Chinese imports ‘threaten to wipe out UK industries in five years’

Cut-price Chinese manufacturers could wipe out whole chunks of British industry within five years, a think tank has warned.

Chatham House said European and UK industries ranging from electric vehicles and machine tools, to wind turbines and pharmaceuticals were “on a trajectory to lose” to China’s fast-growing and technologically dominant companies.

“There is a real possibility that over the next five years, Europe will lose much of its industrial base to Chinese competition,” said James Kynge, a Chatham House fellow and author of a new report on the economic threat from China.

“Not only will this result in the further loss of jobs and expertise; it may also mean the loss of companies with long histories of technological excellence and contributions to local communities.”

Mr Kynge said Chinese companies were winning because the country’s huge domestic market gave them greater economies of scale. China also boasted world-class universities, cutting-edge technological innovation and generous state subsidies.

He warned that British companies were losing market share to Chinese rivals not only at home in the UK, but also in China and in other countries where they competed.

“Chinese competitors are going global and rising to the forefront of global technology. That means that a UK business anywhere in the world is going to experience blowback from these uber-competitors coming out of China,” he said.

The soaring cost of energy is hindering British industry’s ability to compete and last week Britain’s biggest pharmaceutical companies warned of “a slow agony of decline” in the face of China’s growing dominance.

The Chatham House report found that in the pharmaceutical sector, China could rip through the clinical development of new drugs at three times the pace of Europe, for half the cost.

Mr Kynge said British and European pharmaceutical firms were now getting Chinese players to develop drugs for them. “They are outsourcing their brains to China. The collateral damage will be an atrophication of the UK’s own ability to innovate in drugs in the future,” he said.

The report also looked at China’s increasing takeover of industries such as wind turbines, machine tools and cars, where Europe until recently still held the upper hand.

The EU is reportedly about to launch new measures to protect its industries from cut-price Chinese imports. But Britain has remained more open to Chinese trade.

‘We need to do a reverse-China on China’

Jonathan Reynolds, the Business Secretary, told The Telegraph this month that “if you put trade protections up, you’ve got to understand that they’ll probably be reciprocated and you’ll lose out”.

Britain had a £52.5bn deficit in its goods trade with China in the 12 months to the end of March. Goods exports to China declined 0.5pc to £18.5bn, while imports rose 2.4pc to £71bn.

Mr Kynge said the Government needed to reduce the regulatory burden and speed up bureaucratic processes to help British companies compete. Britain also needed to build more infrastructure, and increase the tech skills of its workforce.

Britain should welcome Chinese investment in non-sensitive sectors, he added, as long as the investors transferred technology, used local suppliers or hired and trained British workers.

“These were the conditions of entry for many of the European companies that went to China in the early days – you had to transfer technology. So we need to do a reverse-China on China,” he said.