good "get rich quick" scheme - you import the technology.

They haven't had to invent all the processes they're using. Of course, it's served them very well indeed.

But from where have they imported some of these processes? Leeds.

It turns out that suit manufacturer Berwin didn't die when they closed their Yorkshire plant.

They were reborn in China.

Berwins' new suit factory is the biggest in the world,

making half a million outfits a year for the company's customers on the British high street and beyond.

Now, the workers here are on piece rates, but I'm told they earn about £1.50 an hour,

a quarter of our minimum wage.

And they do a six-day week.

'The move to China has slashed Berwins' labour costs.

'According to factory manager John Fleming, that's the key to the company's resurrection.'

Don't you think it's amazing that the entire labour cost of the suit

is less than four quid to assemble a suit?

Yeah, but the labour cost is only a small part

of the total cost of producing a suit and getting it back to the UK.

But if it's a small part, why would you choose where the factory is just on the basis of the labour cost?

Right, we're saying here the labour cost is maybe £1.50 an hour.

-What is it in the UK? Four times that, minimum wage?

-Yeah.

So your suit costs are going from £4 a suit labour charge to £16 a suit.

-That's not that much, is it, on a suit?

-£12 a suit, half a million suits a year, six million quid.

That's the difference between being in business or out of business.

'The Berwins say investment in new machinery and skills delivers better quality than they managed in Leeds.

'As for the Chinese, they're simply following the same rules that led to our success.

'Our low value work represents high value work here and it makes use of abundant resources,

'in this case, cheap labour.'

You might be feeling suit envy, wishing we were as good at this as they are.

But we are as good at this as they are. They don't do it because they're better at it,

but because they're not that good at anything else. It's a sign of their lack of other opportunities

which makes them specialise in what is relatively low-paid work.

To most Chinese living out in the countryside, the factory pay must look highly attractive.

But it seems poor to us.

We could compete if we paid ourselves as little, but we wouldn't want to.

Now, you take this four-lane highway a mile or two from the factory

and you come to the end of town.

Suddenly, the road narrows. It's like a time portal into a different China - the countryside,

the 20th century China from the 21st here.

What you have to remember is that the vast bulk of people actually live in that China, not this one.

The vast bulk of them are on incomes of less than three dollars a day.

With so many people, no wonder China has so much to export.

Every one of these containers in Shanghai will be crammed full of cheap goods,

some heading our way.

But in my view,

they're not so much a sign of China's strength, more of its limitations.

Seven of the world's ten busiest ports are in China.

That's measured by the tonnage of cargo handled.

Yes, more weight is exported from China than anywhere else in the world.

It is impossible not to be impressed, but we mustn't be afraid of that.

We must never confuse the volume of what China produces with the value.

'The truth is, China is still a relatively poor country,

'making cheap stuff, most of which it's not economic for us to manufacture any more.

'And we've reaped huge benefits.

'Back at Berwins' in Leeds,

'their former factory is now a warehouse, stocked with suits they've had made in China.

'Should we regret the fact we import suits, rather than manufacture them?

'That might depend on whether we can find replacement jobs.

'Angie Butler has. Now, like almost 80% of us, she works in services. She's Berwins' warehouse manager.'

Your old colleagues here, the ones on the factory floor, what are they up to now?

Some of them have gone in to completely different jobs

as there's not many tailoring firms around now, so they've gone in to different jobs, doing really well.

-Most have found something?

-Yes.

I would say the majority of them have, yeah,

which I'm really pleased about. It's nice when you hear something good.

'Not all displaced industrial workers have been so lucky.

'But here's the thing. Since China began manufacturing for us in a big way a decade ago,

'Britain has found plenty of other things to do.

'In fact, a million more people are in work.

'As for Simon Berwin and daughter Kate, things have never been better for their family firm.'

It fits very well.

'At London Fashion Week, their men's outfits are on parade in designer Paul Costelloe's show.

'And since having every stitch made abroad,

'turnover has gone up by ten times and theirs has become one of the biggest suit companies in Europe.'

Could you have survived if you hadn't made the move to China?

Absolutely not. Absolutely no, no, no.

There is no way that the consumer and the retailer will pay the wages that are required in this country.

Whether that's right or wrong, it's not for me to comment, but that is the real world.

'And crucially, although Berwins' suits may be made in China,

'the Chinese only get about 20% of the retail price.

'Most of the rest of the money stays in Britain with the designers, transport companies, shops

'and, of course, the Berwins.

'And there are other benefits which most of us can share.

'Berwins' London showroom is crammed with suits for the British high street, all made abroad.

'They claim these suits are half the price they would be, had they been made here.

'We've got inflation now, but we've been enjoying falling prices for a lot of goods.'

Of course, there are downsides to moving production offshore,

but for most British consumers, the China effect has been considerable

and has been like an invisible pay rise.

We're used to prices going up year after year,

but the things made in China have become considerably more affordable.

The price of clothing, for example, has fallen by a quarter in the last 15 years.

The price of audiovisual equipment like radios has fallen 80%.

Items like toys and cameras are down 30%.

The drop in the relative price of manufactured goods that we've witnessed

is one of those economic changes that only occurs every few generations.

No transition is easy. We lost thousands of manufacturing jobs every month for many years.

But when we come to look back on what's happened,

we won't regret sending low value production to China. We can't do everything.

Far better for us to concentrate on the high value production we've kept for ourselves.

You see, while low value manufacturing has been journeying offshore,

the manufacturing that stayed behind has been on a journey too -

towards smaller, higher value sectors.

I will tell you why we might have gone too far along this road,

but the really important point is that this move into more lucrative sectors was, unquestionably,

the right direction for the economy to have taken.

'This is high-value production and it's what Britain does best.'

-Lovely.

-'McLaren is known for success in motor racing,

'but this is the first sports car of their own for the general market,

'if you have £167,000 to spare.'

-What I'll do now is we'll do a lap.

-OK.

-See what the car can do.

-OK, this is...

-Showing off. This is showing off its performance potential.

'Most of these are expected to be sold abroad and that's just what we need

'as right now we're exporting too little to pay for all our imports.'

The suspension...

Understanding braking and turning and accelerating...

You don't need to sell the car! You just need to...

..give people...a ride!

-Did you mean to come off the track there?

-Well...

'To set up their new sports car business, develop the car and build a new factory,

'McLaren is spending £800 million.'

That's one of the quickest laps a car can do on that circuit.

You OK?

To think you could take that car on the road.

-Did you enjoy that?

-Very, very much. That is really quite...

Ooh.

'The ride IS breathtaking,

'but so are the financial stakes.' If it all fails,

how bad is that for McLaren?

Well, putting aside the financial consequences of failure,

which is always a very difficult pill to swallow, we're a winning machine.

But we've got to be as disciplined and as focused as we are in Formula 1 and we should succeed.

'So what does this discipline and focus actually mean for McLaren?

'It's about striving to be best and high value in everything they do.

'Even their Surrey headquarters is not your usual factory.'

Ooh.

Not an oil smear

in sight.

All right!

This is really a film set. There's no factory or any activity here at all.

What was with the white corridor? I came in through a long, white corridor, went through a door -

-another white corridor.

-So much of what comes into buildings is brought in by humans,

so we clean people's feet as they go down different surface finishes.

But we don't just do feet. We try to do it with their minds as well.

'Level number one.'

Why expect to make a perfect product in an imperfect environment?

'So why has McLaren decided to branch out from racing cars

'to sports cars? It's all back to the basic principles - you use the skills you've got.

'And in Britain we have years of experience in motor racing.

'At the start of the 20th century, Britain had a speed limit of 20mph

'and there was a fear that our industry would fall behind unless cars could be tested at speed.

'So in 1907, the world's first purpose-built motor racing circuit was built at Brooklands,

'just down the road from McLaren.

'Two-thirds of Formula 1 teams now build their cars in Britain.

'Several universities have degree courses in motor sport engineering.

'The industry employs 25,000 engineers and it generates huge export revenues, too.

'McLaren has a turnover of £250 million a year.

'Now it plans to leverage the wealth and expertise accrued from racing

'to create more wealth from sports car manufacture.'

In five years' time, we intend to have a four times bigger turnover

and comparable profitability to those people who succeed in this particular market.

The driving force is to be the best in the world, which means money.

'The essence of high-value production is in selling small numbers at high prices.

'McLaren will sell just 1,000 cars in the first year,

'but that's worth three times Berwins' entire turnover on all those foreign-made suits.

'What McLaren does is the reverse of the Chinese model.'

The skill sets that exist in our organisation and the manufacturing technologies we have

don't necessarily fit into low-cost, high-volume products.

They tend to be relatively low volume with good margins.

At the same time, by necessity, they have to be world-leading products.

'OK, this is really high-end stuff, but the UK is a high-end economy.

'Remember, successful economies always try to focus on the high value,

'but there's a curious effect here. As manufacturing gets more successful over the decades,

'the less we see of it.

CLASSICAL MUSIC

'Let me explain with the kind help of a string quartet.

'This piece by Haydn still takes four people to play it,

'just as it did 230 years ago,

'but in our factories, things get faster and more efficient year by year.'

The oddity is that the better we get at manufacturing, the fewer people we need to do it.

No wonder you read headlines about factory job losses all the time.

'In the two decades up to the recession, we manufactured output worth 10% more

'with 40% fewer workers.

'As it gets more efficient, manufacturing gets leaner and less visible.'

In fact, it's one of economics' great paradoxes that the bits of the economy that are most dynamic,

like manufacturing, are sometimes the ones that look to be in decline.

It's just a fact of life that as economies progress and become more affluent,

they transfer resources away from manufacturing to other things.

We turn car workers into violinists, metaphorically speaking.

That's not a sign of our failure. It's a sign of success.

'Dynamic, efficient, high value, less visible

'and more niche. It's not easy to keep track of manufacturing these days.

'Take our bike industry. It's smaller than it used to be, but more specialist,

'like Brompton, the British fold-up bike.

'The Brompton design team wanted to show me that their bikes can be versatile,

'even though they're sold specifically for urban commuting.'

Brompton really is a very niche company with just one specialist product line,

but if you can find enough small, profitable niches, you can build a large, affluent economy.

'And a profitable niche can build an affluent company, too.

'Amazingly, Brompton is now Britain's biggest bike manufacturer.'

Here we have the really clever part of the factory. This is where all the frames are made,

this is where we have all the forming, cropping and bending of the raw material to make the bike.

'The company is turning out 30,000 bikes a year, but Managing Director Will Butler-Adams insists

'it's not a mass-market business.

'Even the cheapest bike costs £700 because, he says, specialist bikes like this

-'need to be high-precision and hand-built.'

-If you look at the workmanship, perfectly lined.

Beautiful little pools.

And he's put his name on it. Every brazer puts their name on each part they braze.

It would be nice if they could mass produce these one day.

If you don't have a name to it, you can rush it, you don't care, chuck it in a pile, no one knows it's yours.

If you put your name to something, you're proud of it. It's your workmanship for the life of the bike.

'At the turn of the 20th century, Rover, which later became the car firm,

'built the first truly modern bicycle - a niche product, costing over £1,000 in today's money.

'As the century wore on, companies like Raleigh built industrial empires on bikes,

'churning out high volumes of low-value products.

'Affordable motorised transport and cheap foreign competition began to take their toll.

'Britain's commodity bike business collapsed.

'In contrast, specialisation has kept Brompton very much alive.

'Exports of their folding bikes have been growing at 15% a year.'

This one is going to Singapore.

-Arizona.

-Spain, Spain, Spain, Spain.

Singapore, Singapore, Singapore. Disappearing all over the world.

You export about two-thirds of them?

To about 38 different countries.

'China may make specialist bikes like these some day,

'but they won't compete with us while we have an advantage in design, skills and branding.

'Fortunately, as China gets richer, the more of our high-value stuff the country can afford to buy.'

There is a lot of potential in China.

It could be bigger than all of the world we now supply put together, but the interesting thing is

they would only want their bikes if they were made in London.

If we moved manufacture to China, it would ruin it.

So we'd better employ a few more people and make a few more bikes and sell a few more in China!

'Brompton shows that dynamic companies and economies

'are built on the back of doing things others can't do,

'rather than competing with them in things they can.'

British manufacturing has followed a particular direction towards narrower and more lucrative markets.

But there's another interesting characteristic of British industry - its openness to the world.

About a third of British manufacturers are foreign-owned.

That doesn't mean we're not making things. It means investment and expertise from overseas

is helping ensure we're as good as the best.

'Just look at Jaguar Land Rover. A great British company?

'Well, it still manufactures here, but like most of our motor industry it's now owned by foreigners.

'And flourishing for it.

'To appreciate how overseas influence has brought benefits,

'we should think back to the 1970s when this company was British through and through.'

JEERING

What did you find on your first day in your new job as chairman and managing director of Jaguar?

Well, before I started at Jaguar, I'd just had a two-week skiing holiday

and only arrived back the day before.

I went into work on Monday morning and when I got there everybody was on strike.

'Chaos in the car industry resulted in production standards that were comically poor.

'Vehicles without lights were just the start.'

The quality was so bad we were repainting every body,

-knocking out the dents and...

-Oh, no.

So we were painting everything twice.

If I said to you, what went wrong with the British motor industry in the 1970s...?

The trouble was, it... Everything was wrong.

'We've remembered this painful period ever since,

'but what's less well appreciated is the quiet revolution which was to transform British car making

'and our entire industrial landscape.

'First, it was the Japanese with their new ways of doing things that helped us.

'We lacked good management in the motor industry and were out of date,

'so when the Japanese began to open new car plants in Britain,

'we had the good sense to learn from those who could do it better.'

What the Japanese brought to Britain was order, efficiency,

perhaps even a kind of beauty to the art of manufacturing.

Their methods had special names like Kanban

and Kaizen, meaning continuous improvement or change for the better

and that was certainly something the British car industry needed.

'Their methods didn't just revolutionise car making.

'They were taken up by just about every manufacturer in Britain,

'just like the one in this nondescript Birmingham street.

'Like so many of our companies these days, GKN doesn't make finished products in this factory,

'but it does make vital parts for almost half the cars in the world -

'shafts that transfer power from the engine to the wheels.

'Like the rest of the British automotive industry, GKN was struggling in the late 20th century.

'The Japanese didn't take over, but their influence was profound.'

If you look at the productiveness of this cell, in comparison to the 1970s and 1980s,

-we'd have had a lot of men involved in manufacturing these parts.

-Yeah.

This cell typically works with one.

'The Japanese system was all about continuous improvement, eliminating waste

'and creating a more harmonious working environment.'

-White. White machines, white equipment.

-This is about the way we organise our production facilities.

There's a much greater emphasis on the quality of our product.

We measure quality in the automotive industry in parts per million -

-how many rejects we have per million parts delivered.

-Right.

So back in the '70s and '80s, most companies were maybe in the 300-400 parts per million.

We're now less than... Well, we're in single digits.

'GKN now uses Japanese systems in all its factories throughout the world.

'Its fortunes have been transformed.

'We invented the factory for the rest of the world, but the rest of the world has refined the idea.

'No shame in that.

'As well as allowing the Japanese to influence how our companies worked,

'we allowed them to create a whole new motor industry in this country from scratch.

'Britain's biggest car maker is now Nissan.

'It's back to economic principles again and using the resources at hand - foreign expertise.'

What the Japanese did was fill in the gaps. Where we lacked talent, they provided it.

And, in effect, instead of going it alone, we became part of a global car industry.

That's been the story of our nation. We are more globally integrated than other large economies.

That's not great news for ardent nationalists what want to see British products with British flags,

but it has kept us very productive.

'We haven't just let foreigners show us how to make things better. We've let them invest, too.

'They've now bought up most of our motor industry.

'Jaguar Land Rover's latest owners are the Indian Tata group.

'Some might say our property has fallen into foreign hands,

'but you could say their investment money keeps falling into ours.'

We were fortunate that BMW purchased the company

and they invested a lot of money within Land Rover products.

Then, after BMW, Ford.

Ford invested another shed load of money, which was rather good.

And now we're owned by Tata.

'Our motor industry now builds about 1.3 million cars a year

'and contributes about 10% of the country's entire exports.

'Letting foreign companies and foreign techniques into Britain

'hasn't brought the end of UK manufacturing, but its salvation.

'It all adds up to a British industrial base that has learnt to focus on what it does well,

'dispensing with the rest. It makes perfect sense, but it raises an important question:

'is our manufacturing sector big enough to carry our enormous economy?'

It's manufacturers we mainly rely on to export.

So it's they who earn the money to pay for imports.

Given that we import far more than we export, you've just got to worry that the sector's simply too small

to shoulder the enormous burden it has to carry.

'Back at BAE Systems,

'our biggest manufacturer sums up British industry's strengths and weaknesses.

'Yes, it's high-end, lean, specialised, globally-integrated and innovative,

'but there simply aren't enough companies of this size.

'BAE has followed the UK trend, narrowing its range, exiting civil aviation,

'focusing on security and defence and the complex manufacturing end of it at that.'

It's not done with just a few bolts. It's more like micro-surgery.

-It's all quite delicate?

-These aircraft are hugely strong.

A Mini is 1.5 tonnes. You could put 63 Minis on a Typhoon wing.

'It's advanced, but BAE Systems can't exist on Typhoons alone.

'It has to keep adapting as the rest of the world catches up.

'So in the deserts of Australia, they've been testing the next big thing - Mantis,

'the pilotless reconnaissance plane that flies and thinks for itself.

'BAE Systems has now signed a deal with the French to develop it further.'

There's a really important change in defence aerospace happening,

perhaps ranked alongside the move in naval terms from sail to steam,

where we go from manned aircraft to unmanned aircraft.

The consequences of standing still and not actually striving to be out in front of the others

is simply that you lose the race and the enterprise collapses.

It's why we're focused on not just the next big thing, but the thing after that and after that.

'For now, the planes are manned, still carrying the occasional passenger like me.

'Now the bad news.

'BAE Systems generates about £4 billion of exports a year,

'but last year we imported £30 billion more than we exported,

'a huge gap that has to be plugged with yet more borrowing.

'Elite our manufacturing may be,

'but it's not big enough to meet the task at hand.

'So why might we have too little manufacturing?

'This is where we come to our role in the economy, you and I.

'For many years, we've been more interested in buying things than making them.

'In the Derwent Valley, where the Industrial Revolution started,

'you see the shifting priorities.

'This old textile mill - the plan is to convert big chunks of it into flats

'to buy and to furnish. And look at this other old mill.

'It could be fitted out as a brand-new factory, but no. It's a complex of shops.

'This industrial site once made oils and soaps.

'Now it's made way for cars, a roundabout and more homes for sale or rent.

'Our decision to spend rather than save doesn't just affect the landscape of old industrial towns.

'It has enormous consequences for our entire economy.

'It's our savings that pay for the tools manufacturing needs.

'We put money in a bank or pension, which is invested in companies that need cash for plant or machinery.

'The economics may be complex, but the biggest industrial nations, like Japan and Germany,

'save and invest a lot and manufacture and export a lot.

'So is this where Britain has gone wrong, saving too little?

'The old principle applies - economies use the resources at hand as best they can.

'Take away the capital for investment, you'll have less plant and machinery, less manufacturing.'

Funny to think, isn't it, that the amount you and I save and borrow, or that the government does

could affect manufacturing, but I think it does.

If we have our heads screwed on and know what we're doing financially, put enough aside for our retirement,

well, then no problem. The manufacturing sector we have is probably the one the nation needs.

If, though, we've been making mistakes, living too much for the present, not saving enough,

then there's every reason to think we've let too much manufacturing go.

'So what to conclude? The manufacturers I've met are all working hard to sell more,

'but given our export gap, we'd need another 36,000 companies the size of Brompton to pay our way.

'It's a tall order and Will Butler-Adams feels things have to change.'

Without a manufacturing base, an innovative base of creating things,

ultimately we can't sustain our economy on services alone.

I think we've learnt that.

Hopefully we've learnt that enough to change the balance of the economy to bring manufacturing back up.

'Britain desperately needs a boost in performance from industry and exports.

'It'll be a long road, but we have made a start.

'Post-financial crash, we're saving more and manufacturing is beginning to grow.

'There are reasons for confidence.'

We have the ability, we have the mentality, we have the history, we have the expertise,

we're innovative, we're imaginative, we're creative.

We should have more self belief

and less doubt about what we can achieve if we put our minds to it.

'So yes, we need to do more, but contrary to the impression so many have,

'we CAN manufacture when we put our minds to it.'

When you look at the industry in the UK, it doesn't look like the dark, satanic mills

with blackened-faced workers coming out at the end of a shift.

It's a modern, hi-tech environment, which you can't discern from outside.

We tend not to have been out and about trumpeting it in the way we could have done.

Ultimately, manufacturing is all about the physical, the cloth or the metal or machines.

It's incredibly important to the UK with no sign of that ever changing,

but if I make one observation about the factories I've visited,

it's that all the improvements have come out of the thinking, rather than the manual work.

So the ironic thing is that the future of manufacturing, for all its physicality,

depends much more on our brains than our hands.

'And that's what I'll be examining next time on Made In Britain.

'What does innovation and creativity contribute to the economy?

'How can brand power and brain power help solve the nation's problems?'

To discover more about how Britain pays its way in the world

and to contribute your experiences to the Open University's online toolkit, visit:

And follow the link to the Open University.

Subtitles by Subtext for Red Bee Media Ltd - 2011

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