"What is needed are some policy initiatives and a sustained follow through. Let me suggest a few measures which I believe could soon create the environment in which UK industry can flourish once more," Lord Paul said while participating in a debate in the House of Lords on the Manufacturing sector.
He said that other countries like China, India and Brazil have seized opportunities by focussing on manufacturing sector.
"Look at the numerous visits that Western leaders now make to these emerging economies. Statesmanship is now salesmanship. This is surely the Grand Paradox of our age - leaders who pay obeisance to manufacturing abroad while tending to neglect it at home."
In an effort to revive the manufacturing sector, he suggested a series of measures including a reduction in the administrative burden on industry.
He said the present taxation arrangements, pension structures and human resources regulations are needlessly complicated.
Secondly, he wanted a tax distinction between financial services businesses and industrial companies.
"Manufacturing cashflow requires large outlays over long periods before any money can be recovered, which surely deserves tax recognition. We also need to revise R&D tax credits to encourage investment in practical production processes."
Third, the Government should stimulate small enterprises, which are among the most innovative businesses, by giving special capital allowances and lowering their tax thresholds.
He said initiatives like the Enterprise Finance Guarantee Scheme are supposed to put cash into the economy with the government providing guarantees to the lending banks.
In reality, banks are still asking small business owners to provide personal guarantees against borrowings.
"That is why, speaking in this House on December 8, 2008, I suggested creating a state-sponsored national Industrial Development Bank. We need one even more today," he said.
He said even the United States - the citadel of free enterprise - is talking about setting up a state sponsored Infrastructure Bank because it is evident that this is one of the most effective ways to mobilize capital for national purposes.