Today, manufacturing is enjoying a surge in exports and profits, driven by exchange rate gains, increased competitiveness and sticky wages.

Quite a lot of that comes from inward investment, some of which I have been privileged to bring in myself.

However, I think we all know that there are major issues to be addressed if this growth is to be sustained.

In the 1950s, British gross capital formation was a little over half that of Germany and Japan. It stood at 16 per cent of GDP. Today, capital formation is 15 per cent of GDP – still significantly below our main competitors. In 2009, UK investment in research and development shrank both in cash and real terms. Business R&D fell significantly. There was a recovery in 2010, but by the final quarter we were flat-lining again.

We need better incentives for the private sector to invest in developing improved products and systems.

New products and systems are the basis on which you go forward.

While the Government’s R&D tax credit changes are useful, the recent reductions to capital allowances work in the opposite direction. Further, the research funding system is so complex and distant from commercial reality that many small companies get little advantage from participating in R&D programmes.

Evaluation based on commercial impact is not right for all subjects, but in applied sciences and engineering it is surely essential.

Why do we need such commercial clarity?

We need it because, although manufacturing is fashionable today, experience tells us that existing schemes and centres will stick a “manufacturing” badge on their projects to secure funds without delivering what we need.

Indeed, we are already seeing the bizarre situation of projects trying to secure funding from government and talking about a 15-year strategy before being sustainable and delivering commercial impact. That is far too long.

Many good things have happened. The Technology Strategy Board is a beacon. However, it does not have much money. If it were doubled or tripled, it would still be a minuscule amount compared with what is needed. The perennial problem of underinvestment is exacerbated by the inability of business to obtain finance.

If we are to succeed, we need more than a splash of fuel. We need to supercharge the engine. Time will tell whether this Government’s deeds match their words.

* Lord Kumar Bhattacharyya is founder of Warwick Manufacturing Group