This article was written by Vince Cable and appeared in today’s Mail on Sunday:

Does trade matter? Should we be bothered if Britain has a whopping deficit in manufacturing trade?

Well, yes, we should. A problem which haunted a generation of political leaders and chancellors is returning in a new form.

For a long time the country’s balance of payments disappeared as an issue: something that belonged to the era of steam trains, black and white TVs, The Beatles and Harold Wilson’s pipe.

Manufacturing: Britain needs to engender respect for people who make and build things

Except for a few, unhappy years in the European Exchange Rate Mechanism – remember Black Wednesday? – our sterling exchange rate has floated against other countries’ and, as a consequence, the balance of payments has, sort of, balanced itself.

If the trade deficit or the overall payments deficit got too big the pound could fall to help exporters and vice versa. A good theory. One less headache for Chancellors.

But there is a problem.

When I spoke at a conference of British manufacturers last week someone showed me a chart that described how, after being broadly balanced for half a century, in the decade after 1997 Britain’s balance of trade plunged to £60billion – five per cent of our economy.

This was the boom time on our Fantasy Island when imported goods were consumed on credit and exports suffered. Another £20billion or so went on travel.

Much of this deficit was paid for by financial services: banks and the rest of the City. But, as we have painfully discovered, banking is not some London-based El Dorado, pouring out everlasting riches for the economy to consume, but a highly precarious, risky industry that ultimately collapsed in a heap, and which we rescued.

The economist part of my brain says this problem will sort itself out because the pound will fall to make British manufacturing more competitive. 

The pound has indeed fallen – by 28 per cent against other currencies since before the credit crunch. Unfortunately the latest trade data tells the opposite story: exports in January fell (the worst monthly fall for eight years) and the deficit deteriorated.

One explanation for the January disappointment is that the developed world markets to which we export are also growing very weakly or not at all.

For all the talk about the new ‘gold rush’ to Asia and other emerging markets, trade with Ireland is larger than with China, India and Brazil combined.

The euro area generally is struggling, the US is also faltering badly. World trade fell by 12 per cent last year.

Crisis: Financial services cannot pour everlasting riches into the economy

So we have countries (like ours) trying to boost their economies through ‘export-led growth’ – but there aren’t buyers at the moment.

However, there are causes for hope and celebration – impressive British manufacturers who have survived and who are battling on.

A couple of weeks ago I visited Cosworth in Northampton. This company makes the engines for four of this year’s F1 teams and has branched out into various specialised areas of engineering where it is as good as anyone in the world.

On top of this, the firm is producing apprentices.

Last week I had lunch with an entrepreneur from Leicester who makes bushes for large electric insulators exported around the world, including to China.

A firm in my constituency also sells much of its production – a key component of wind turbines – to China.

In Luton, I met an impressive businessman who set up a company turning plastic waste into a substitute for plywood – a new British technology.

His customers want far more than he can produce.

These manufacturers have several things in common: advanced technology; high-quality specialist products; totally committed British managers and owners; and loyal, highly skilled workers.

There are many success stories – in biotechnology and pharmaceuticals, information technology, TV, music and computer games, as well as specialised manufacturers. But there aren’t nearly enough of them.

To turn Britain back into a successful manufacturing country, part of what is needed is a cultural change: a respect for people who make things and for businessmen and women who invest their money in genuinely wealth-creating industries.

The Government should not be involved in picking winners. There was too much of that in the past and a lot of money was wasted. What the Government can and should concentrate on is ensuring that young people are educated to a standard where they are trainable and employable.

It can and should encourage teenagers to see the value of vocational training in technical colleges as an alternative to university, which for many is becoming an expensive route to unemployment.

And it is the Government’s job to ensure that there is a functioning infrastructure – transport, ports, energy, digital – which is why I believe we need an infrastructure bank.

Unless these things are done, creating a platform for a manufacturing revival, there will be no base for Britain to pay its way in the world and those old worries about the balance of trade, and payments, will reappear – with a vengeance.

Vince Cable is the Liberal Democrat Treasury spokesman