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Welcome: Secretary of State

This section of the website is about my work as Secretary of State for Business, Innovation and Skills and President of the Board of Trade. You can also find out more about my local work as MP for Twickenham.

I have been the Secretary of State for Business, Innovation and Skills and President of the Board of Trade within the coalition Government formed in 2010.

As Secretary of State, I have overall responsibility for the department strategy and all policies, overall responsibility for BIS budget, particular focus on business and banking issues, and lead Cabinet Minister for reducing regulatory burdens across Government.

Vince Cable

Recent updates as Secretary of State for Business, Innovation and Skills

  • Article: Sep 16, 2013

    Friends.

    It is a special pleasure to speak to Conference in the city where I had my political baptism of fire. Glasgow is a great city and Glaswegians are warm, hospitable and humorous.

    But Glasgow has experienced one party, Labour, rule for decades. And I was part of the Labour political machine here in the 1970s. On one level it worked. Insanitary slums were razed to the ground. We built 30,000 new social homes for rent in a decade - 5,000 in one year, a scale unimaginable today.

  • Article: Sep 11, 2013

    Vince Cable's speech at the Industrial Strategy Conference at the University of Warwick on 11st September 2013.

    I am delighted to see so many serious people here from the business community. The idea of an industrial strategy for Britain is achieving significant traction.

    Successive governments baulked at the concept, of course - a reaction to the 1960s and 70s when state involvement was seen as backward-looking, wasteful and meddlesome. Intellectual fashion turned towards a faith in the rationality and efficiency of markets - a consensus that lasted several decades and, in the UK, saw the virtual disappearance of a number of big industries.

  • Article: Apr 4, 2013

    The New Anglia Local Enterprise Partnership 'Growing Business Fund' is supported by the government's Regional Growth Fund (RGF) and is specifically aimed at helping firms that want to grow but have been held back by a lack of finance.

    The fund will provide grants of up to 20%, between £25,000 and £100,000, to business that have a shortfall in their investment plan and are able to create at least one job for every £10,000 provided by the fund.

  • Article: Jan 30, 2013

    Figures released by UCAS today show that the number of applications for higher education by people living in England has risen by 3 per cent year-on-year.

    Among 18-year olds, the application rate has risen by 1 per cent to 34.8 per cent and is the second highest level on record. The application rate for 18-year olds from the most disadvantaged backgrounds has risen to 19.5 per cent, the highest on record - up from 10.7 per cent in 2004.

  • Article: Jan 30, 2013

    Business Secretary Vince Cable has today (30 January 2013) written to the Chairman and CEOs of the last seven FTSE 100 firms with all-male boards, urging them to take action to increase the number of women in the boardroom.

    The letter from the Business Secretary comes on the back of the announcement by Randgold Resources that Jeanine Mabunda Lioko has joined its board as a non-executive director.

  • Article: Nov 22, 2012

    The need for a fundamental change in the culture of investment was endorsed by Business Secretary Vince Cable today in his response to Professor John Kay's independent Review of UK Equity Markets.

    Dr Cable set out his support for Professor Kay's 10 Principles for Equity Markets, which focus on reversing the culture of short-termism and restoring relationships of trust and confidence in the investment chain. The Government also committed to exploring whether changes in law or regulation are needed to deliver Kay's principles in practice.

    Today's response sets out the work Government is taking forward to deliver Kay's recommendations, including:

    • Working with EU counterparts to end mandatory quarterly reporting and help reduce the excessive focus on short-term earnings;
    • Endorsing clear minimum standards of behaviour for all investment intermediaries to ensure they act in the long-term best interests of their clients. The Law Commission has been asked to review the legal obligations on intermediaries, to take appropriate long-term factors into account. The FSA has also been asked to ensure that the regulatory framework promotes high standards of behaviour throughout the investment chain;
    • Encouraging industry to establish an Investors' Forum to champion constructive engagement with companies;
    • Endorsing Good Practice Statements for company directors, asset managers and asset holders, which emphasise the need for trust-based relationships and advocate more collective action by institutional shareholders; better disclosure of costs in the investment chain; increased transparency and fairness in stock lending; and better alignment between pay and long-term performance.

    Vince Cable said:

    "Many of us feel that in the past, our public companies and investors have focused on short-term profit at the expense of long-term value. The behaviour of many banks in the run up to the financial crisis is an extreme example of this quick buck mentality, but there is clearly a wider problem. That's why I asked John Kay to look at what could be done to ensure equity markets support good, long-term decision making. His insightful review calls for a shift in the culture of investment and sets a clear challenge to companies and those who invest in them.

    "His agenda is an ambitious one but I am very encouraged by the level of engagement we have seen already from investors. Not only on Kay's ideas, but through our directors' pay and shareholder voting reforms; in addressing diversity on corporate boards and through changes to the way companies report their business strategy and results. These actions will help restore trust in markets and in the system of capitalism on which our future prosperity depends."

    The Kay Review, published in July, presented a compelling argument for market participants to change their behaviour and make investment decisions based on enhancing the performance of UK companies and supporting long-term growth, rather than maximising short-term gains.

    The Government response looks in detail at each of the Kay Review's 17 recommendations and highlights the steps being taken to deliver them, either through specific policy measures or by business and industry working together to develop good practice.

    Delivering on this agenda will require a sustained commitment from Government, regulators and others. The Government will publish an update in Summer 2014 setting out the progress achieved in delivering Professor Kay's recommendations and reporting how well companies and investors have stepped up to the plate.

    Original Press Release and Contacts: http://news.bis.gov.uk/Press-Releases/Government-sets-out-steps-to-change-culture-in-UK-equity-markets-683c1.aspx

  • Article: Nov 22, 2012

    (22/11/12) Vince Cable argues for an end to the focus on short-term returns among investors and sets out what the government is doing to foster a system of capitalism based on long-term value creation.


    RESPONSIBLE CAPITALISM

    Introduction

    Good morning. It is no exaggeration to say the pensions industry is a lynchpin of the economy. Pension fund investments are a critical source of capital for UK companies, and potentially for infrastructure as well as savings vehicles.

    Collectively, you hold over £150bn of UK equities. That figure illustrates the scale of your influence, but it goes much further than merely delivering returns to fund tomorrow's pensions for today's workers.

    Careful husbandry over long timescales, a core duty for any pension fund, is an essential component in a system of responsible capitalism that encourages the pursuit of long-term value rather than short-run, sometimes illusory, returns.

    So I would like to focus today on the work we are doing in government to support such a system - because it is clear we have a long way to go before we can say it exists.

    Equity investment has become increasingly complex and intermediated, with more and more links in the chain. As a result, the different players are often working to their own agendas and timescales to the detriment of long-term value creation.

    Too often, traders go after a quick buck rather than looking for sustainable returns based on sound stewardship of companies. Holdings are bought and sold to turn a short-term profit with no thought given to the underlying fundamentals.

    This phantom chase was at its most frantic in the financial markets, where banks took dross and sold it as gold. But that lack of responsibility - the failure to take calculated investment risks based on sound principles - is more widespread.

    Capitalism

    The issue of so called short-termism is part of a wider debate about capitalism and whether it should be constrained by a wider sense of responsibility. So, what do I mean by responsible capitalism? Let me explain by quoting Adam Smith, who said:

    'It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages.'

    But Adam Smith himself was scathing about some forms of business behaviour - particularly those that led to the suppression of competition. He wrote "people of the same trade seldom meet together even for merriment and diversion, but the conversation ends in a conspiracy against the public."

    I realise that there some irony in using this particular quote in a speech to a trade association conference. But Smith's conception of self-interest is distinct from the crude, material, selfishness we have seen. Elsewhere in his writings he discusses the notion of sympathy, or fellow feeling, and emphasises its importance. So Smith's butcher or baker cannot pursue their self-interest and obtain what they want without also meeting the needs of the customer. .

    The pursuit of self-interest is not inherently irresponsible: the desire to trade and profit produced meat, beer and bread in Smith's day, and today has given us iPads, foreign holidays and life-saving drugs. What connects these things is their reliance on individuals acting in their own interests to deliver goods and services that benefit us all.

    It is difficult to reconcile Smith's butcher, brewer and baker with the complexity of today's capitalism. Indeed the modern public company with dispersed shareholder ownership did not exist at that time. But they would have recognised the key role that trust and confidence play in effective markets. Without them, no economy can function effectively.

    We have seen too many examples of irresponsible capitalism recently. Companies not paying their taxes. Employees making up the numbers or gambling the future of the entire company. Customers being sold complex products they neither need nor want. Managers helping themselves to lavish remuneration packages at the expense of customers, their shareholders and their workforce.

    Sir Roger Carr, the CBI's President, acknowledged the problem at its annual conference on Monday. He said:

    "…standards have been variable, greed prevalent and fairness forgotten in a number of sectors - banking and media at the forefront - but others from all walks of life showing signs of bad behaviour."

    As someone who found myself labelled "anti-business" for criticising the excesses of banking and media barons I empathise totally with Sir Roger. He, like me, is of course pro-business.

    But like many in this room and in business we share a sense of dismay at some recent behaviour. I believe the majority of businesses play by the rules, pay their taxes and contribute to the economy. Where they don't, Government has a duty to intervene. But as owners, institutional investors have a major role in challenging and correcting this behaviour.

    Our task together is to reform the system in order that trust is restored because, without it, the capitalist system cannot function effectively.

    There are fundamental questions about why parts of the capitalist system have gone awry. At least part of the industry's problem is one of distorted perspective - a prevailing focus on the short term at the expense of the long-term.

    The Kay Review

    This was the supposition which led me to invite John Kay to look at this problem in the round. And he has subjected the UK's equity markets to rigorous independent review with support from Sir John Rose, formerly of Rolls Royce, Chris Hitchen of Railpen and James Anderson of Baillie Gifford

    His findings amount to a compelling argument that today's transactional cultures and the pursuit of short-term gains in financial markets are undermining the core responsibility of company directors and institutional investors to act as effective stewards of the assets they control.

    The long-term pursuit of value creation has been crowded out by a focus on short-term gains.

    Company directors have a clear legal responsibility to make decisions with regard to the long-term. This is part of their duty to promote the success of the company. Engagement by investors needs to change to support directors to meet this responsibility. The focus should be aligned with the timescales of the company's business model - which may be very long term.

    And the stewardship relationship must be based on an understanding of company fundamentals. That's the best way to create an environment of trust and challenge, which enables those managing the company to take sound long-term decisions on investment and strategy.

    John Kay found there is a particular problem in how the performance of active asset managers is currently measured. Faced with the need to deliver short-term performance, active asset managers will have an incentive to focus on what the market is doing - seeking to outperform other asset managers - rather than to engage with companies to understand and foster the creation of value.

    So pension schemes and other asset holders need to issue clear mandates for active asset managers. They must set targets to achieve absolute returns that meet the needs of savers rather than just chasing the market.

    That approach will send a strong signal that it's time the short-termism ended and was replaced by a clear-sighted focus on long-term value creation.

    I am grateful to John for his cogent analysis of the problems in the corporate sector. Today I am publishing the Government's response to his review. It focuses on restoring relationships based on trust and confidence to the investment chain. The report has provoked constructive debate on many of the issues raised, and progress is being made on a number of the recommendations.

    The Financial Reporting Council has revised the Stewardship Code to give a sharper emphasis on long-term company strategy, reinforcing the message that engagement has to be more than a box-ticking exercise. Instead, it requires genuine dialogue with companies about the long-term prospects for growth.

    Investors are also recognising they need to engage collectively with companies. The review recommended an investor forum to maximise their influence, and there are encouraging signs that this will happen soon. I am happy to be a catalyst but it is not for government to create a new quango - a forum will only succeed if it is created and run by the investors it represents.

    High on the to-do list for any forum is to tackle overly complex incentive schemes which encourage short-termism and tend to pay out asymmetrically. Some executives see spectacular rewards for good performance but there is no corresponding fall in pay when performance is poor.

    John Kay called on companies and asset managers to change their own practices. Our reforms to executive pay - including giving shareholders a binding vote on pay policy for the first time - will support this by empowering investors to engage more effectively with companies.

    We have come a long way in the last year. The shareholder spring has shown there is real appetite among shareholders to be much more challenging of unjustified pay awards.

    The crucial factor is ensuring investors have the information they need to make long-term decisions, on pay and a range of other issues. John Kay was scathing about the effect of quarterly reporting on long-term investment. I agree with his analysis, and the government will work with our European counterparts to change the law so it is no longer required.

    But there is a challenge here too for asset owners, including pension funds, who need to look beyond quarterly performance to judge their managers.

    Our narrative reporting reforms, to encourage better quality annual reports that put the numbers into context, will help. The new rules, which come into force next year, will make reports simpler, more relevant and more focussed on forward looking strategy.

    Trust is also the product of behaviour - a commitment to act with integrity and expect integrity from each other.

    The term "Fiduciary duty" is used a lot in the debate on these issues, but it means different things to different people. We need clarity, with consistent standards of behaviour required throughout the investment chain.

    So today we are making it clear that all intermediaries should act in good faith in the long-term interests of clients or beneficiaries.

    These standards should be universal and immutable. We need to achieve them by making sure that our regulatory framework supports them - but also by promoting them as behavioural norms in the investment industry.

    So we will ask the Financial Conduct Authority to consider whether their regulatory rules and approach support these standards and, where necessary, we will argue for changes to regulatory requirements at EU level.

    In addition, we are asking the Law Commission to conduct a review of the legal obligations on investment intermediaries seeking to act in their clients' best interests - and to report back as soon as is practicable

    Takeovers bring the discussion of duty and long-termism into particularly sharp focus. Company directors have a legal duty to promote the success of the company. A duty that requires that decisions be made with regard to the long-term consequences.

    Company directors must recommend that shareholders reject a bid if they believe that the transaction will destroy long-term value, or that the premium being offered does not reflect the fundamental value of the company. Directors must give their best advice to shareholders. Shareholders must then decide what to do.

    Owners and asset managers have a vital role here. In order to protect their long-term financial interests they must challenge management to explain the strategy and logic of large deals and provide robust, consistent push-back where they have concerns. Events continue to show it is as true for the shareholders in the bidding company as it is in the target.

    I understand that the Takeover Panel are carrying out a review of the impacts of last year's changes to the Takeover Code. I look forward to seeing their findings, and their assessment of the progress that has been made.

    In the light of the debate around takeovers in the wake of the Kraft acquisition of Cadbury, I was anxious to ensure that takeover activity should be subject to greater transparency over fee incomes, and that rules should not play into the hands of short-term speculative investors. I therefore welcomed the reforms by the Takeover Panel.

    But Government also has a wider role to play here - particularly in strategically important sectors. This is recognised by the current legal framework, and we are not proposing to change it. It is important that companies focus on creating sustainable competitive advantage, not on complex merger and acquisition strategies that destroy shareholder value.

    Takeovers are part of a wider context: the need to ensure that the bedrock of the capitalist system - the competitive market - functions as effectively as possible. The government is consequently strengthening the regulatory framework to create a single, powerful competition authority - the Competition and Markets Authority.

    It will have a duty to promote competition for the benefit of consumers and will observe the principle of supporting long-term growth. This objective will be formally embedded in its performance framework.

    We will also ensure that the Competition and Markets Authority works closely with sector regulators to more vigorously tackle competition issues in regulated sectors.

    All of the areas I've discussed depend on effective engagement between companies and their owners for progress to be made. So to fuel to the cultural change that's required, we are endorsing John Kay's 'Principles for Equity Markets' - and the directions for market practice which flow from these.

    In particular we have challenged leading industry bodies - including the NAPF - to review the report's Good Practice Statements. I am delighted the NAPF has accepted this challenge.

    And to measure the headway we are making on John Kay's recommendations we will publish a progress check in eighteen months' time, setting out how Government has taken forward the recommendations and how well companies and investors have stepped up to the plate.

    Industrial Strategy and Financial Services

    There are other major policies afoot which have at their heart an attempt to inject a more long term approach to business decision making. One is the industrial strategy in which we sit down with sectors like aerospace, life sciences, automobiles, energy supply chains, and others to plan the long term implications for skill development, technological change and innovation and procurement.

    Another is financial services. Tim Breedon's recent review for me found the UK has one of the most sophisticated financial centres in the world. But UK businesses outside the financial sector aren't getting the benefit from this. There is a kind of enclave development unconnected with the real economy.

    One specific example is that while the City can provide a range of sophisticated services to international business, British medium and small companies cannot get long-term, patient capital for love nor money.

    So, we need to fundamentally change the system so the financial services industry serves businesses, and not the contrary.

    We are taking a number of steps to reform the banking industry, but we need to go further and reshape the business finance market. That is why I have announced the creation of a business bank that will have as its core mission to stimulate competition in the business finance markets and make them work for businesses.

    With a clean balance sheet, and £1bn worth of funding, this bank will be tasked with expanding lending and investment to the manufacturers, exporters and high growth companies that power our economy, in particular addressing the need for long-term, patient capital.

    We will shortly announce the appointment of an advisory group for the bank. Its task will be to help shape the design and its future activities

    Wider work

    There are many other areas that will help promote long termism, and truly responsible capitalism, such as greater diversity in workforces - especially in the boardroom, the growth of social enterprise and alternative models such as employee ownership and mutuals. I cannot hope to go into detail on all of these areas in this speech, but we are making good progress

    Conclusion

    This then, is the government's clear priority - ensuring we have a market economy rooted in a system of responsible capitalism. Expectations of the market system have changed since the financial crisis - after paying for its reconstruction, UK citizens must see and share in the benefits of recovery and growth.

    The far-reaching reforms I have discussed today will help, but they are the start of a much longer process. One that requires a change in attitude and behaviour among key players in the system.

    Many companies are beginning to recognise this, and are investing in jobs, skills, supply chain development, and other areas that will help create long-term value.

    It is only by responding to these concerns that we can restore trust in markets - and as major shareholders you are in a uniquely strong position to help achieve that.

    Original and Press Contacts: http://news.bis.gov.uk/Press-Releases/Vince-Cable-speech-National-Association-of-Pension-Funds-Corporate-Governance-Conference-NAPF-HQ-Cheapside-House-London-683c4.aspx

  • Article: Nov 21, 2012

    More than fifty colleges across the country will be spending £412 million on projects ranging from the creation of a state-of-the-art civil engineering academy to transforming classrooms into modern vocational workshops, thanks to co-investment from the Government.

    The Government is investing £110 million, through the Skills Funding Agency, which will be more than matched with £302 million investment from colleges.

    The funding is the third phase of the Enhanced Renewal Grant (ERG3) which has contributed £330 million since May 2010, supporting over £1 billion of investment in college buildings across England.

    Making the announcement at the Association of Colleges (AoC) Conference, Business Secretary Vince Cable said:

    "These projects will transform the learning environment for thousands of students across the country, providing them with state-of-the-art facilities and modern resources that will help them fulfil their potential.

    "Addressing gaps in skills is an important part of our industrial strategy. This initiative is another example of how Government is working in long-term partnership with industry to give them more confidence to invest, hire and grow."

    Examples of successful bids submitted to the Skills Funding Agency, who conducted the assessment and moderation process, include:

    • South Essex College of Further and Higher Education has raised almost £40 million which will be combined with nearly £3 million grant support to build a new town centre site. It will have facilities ranging from mechanical engineering workshops to student training kitchens
    • A new £4 million agriculture building at Bridgwater College in Somerset which will address the growing demand for specialist rural skills and develop closer links with the agriculture industry in the region
    • A new £7.7 million creative industries building at Kingston College to replace current facilities
    • £8.1 million on refurbishing the campus and building new arts facilities at Burton and South Derbyshire College.

    Kim Thorneywork, Chief Executive of the Skills Funding Agency, said:

    "Following a high demand of inspirational applications for the Enhanced Renewal Grant, it is great news that the Agency and BIS are able to announce the successful colleges who will receive government funding, through the Agency, to support their projects and enable them to be brought to life.

    "This additional funding demonstrates the Government's continued commitment to the further education estate allowing students to grow and flourish in an exciting, inspirational, modern learning environment in the heart of the local community."

    Julian Gravatt, AoC Assistant Chief Executive, said:

    "AoC is delighted to have supported the recent Enhanced Renewal Grant funding process. These grants will provide much needed capital funding to colleges across England.

    "These colleges will now be able to improve their facilities for the benefit of the learners, businesses and the communities they serve."

    In May this year all colleges were invited to apply for up to £3 million for individual projects, with an expectation that the facilities will be ready to use by September 2014. The resources are aimed at colleges that have not received significant funding in the recent past.

    Original and Full Press Release available from BiS: http://news.bis.gov.uk/Press-Releases/-400-million-boost-to-England-s-colleges-683a4.aspx

  • Article: Nov 19, 2012

    Budding engineers now have the chance to be talent spotted by some of the country's biggest and most innovative engineering companies thanks to the extension of an industry-led scheme. The announcement will be made today by Business Secretary Vince Cable in a speech to the Confederation of British Industry.

  • Article: Nov 19, 2012

    Introduction: competitiveness

    You have heard the PM speak about achieving economic growth and jobs in the UK in an environment where there is intensifying international competition. Global growth is undeniably good news. We should welcome the fact that the vast swathes of humanity who until recently were subsistence farmers are now clawing their way out of poverty. They will expand the markets into which we sell - as the Prime Minister pointed out, exports are growing fast to Brazil, Russia and China. And we need to do a lot more to offset years of neglect of emerging markets.

    But we can't forget that these countries also generate more commercial competitors. And every other developed country, including a recovering United States, is relying on these markets to grow and looking at how to be more competitive.

    We don't live in a zero sum world but it may not feel like that in countries that are struggling to grow.

    UK trends

    In the UK we have had a difficult time, but there are some reassuring figures on job creation, falling unemployment, and business start-ups. If the more upbeat mood in business is to be sustained, there has to be a clear pathway to resumed and then sustained growth out of the financial crisis.

    Growth in the short run - the next year or two - depends largely on an expansion of overall demand. In the past two years the ongoing Euro crisis and the persistent challenge of dealing with the legacy of damaged banks and a collapsed property bubble has not been helped by a big rise in energy prices. It is little wonder that business confidence has been faltering.

    The government is determined to do what it can to support demand. Our determination to put in place a credible plan for deficit has allowed the Government to pass on the benefits of a credible balance sheet to the wider economy. That, and our independent monetary policy, is why we have been able to announce innovative schemes like Funding for Lending. And we will not sit on our laurels till the economy is growing strongly.

    Investment in human capital

    But in the longer term what matters for growth is the attractiveness of the investment climate, the quality of physical infrastructure and the supply of high quality human capital. Some government decisions have an immediate impact: movement on infrastructure projects and regulatory certainty for energy investors means activity and jobs in the near term. I recognise the frustration in the business world that these things are moving slowly.

    Human capital calls for substantial investment in training, further and higher education as well as schools and research leading to innovation. Where is this going to come from? Most of it, of course, takes place in companies. However, for wide swathes of training and education there are valuable spillovers which mean that the private sector needs support from the government. That is why I have been so determined to protect and grow apprenticeships and put higher education on a sustainable footing.

    I recall that at the beginning of this government we were forced to make difficult cuts in pursuit of deficit reduction and we enjoyed the support of the CBI for that. But the CBI was critical of certain cuts in particular and argued for more spending on education and science. Now the government faces serious financial constraints on account of the large fiscal deficit: a problem which will continue beyond the middle of the decade. We cannot repeat what we did before when we replaced grant funding with student loans repayable from graduate incomes. Now the main areas of higher education that still enjoy considerable financial support from government are subjects like engineering and science and the research ringfence which is the basic minimum to protect Britain's competitiveness.

    Growing demands

    Indeed in the coming years I see a growing call on government in two areas in particular. The first is in post 18 vocational education. We have made a big step forward with partially funded apprenticeships which have increased to over 1 million in the last 2 and half years, a growth of over 60% - and we are shifting towards a more employer led system where the funding flows from the company to trainers. But apprenticeships cover only a modest proportion of the student leaver population and we badly need a system of training that deals better with the so-called NEETS. This means having real ambition for the further education sector.

    A second is in research and development before commercial innovation. I am delighted at the progress we have been able to make with the Technology Strategy Board and in introducing the Catapult centres - in advanced manufacturing, cell therapy, new offshore renewables and space, with the connected digital and transport technologies catapults to come. Even though we have managed to protect the science budget from serious cuts we must not be complacent. We have noted the criticisms of the CBI that the valuable Smart Awards and Knowledge Transfer Partnership have been squeezed and are giving priority to supporting innovation when we have opportunities to invest more.

    We need to build on our excellence in science, and improve how we turn great ideas into great businesses - just last week the Chancellor laid out eight technologies where Britain could be a world leader. And you only need to look at the proposals coming out of NESTA and CASE to show that there is no lack of opportunities.

    There has to be some prioritisation connecting public spending in areas which contribute to recovery and growth, not on the political soft options. And this is an issue I have spent a lot of time reflecting upon in recent months during the work I have done with colleagues across government to formulate a new long-term plan for UK industry.

    Industrial strategy

    The resulting Industrial Strategy, is underpinned by two principles. First, a recognition that is necessary to plan for the long-term, prioritise activities and allocate resources accordingly - just as any successful company does. And second, an understanding that government must work with industry to tackle genuine market failures where they occur.

    But this does not mean picking winners. We will be flexible in our approach, rigorously evaluating where we best use our resources, and open to new, disruptive industries as they develop. This is not about entrenching the old industries, but rather ensuring that the UK is ready to take advantage of new opportunities as they develop.

    Nothing fits these two principles as clearly as getting the skills system right. This task is long term: to have the skills we need in 2020 or 2030 we need to start acting now. And the benefit that the whole economy receives from talented people makes investment in skills a classic market failure, requiring permanent government support. It is also an area where working with business is utterly essential - too much failure in the past has come from the government ignoring the input of industry. That is why it is so welcome that the CBI chose this theme in its report "First steps: A new approach for our schools".

    Engineering skills and education

    So to ensure long term success we have to plan, now, to ensure an adequate supply of skilled workers.

    There are many strands to this work. We need to remain open to the many talented and entrepreneurial people that throng to our shores to learn, work and invest - that is how over the years Britain has gained so much of its industrial and business expertise. Being open for business means being open to overseas talent as well as overseas investors.

    It also means we need our schools system to produce people with the soft skills required by all employers, such as the ability to cope with the routines and demands of the workplace, as well as equipping them with the management and leadership skills they need to progress. I applaud the emphasis being placed by my colleague the Secretary of State for education on raising the standards of maths and English in school and on standards in general. But we also have to develop credible pathways of vocational education in schools including engineering, and to introduce school children to the importance of enterprise and entrepreneurship.

    And there is a clear and growing demand in British companies for specialist technical skills.

    Time and again, large manufacturing companies come to my department and tell me they are worried about looming shortages of skilled engineers. It is one of my major priorities as Business Secretary to address this problem.

    The Royal Academy of Engineering has published estimates of long term demands for engineers, and there is no doubt that these are very challenging. My Department's Chief Scientific Adviser, Professor John Perkins - himself an eminent engineer - is working closely with the Academy and others to see what more might be done, including areas such as diversity and redressing the pronounced gender bias, and helping people return to the profession. On this I'd like to commend Allan Cook, Chairman of Atkins, for picking up and running with the idea of the 'Talent Retention Solution' an industry group set up originally to match jobs with engineers leaving the defence sector, and now running with more than 500 companies registered - currently still free for SMEs. I'm very pleased to announce that the TRS which is now funded and managed entirely by business is being extended now and is working with Universities so that students can put up their profiles & search for jobs - effectively an ebay for talent. The industry group see this as an important move towards supporting young people into engineering and manufacturing jobs and will be progressively using TRS to source new and experienced talent in the years to come.

    Perceptions of engineering

    The constraints on engineering supply are clearly complex and rooted in a number of factors, ranging from the influences of parents and teachers to the outdated perceptions of industry that are a world away from the well remunerated, rewarding and dynamic careers on offer in engineering today.

    I am always astonished by how different engineering is from the stale image of repetitive badly paid metal banishing. Instead I'd point to recent visits such as one to a McLaren factory, which felt more like a space ship than the classical image of a factory floor. Equally on a modern car production line, like the ones I've seen in visiting Toyota and JLR over the past months, you are just as likely to see women as men.

    And even as we gradually turn this perception around, by the time young people reach the age where they might want to choose engineering, they may have failed to gain the educational and/or technical skills needed to take it forward.

    This is the reason we are running a number of programmes designed to increase the numbers passing through every stage of the pipeline.

    The See Inside Manufacturing campaign has been a successful way of opening young people's eyes to the career opportunities available in engineering by showing them around some of the UK's leading industrial companies. Complementing this, we have programmes such as STEM ambassadors, Apprenticeship ambassadors, Make It in Great Britain, and the very successful Big Bang Fair which inspires the very youngest and this year involved 170 organisations with 56,000 people at the main event in Birmingham. Last Wednesday, I opened the Skills Show in Birmingham which welcomed 100,000 young people over the next three days to competitions and talks built around high levels of skill.

    A prestigious new award, the Queen Elizabeth Prize for Engineering, has also been launched. A range of private sector partners have contributed to the endowment of the prize fund, and the £1m prize will now be awarded bi-annually by the Royal Academy of Engineering. It has real potential to inspire future generations of engineers.

    Many manufacturers and professional bodies are highly pro-active in reaching out to inspire and inform young people. It is gratifying also to see Engineering UK's 'Tomorrow's Engineers' programme take this to the next level, by helping companies and academies join forces to engineer a vital step change in perceptions for the long-term.

    Lord Heseltine has supported the move towards greater Business Engagement in the school curriculum. He is right, and we are working with the careers service to connect the businesses, LEPs and schools to make this happen.

    But once their interest has been engaged, we have to ensure that opportunities to develop the requisite skills are available. University Technical Colleges provide a model for meeting that need.

    Our UTC programme will establish at least 24 new colleges by 2014, offering around 20,000 14 to 19 year olds rigorous training in a number of engineering, science and technical disciplines. Details of the first 15 were announced in May and include partnerships with household names such as Jaguar Land Rover, British Airways and Virgin Atlantic.

    Access to jobs

    However, following their technical education, would-be engineers need access to jobs and training so they can start and develop their careers. If an adequate pipeline of British Engineers is to be created it cannot be down to government and future engineering graduates - through their fees - to do the financial heavy lifting. I hope we can see a reciprocal number of industrial sandwich schemes, paid internships and individual sponsorship from the private sector.

    One area where there is real progress is apprenticeships. The investment we have ploughed into apprenticeships over the past two years has led to record numbers.

    I don't pretend that apprenticeships can solve the skills supply issue at a stroke - but they are an important part of the solution. Specifically apprenticeships in engineering and manufacturing technologies have doubled in recent years to 49,000 starts in 2010/11. We recognise that in focusing on quality as well as quantity we need more advanced apprenticeships in engineering, construction and digital skills.

    Smaller employers may need some extra help to absorb the costs of taking on an apprentice, so we are offering grants of £1,500 to support those with fewer than 1,000 employees that have not hired an apprentice in the past 12 months, and we have recently streamlined the process to make it as easy as possible for employers to recruit apprentices.

    It is gratifying also to see that the bids for Employer Ownership Pilots that I announced on the 11thSeptember have included a number of high-quality bids from employers seeking to meet their specific engineering needs.

    Also, the development and delivery of higher level apprenticeships, equivalent to degree level, is being supported through a £25m fund that will build the engineering skills base in a range of disciplines, including environmental technologies, space, energy and utilities.

    Engineering in HE

    Our commitment to engineering is just as strong in the higher education system. Since 2009, the Higher Education Funding Council for England has invested in measures to increase the demand and sustain the supply of strategically important subjects within STEM. Engineering and technology are by far the largest of these subjects in terms of undergraduate numbers. This year, when we introduced the new student financing system, demand to study engineering held up better than for any other subject, as students have taken an increasingly hard-headed view about career options.

    In addition, earlier this year an extra £12m was invested by the Engineering and Physical Sciences Research Council in new doctoral training programmes in four of the EPSRC Centres - Emergent Macromolecular Therapies, Continuous Manufacturing and Crystallisation, Ultra Precision, and Composites. Each training programme will support three cohorts of doctoral researchers and will provide specialist research and technologists specifically for advanced manufacturing industry.

    This programme will reinforce the £300m Research Partnership Investment Fund, which will be used to leverage over £1bn investment in science and R&D collaborations. The fund, run by HEFCE, will support the creation of more cutting-edge research facilities and help promote long-term strategic research partnerships between universities, businesses and charities.

    A number of innovative projects have already been given the green light. For example, a £60m partnership between the Birmingham University and Rolls-Royce to establish a casting and simulation research facility. And a £92m partnership between Warwick University, Jaguar Land Rover and Tata Motors European Technical Centre for a new National Automotive Innovation Campus.

    All of these interventions are designed to stimulate innovation, reduce the risks associated with investment in new technologies and R&D, and bolster the skills pipeline all the way along. The ultimate aim is to nurture a thriving innovation ecosystem which attracts the most talented people to careers in engineering and science.

    Conclusion

    But I am a realist and I recognise that the initiatives I have outlined will take time to bear fruit. I know, too, that more needs to be done to reverse the constraints on skills that have resulted from the historic lack of investment. It will also be necessary to win battles in Government to prioritise this agenda. Nevertheless, I am confident we will succeed in bolstering the skills base as we develop and implement our long-term plans for UK industry.

    It's an ambitious agenda and we stand ready to work with the CBI and others as it is implemented in the months ahead.