Autumn Budget: a plan for uncertain times

EEF's Terry Scuoler calls for a Budget that is clearly aligned with an ambitious industrial strategy and which boosts manufacturing investment in technology, thereby enhancing productivity and helping to secure long-term sustainable growth.

UK Advanced Manufacturers Autumn Budget Cash Finance Investment Money Coins Working Capital GDP Figures
The Budget will have to address several competing priorities, from lifting public sector pay to offering some business certainty about the UK’s post-Brexit landscape.

Very shortly, the Chancellor will deliver one of the most closely watched and highly anticipated Autumn Budget statements for some time.

He will do so against an economic and political backdrop clouded with uncertainty, with the distinct possibility – as I write – that Brexit negotiations will have stalled and the prospect of a ‘no deal’ scenario ever more real.

He will also be dealing with a slowing, anaemic UK economy which is set to be the laggard among the G7 and OECD economies this year and next.

However, if the Chancellor needs a pick-me-up, he could do worse than look to the performance of manufacturing, which has enjoyed improving conditions through the course of 2017 on the back of a synchronised upswing in world trade and a weaker currency.

Our latest survey shows robust activity across all sub-sectors with the new order pipeline buoyant and stronger recruitment intentions.

Stronger investment needed

The one area of weakness, however, is the subdued outlook for investment, which our latest annual survey, produced in conjunction with Santander, shows remains finely balanced.

While intentions to invest are in positive territory and have edged higher in the past three months, balances are nevertheless weaker than we might expect given the positive picture for the sector overall.

Most critically, our analysis of official data shows the UK levels of manufacturing investment still significantly behind our European competitors.

Discussions with manufacturers indicate that there are several reasons for this disparity: Brexit-related uncertainty, decisions around technological change and the exchange-rate-related cost of new capital equipment are all in the frame as hurdles to increased investment.

Similarly, while we see companies engaging in more innovation there is concern that it may be insufficient to secure much-needed productivity gains, or to keep up with competitors when it comes to the adoption of 4IR technology.

Competing priorities

EEF's Terry Scuoler addressing the National Manufacturing Conference 2017 at the QEII Centre, London - image courtesy of EEF.
EEF’s Terry Scuoler addressing the National Manufacturing Conference 2017 at the QEII Centre, London – image courtesy of EEF.

It is with all this in mind that the Autumn Budget will have to address a range of competing priorities, from lifting public sector pay to offering some business certainty about the UK’s post-Brexit business environment.

Additionally, the continuous need to manage the trajectory of public sector borrowing has not diminished.

Overall, measures announced in this statement should be consistent with the goal of eliminating the deficit as soon as possible.

This can be achieved while making some adjustments to the business environment that would spur more investment in technology and productivity enhancing improvements across manufacturing and the wider private sector.

Ultimately, this is what is needed to secure sustainable growth over the longer-term, as well as tackle the UK’s longstanding productivity gap.

Critically, as far as manufacturers are concerned, fiscal policy decision in this Autumn Budget should be clearly aligned with a clear and ambitious industrial strategy. This must set out a framework that will provide certainty and predictability about government’s future policy choices and give manufacturers the confidence to invest.