Budget 2016: UK manufacturing has to be a paramount priority

Terry Scuoler, EEF CEO, outlines his expectations for the forthcoming budget in a hope to bolster the future of UK manufacturing.

Great Britain is proud of its manufacturing prowess and our sector forms an essential part of a balanced economy.

Terry Scuoler, CEO, EEF
Terry Scuoler, CEO, EEF.

As we approach the Budget, it is critical that all parts of government work together to support a competitive, innovative and growing industrial sector, at home and abroad.

The global headwinds faced by companies in 2015 – the collapse in the oil price, sluggish demand in Europe, and volatility in emerging markets, particularly China – continue to be a cause for concern.

Many of the risks we face this year stem from challenges in the global economy. However, our latest Executive Survey which we published at the start of the year indicates that companies are also increasingly concerned about the creeping onslaught of taxes and policy decisions which create added cost burdens at home.

When taken together, a potentially damaging combination of new policy announcements signal a significant rise in the cost of doing business in the UK for many employers.

While the lowering headline rate of corporation tax is welcome, announcements including the national living wage, the apprenticeship levy, a further skills tax on employers recruiting employees from outside the EU and the potential loss of tax relief on occupational pension contributions all add to manufacturers’ concerns.

This, in part, has led to a decline in the proportion of companies that believe the UK will be a competitive location for manufacturing activities in 2016.

We are therefore calling in our submission for a better-balanced and more considered approach to some of these measures.

And it is why we believe there is a requirement for a high-level industrial strategy to sit at the heart of ongoing fiscal and other decision-making.

One of the great successes of the coalition government was the establishment in all but name of an industrial strategy. The absence of a clear long-term strategy for industry, however, is now a gap in the current administration’s business armoury.

Added to this, concerns over energy security and question marks about the long-term viability of our energy infrastructure all add to doubts about a strategic approach to building a strong foundation for manufacturing in the decades ahead.

The steel industry’s difficulties in 2015 have not come about in the space of months or a few years. They are the result of a series of ill-advised decisions on energy and as a result of a lack of investment, which in itself is often the result of higher costs and the creation of an uncompetitive playing field.

Blast furnace number five at Tata Steel's Port Talbot works.
The steel industry’s difficulties in 2015 have not come about in the space of months or a few years.

The added ingredient of unfair competition from products dumped on the market has created a perfect storm which threatens the existence of steel-making in Britain.

This should act as a bellwether and an incentive to ensure the right foundations are put in place to support manufacturers as part of a commitment to rebalance the economy.

I believe the Chancellor has three priorities in the forthcoming Budget.

Firstly he must signal that the current increases in business costs are not going to become the thin edge of a much thicker wedge.

He should also set out a tax reform agenda that sets the UK  on course to deliver a more cost competitive tax system for industry that is better aligned with further investments in technology over this parliament, while ensuring policies currently being implemented support industrial competitiveness.

Finally he must set out further action to lay the foundations to tackle an issue that has dogged the British economy for decades, higher productivity.