The Chancellor’s autumn statement won approval for its action on skills but drew criticism for its failure to address crippling energy costs for energy intensive businesses.
George Osborne’s biggest announcements should have a positive impact on the retail and construction markets with action to cut business rates, and provide loans to unblock stalled housing developments, particularly in the north of England.
However, his entire statement to parliament failed to once use the word ‘manufacturing’ and featured just a single use of the word ‘industry’ when referencing the insurance industry’s support for the new National Infrastructure Plan.
As such, it is unsurprising that will measures to accelerate economic recovery failed to address critical issues for energy intensive businesses or to incentivise investment in heavy capital investment with measures such as enhanced capital allowances.
Highlighting this failure, Karl Koehler, CEO of Tata Steel’s European operations, said: “The Chancellor has offered no help on energy costs for foundation industries such as steel, which will continue to operate at a huge competitive disadvantage to other European countries.
“Capping and reviewing business rates as well as more investment in infrastructure, while welcome, do little to improve the competitiveness of the country’s vital foundation industries.”
Mr Koehler said Mr Osborne had missed on opportunity to prove his commitment to manufacturing.
That said, many industry leaders approved of the Chancellor’s decision to provide funding for 20,000 more apprenticeships in the next two years – with funding delivered direct to employers via HMRC. However there’s was a feeling that judgement should be reserved on the intelligence behind this move until further detail is available on the skills levels to be supported and for which age groups.
The Chancellor took a strong stance on the need to reduce youth unemployment by incentivising job creation for younger people. His promise to abolish National Insurance on all jobs created for people under 21 will cut the cost of employing a young person on a salary of £12,000 by £500 a year and take £1000 off the cost of an employee on £16,000 per annum.
Acknowledging increasing concern over the UK’s ability to meet its national export challenge the Chancellor also freed up an extra £50bn of export finance to be delivered via UKTI.
To read the Autumn Statement in full and to access supporting policy documents click here.
Below is a selection of industry and trade body comment on the Autumn Statement 2013:
Karl Koehler, CEO of Tata Steel’s European operations:
“The Chancellor has offered no help on energy costs for foundation industries such as steel, which will continue to operate at a huge competitive disadvantage to other European countries. Capping and reviewing business rates as well as more investment in infrastructure, while welcome, do little to improve the competitiveness of the country’s vital foundation industries.
“Our electricity costs in the UK will remain up to 50% higher than competitors pay in France or Germany and our industry will continue to struggle globally as long as our energy costs remain so high.
“The Chancellor has missed a chance to show that he is serious about a manufacturing-led economic recovery by failing to show the real commitment to fair energy costs for the foundation industries.”
Terry Scuoler, Chief Executive of EEF
“The Chancellor was right to stress the risks to recovery but did too little to support the investment that would secure it.
“While the Autumn Statement contained some useful measures on apprenticeships, skills and business rates, it failed to send a clear signal to industry that now is the right time to invest and create new jobs. In particular, it failed to address the growing threat to investment from energy prices that are squeezing margins and racing ahead of our competitors.”
“>“Industry, especially energy intensive users, will be dismayed that government has failed to address the genuine concerns surrounding the uncompetitive price of energy for UK manufacturers.
“Companies looking to invest and create jobs in the UK need a long-term commitment by government to control costs increases and compensate those most affected. Without this commitment, making the case in global boardrooms to invest in the UK will get increasingly difficult.”
Paul Everitt, Chief Executive of ADS
“The Chancellor’s statement today reaffirmed the good news that recent growth is beginning to reap economic rewards. The package of measures to support business, including £50bn for Export Finance, prioritising higher level apprenticeships and engineering graduates and capping business rates, will provide much needed support for high-tech, export-led growth.
“The priority now is to support these positive measures by unlocking business investment, which is remains 24% below pre-recession levels. In 2014, the Government should seize the opportunity to build on its successful Industrial Strategies to make the UK a genuinely globally attractive location for investment, innovation and exports.
“The Chancellor’s cap on business rates will be welcome relief to many small businesses, including in aerospace supply chains where rapid growth has strained cash flow. The discount to retailers should have gone further to include all companies critical to rebalancing the UK economy.”
John Cridland, director-general, the CBI:
“We have always advocated the dual approach of tackling the deficit and driving growth – the OBR forecasts confirm it is working. Let’s stick with what works.
“The pressure on the high street has been recognised; the 2% cap on business rates and discount for very small businesses are positive, as is the reoccupation relief.
“Abolishing a jobs tax on employing young people under 21 will make a real difference and help tackle the scourge of youth unemployment.
“But it was a missed opportunity not to support our hard-pressed energy intensive businesses which are also struggling with rising costs, and the package on housing supply could have been more ambitious.
“As we enter the festive season, positive news on growth is clearly welcome but much remains to be done if the benefits of economic recovery are to reach every home in every corner of the UK.
“The cost of energy is affecting the competitiveness of our energy intensive firms which support jobs and growth, so it’s disappointing this wasn’t addressed.
“Businesses will now be looking for government action in the Budget and this has to include looking at the impact of the Carbon Price Floor. Shale gas will play a role in delivering a balanced energy mix, but we need action on all fronts to keep costs down and secure our future supply.”
Juergen Maier, MD, Siemens UK Industry:
“The measures to help younger workers and improve the country’s skill base, such as a commitment to provide 20,000 more higher apprenticeships over the next two years, extra funding for science, technology and engineering courses should be commended – on the skills front the Government is heading in the right direction.
“Cutting national insurance payments for employers who hire young people is something we have been calling for a long time – and this too is a welcome move. For jobs and skills this feels positive.
“For confidence and investment, especially for manufacturing the statement felt weak.
“We still lack a clear focus on a coherent energy efficiency policy – and a strategy to especially support energy intensive industries. In general it was more of a short term mix of measures and we hope that as we get closer to an election we manage to stay very strategically focused on the positive and long term industrial strategy the private sector is developing together with Government.”