This year has seen seismic change in the political landscape in the UK and across Europe, with potentially yet more to come with the US election next month. It is against this backdrop that we will see a first Budget by a Labour Chancellor in 14 years.
The current economic scenario the Chancellor faces is challenging to say the least, with growth in both manufacturing and the wider economy anaemic at best. Yet with these changes comes substantial opportunities for manufacturers who will be at the forefront of boosting growth and tackling the societal challenges such as climate change, an ageing population and the need for clean energy and transport. So, what should be the key priorities in the Budget for manufacturers?
Firstly, a key part to unlocking growth is having an industrial strategy which works across industry to prioritise the UK’s place as a leader in the fourth and fifth industrial revolution. Manufacturing must be a key part of that strategy, as it is fundamental to local and national growth and higher wages. On the face of it, Invest 2035: the UK’s Modern Industrial Strategy green paper commits to this aim and Make UK will be at the heart of designing and building such a strategy. This has already begun with the announcement that Clare Barclay, CEO of Microsoft UK, will chair the new Industrial Strategy Advisory Council, unveiled at the same time as the government’s Industrial Strategy, as well as the inclusion of advanced manufacturing in said strategy.
Secondly, the Budget must include an urgent review and uplift of the apprenticeship funding band. The cost of running a level 3 apprenticeship in engineering and manufacturing is approximately £36,000 a year (and that’s not including capital equipment or salary costs).
However, the gap between that cost and the £27,000 funding cap means that it is rarely economical for providers to run these courses, leading to many of them leaving the market. We believe that this has played a major part in the 42% drop in apprenticeship starts which our sector has seen since the introduction of the apprenticeship levy seven years ago.
Third, Make UK supports the introduction of a UK Carbon Border Adjustment Mechanism (CBAM), which will seek to level the cost of carbon for imported in scope materials. However, delaying the introduction of the UK CBAM to 2027, a year later than the EU CBAM, will introduce additional risks of trade diversion for some materials.
This is the current policy, rolled over from the previous government. High emission steel, cement and aluminium should be brought forward to 2026, which would avoid exporting countries diverting their high emission products to the UK, which would damage the UK domestic production and cause deindustrialisation.
Finally, there is an urgent need bring forward substantial investment in major UK infrastructure projects. According to Make UK research, three quarters of companies rate major road networks as significant or very significant for supply chain management. However, this investment must not just be limited to major road networks as there is an urgent need to upgrade the national rail network to free up extra capacity on the roads.
Beyond these immediate priorities there are also other essential requirements for manufacturers, including maintaining the current full expensing scheme, expanding tax relief on occupational health services and reforming the electricity market. However, industry is realistic to know that the new government faces many issues in its inbox and has to face difficult choices given the strain on the public finances. However, it has identified that the only way out of this political maze is by boosting growth. As far as industry is concerned, this requires a cross government effort of which manufacturing is also willing to put its shoulder to the wheel.
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