Back to Scuoler – EEF’s take on 2012

Posted on 1 Jan 2012 by The Manufacturer

Terry Scuoler, CEO of  trade body EEF delivers the first of his new regular columns for The Manufacturer as the manufacturing sector embarks on a year set to be fraught with difficulty yet where opportunities are still to be exploited.

Terry Scuoler, CEO of EEF

Never has the saying ‘what a difference a year makes’ rung as true as it does as we enter 2012. Last January pointed to the broad based industrial recovery that began at the end of 2009 continuing, since when manufacturing has accounted for over a quarter of UK economic growth. For most of last year this was borne out as manufacturers outpaced the rest of the UK economy. A competitive exchange rate and the opportunity to sell into fast growing markets overseas have helped but this is far from the whole story.  We have now a much more competitive manufacturing sector, which increased  its productivity rise by almost a half over the last decade and increased its output per head by almost five times the economy overall over the past year.

Looking ahead to this year, the eurozone, government debt and banking crisis has gathered pace, weakening many of our major export markets and leaving industry facing greater uncertainty. However, in spite of the risks ahead, we should not forget there are still areas of growth.

A number of sectors, including automotive, civil aerospace and mechanical equipment remain more optimistic and have seen significant investment and expansion plans announced. Looking across the world economy, emerging economies are continuing to post considerably stronger growth than the UK’s European neighbours. Increasingly, we hear from manufacturers that they are making major inroads into these markets and this is backed up by trade statistics, which show that our  exports to the BRIC economies have grown by a half since the beginning of 2009.

However, there is little doubt that the first half of this year at the very least is going to be immensely challenging and policymakers and companies are likely to need to react quickly to changing circumstances.

This being the case, it is vital that government maintains a relentless focus on economic growth. Its forecasts are projecting that close to 90% of the growth in our economy will come from business investment. Given the economic outlook, many businesses will feel nervous about making major investment but past experience shows that this can be exactly the right time to steal a march on competitors by getting ahead in new technologies or businesses innovations.


At the same time, government has a vital role to play in helping companies make these investments. The Autumn Statement saw some useful moves that should help companies to invest including future reforms to the R&D tax credit to provide immediate reductions in the costs of investing in this area. It also contained a package of measures that aimed to reduce the cost of credit to business and make it easier to access alternatives to bank finance. It is now critical that the government ensures that these measures make a real difference.  We also believe that this year’s Budget should increase the rate of capital allowances to 100% for a two period to give a boost to cashflow that will support investment. Improving capital allowances is a familiar call from industry but at a time when the government is relying on business investment, it is a move that it should make.


With public finances under significant strain, there are clearly limits to what government can do on the fiscal front. But there is still much it can do to help industry by ensuring that it is not exposed to unnecessary costs and regulation. It is has made a number of significant commitments to simplify and reduce the impact of health and safety regulation and it is vital that it delivers on them. It also needs to work even harder to ensure that the focus in the rest of Europe is on how it can improve competitiveness and less on advancing its social model. With countries like Italy and Spain starting to reform their labour markets, the door is now ajar and the government should work actively with its partners in Europe to push it open further.  There are also key decisions to be made at home in Europe that will impact on the costs of expanding our supply of low carbon energy and of company pension schemes.

However, I want to conclude this article by looking further ahead. Near the end of last year the government announced a Manufacturing Foresight project to examine the shape of manufacturing in 2050. As well as being a welcome recognition of the importance of the sector to a rebalanced economy, it also reminds us that whatever challenges we face this year, we will continue to have a manufacturing sector of which we can be proud.