Another way to best China's low-tech, low-wage model

AT a time when developed - and developing - economies are battling to compete against China and other, cheaper Asian competitors, it is heartening to discover a sector where competitiveness is not determined by price alone.

I have taken leave to install my nephew in a short internship with one of the great motorsport designers, Mike Pilbeam.

His company is in Bourne, a small market town in the heart of the English countryside, once the headquarters of the famous ERA and BRM teams.

Mike, now 74, was the designer of the last successful BRM in 1974 before going it alone to build a range of Formula One, Two and Three and Le Mans cars.

With no fewer than 300 cars to his credit, his workshop today contains projects for Australia, Switzerland and, now, South Africa.

We arrived at Pilbeam Racing Designs just as the European Union concluded its fifth summit to rescue the euro - where UK Prime Minister David Cameron used his veto on a proposed new treaty to tighten the terms of fiscal union.

Europe's financial woes stem fundamentally from burgeoning public debt, mostly thanks to the southern Mediterranean lot spending more than they generated.

This is especially pronounced where tax avoidance is apparently a national sport, viz Greece.

The results? The 17 countries of the eurozone, as distinct from the 27 members of the European Union, have to repay 1.2-trillion euros in short-term debt in 2012 alone.

For Europe, a monetary union without fiscal rules has proven disastrous.

But it has been impossible, in the face of cultural and economic differences, to formulate these rules.

The core problem is that Europe is trying to meld wealthy states together with less-productive nations, primarily for reasons of power, trade and politics.

Cameron's reluctance to sign a new deal was founded on two additional concerns, the first being fear of the effect of a proposed transaction tax on the City of London, worth 10% of the UK's GDP.

The revenue from the financial centre is about the same as manufacturing, which has more than halved as a share over the past 15 years. The second reason is a suspicion among the British public of creeping European bureaucracy.

More importantly, such chaos threatens what has become the core of the modern European project - a common market, lowering trade barriers and improving economies of scale across 500 million people in the 27 EU member states.

It also inevitably obscures - and makes more difficult - the success of those sectors built on innovation and manufacturing.

For example, the UK motorsport industry involves more than 4500 companies, from the giants of Formula One to the multitude of subcontractors; parts suppliers and fabricators. It turns over £6-billion annually, and supports 38500 jobs, including 25000 for engineers.

A major source of technological innovation, value-addition and excellence, motorsports' average research and development spend of 30% of turnover dwarfs even the UK's pharmaceutical and IT industries.

Technology and skills have improved simultaneously. Mike Pilbeam's son, Ciaron, who has a first from Cambridge and a doctorate from Cranfield University, is chief engineer for Formula One driver Mark Webber.

But across the road from the cutting- edge Pilbeam Racing, is Hall & Hall, one of the largest global historic racing-car restoration businesses.

The company was started by Rick Hall, a BRM mechanic and Bourne lad. It employs 23 craftsmen, who make everything from complex BRM V16 and H16 and Maserati engines from scratch, and rebuild Le Mans winners and Formula One cars made before 1984.

As I type this, I can hear the rasp of a Williams starting up, its exhausts shooting flame in the gloom of an English winter afternoon.

Just round the corner is Dave Fox's workshop. This is the man who has been making, first, fibreglass and, now, carbon-fibre bodies for everything from Formula One racers to Dakar rally cars for more than 30 years. Trained originally as a pattern maker, he regularly takes on students to teach them the practical skills often missing in their academic qualifications. Yet he believes it's increasingly difficult, as a small business, to compete against the weight of health, safety and labour laws which have driven business elsewhere.

For my nephew, Robert, and me it has been a privilege to get out from behind our computer screens, apply some knowledge in Pilbeam's company - one of the greats in this field - and get some dirt under the fingernails.

This is a profession where skills are learnt, applied, learnt again and tested.

The reason Britain has been successful in the motorsport sector is simply because costs matter less and skills count for more. That much is a lesson to all in contemplating routes to employment and prosperity in the face of China's low-tech, low-wage challenge. As the euro crisis reminds us, the principal role of government is to do no harm if it cannot do any good.

•  Dr Mills has written six books on Southern African motorsport.