As manufacturers look ahead to a year of uncertainty, there is much government and Whitehall can do to boost British business and allay some concerns. EEF CEO, Terry Sculler weighs in.
We did see examples of decisive action last year, when ministers from the Prime Minister down, rallied round to the crisis in the steel industry.
That work is ongoing and it is far from job done if we are to see a sustainable steel industry in the future.
It does show, however, what can be achieved when industry, government and employees work closely together, with common goals and a long-term strategy.
We need more of this kind of collaboration if our economy is to grow this year.
To paraphrase a certain US Defence Secretary, there are known unknowns and there are unknown unknowns in 2016. As a result, we see a muted outlook with business confidence subdued under the lingering cloud of risks across the global economy.
Many manufacturers are concerned about a slowdown in key markets and, in contrast to last year, our surveys show more companies are concerned about risks than opportunities in 2016.
We know that China is growing at a slower rate, while businesses that export goods are concerned about fluctuations in exchange rates and, in particular, the prospect of a stronger Sterling against the Euro.
Central banks will be taking divergent paths on interest rates, and it is unclear when the Bank of England will increase base rates and where Sterling will end up as a result.
There will also be a lot of talk about Britain’s future – or otherwise – as part of the EU. We don’t know as yet, however, when the crucial vote that will decide that question will take place or, what impact it will have on business confidence.
Equally it’s very uncertain what life outside the EU might mean for Britain and our economy. It is risky, uncharted territory and all these factors add up to a landscape of considerable uncertainty.
There are, however, upsides to consider in 2016. While some of this uncertainty will result in tough decisions for companies, many are once again being proactive about creating opportunities for growth.
Businesses – and manufacturers in particular – thrive on new investment and, despite the uncertainty are indicating they will be channelling more funds into innovation, technology and research and development.
This is in part buoyed by the Government’s welcome decision in the spending review to protect large areas of the science and innovation budgets.
Manufacturers are also actively seeking new market opportunities to offset the slowdowns in emerging markets such as China and Brazil.
Others are reviewing the supply chains within which they operate as they seek to open up new opportunities. So for every challenge there remains an opportunity.
But what business needs more than anything is some certainty and stability for the longterm when it comes to their costs, and the wider business infrastructure, whether it be access to high-speed broadband, or a decision on extra airport capacity in the South East.
It continues to defy belief that when business is being urged to improve its export performance we are being denied the extra capacity to help do this on the grounds of short-term political expediency.
Business is also concerned at being loaded with extra employment costs which simply add cost to the bottom line, and which add another layer of complexity and uncertainty.
These include the apprenticeship levy, the cost of gender pay reporting and pension changes.
At a time of great economic uncertainty these are burdens which businesses can ill afford and run counter to the ideology of a free market Conservative administration.
Companies are of course pragmatic and recognise that government has to govern. In doing so, however, it must be careful to consult and engage business in its planning to ensure British companies can remain competitive and innovative.
Make no mistake, 2016 will be a testing year and one in which government and business must show leadership.
