“No, you can't always get what you want. But if you try sometimes you find you get what you need”.
Seemingly wise words from the rubbery-lipped Rolling Stones frontman, Sir Mick Jagger – after all he was educated in Business at the London School of Economics and considered seriously becoming a journalist and politician before the exaggerated collars and crop tops.
But it’s probably safe to assume dear old Mick wasn’t thinking about the plight of the UK manufacturing sector when the band penned the lyrics to its 1969 single, You Can’t Always Get What You Want.
To that end, and ahead of the UK government’s Budget set to be announced on 11 March 2020, The Manufacturer has been speaking with a range of firms from various sectors about what they hope the Spring statement will mean for their industry.
It has been almost 18 months since the last Budget which was in October 2018 – so it could be argued that this imminent statement is a crucial one for UK manufacturing, particularly with the ever-shifting landscape set in motion by Brexit.
The Manufacturer surveyed firms involved in a broad range of capabilities for the aerospace, automotive, food and beverage, and pharmaceutical sectors, and including those delivering services and solutions across an array of manufacturing customers.
We posed two questions:
- What do manufacturers want from the March Budget?
- What do manufacturers need from the March Budget?
(The distinction perhaps being between idealism and practicality, for their purposes)
The Chancellor of the Exchequer, Sajid Javid, said in his March Budget preamble that his government will usher in a “decade of renewal”, unleash Britain’s potential, and signal a new chapter for the UK economy as Britain “seizes the opportunities that come from getting Brexit done”.
The government withdrew a 6 November Budget in October 2019 to make way for the general election.
As part of the March Budget, Mr Javid has also vowed to boost spending on vocational education – a seemingly positive step towards getting the UK’s future workforce properly equipped for the jobs our industry is building in the era of Industry 4.0.
“With this Budget we will unleash Britain’s potential – uniting our great country, opening a new chapter for our economy and ushering in a decade of renewal” – Sajid Javid
The Treasury Department has also said it will prioritise the environment, while pledging £100bn to fund an “infrastructure revolution” (for example, transport spending) over the next few years that will be “transformative for every part of our country”.
Big government investment projects that are typically biased to where “economic growth and high productivity are concentrated” could also be reviewed, according to the BBC.
Want vs Need – what UK firms are saying
Neil Clifton, Managing Director, Cube Precision Engineering
Cube Precision Engineering is a West Midlands-based specialist in single op prototype tooling and complex multi-stage tooling suites for the automotive, aerospace and commercial vehicle sectors.
What we want
“I suppose top of the wish list would be funding to help SMEs invest in new capital equipment as we strive for better productivity, something similar to the Regional Growth Fund could be reintroduced for example.
“If I was in power, I’d also extend the increase in Annual Investment Allowance (again incentivising firms to spend to improve), try to find a way to control escalating energy costs and a freeze on business rates until uncertainty eases.
“A continual frustration is the need for expensive packaging of components due to the poor condition of the road surfaces and potholes. We should certainly look to invest in our highways so that the goods we make are not damaged on the way to the end customer.”
What we need
“R&D is a big thing for our business and we need to make sure the government continues to support this area, as it is one of the best ways for the UK to compete with international rivals.
“Finding innovative ways to tackle the skills gap and making the Apprentice Levy easier to access would be beneficial.
“Manufacturing is also increasingly moving to the digital age of data transfer and modernising production techniques and, if we are to lead the world in this field, we need to ensure we have the IT infrastructure in place, including 5G technology.”
Rowan Crozier, Chief Executive Officer, Brandauer
Based in Birmingham, Brandauer is one of the largest contract precision stamping companies in Europe
What we want
“Industry lamented the government’s decision to axe the Manufacturing Advisory Service in 2016 and we would relish the introduction of a new support service that understood what SME manufacturers actually want and need.
“This would mean no red tape and stronger match-funded assistance, biased towards companies that are heavy on innovation and committed to developing new processes and products.
“We also need to have the ‘productivity versus jobs created’ conversation – often a common denominator for accessing government support.
“If we get more productive, we will be more competitive and naturally new jobs will be created. Currently, one conflicts with the other.”
What we need
“Quite simply, long-term certainty so that we can get on and try to continue to do what we do best. To this extent, I would urge government officials to secure a trade understanding with the EU long before the 31 December deadline.
“Capital investment grant support for productivity driven investments should be a core part of the government’s strategy and I would welcome building on the success of the R&D Tax Credits system, increasing the benefit/recovery for firms that are heavily investing.”
Tony Hague, Chief Executive Officer, PP Control & Automation
PP Control & Automation is a West Midlands-based leading strategic manufacturing outsourcing specialist operating more than 50 years.
It employs more than 200 staff and works with OEMs across a range of industries, including food processing, machine tooling, packaging, printing, security and energy to name a few.
What we want
“I think the main thing we all want is longer-term confidence that the government has now put aside all of the political uncertainty of ‘in’ or ‘out’.
“They then need to communicate a clear schedule of timings to businesses and convince us that a smooth transition out of the EU will be pursued and a renewed determination to get global trade agreements agreed will be adopted.”
What we need
“What we need is for the government to put sustained investment into supporting and promoting export (both inside and outside of the EU) for those UK SMEs who still export little and are not fully aware of the opportunities that exist out there. I’m talking about practical help and support that has longevity and not a short, ‘flavour of the month’ initiative that runs out of steam and money quickly.
“I would also like to champion a cross-party Industrial Strategy that would create a longer-term blueprint that reflects what we actually need and will withstand any political changes in Whitehall.
“The automotive sector also requires support (and incentives) to get consumers ‘buying again’ – too many people don’t know what to buy with the mixed messages on diesels (clean or not), petrol, hybrids or even full EVs.”
Adam Cunningham, Chief Executive Officer, Muller Holdings
Muller Holdings is a machining solutions and services firm headquartered in Kidderminster, with manufacturing sites across the UK, Wales and India. Its customers include automotive, defence, hydraulics, gas, electrical and healthcare companies.
Adam is also Chairman of the Manufacturing Assembly Network (MAN), a collective of eight sub-contract manufacturers and a specialist engineering design agency.
What we want
“Manufacturers don’t want handouts, but we do want a level playing field so we can compete in what is now a global economy.
“Leaving the EU could potentially restrict access to some very good funding programmes, so we need to ensure that the government at least matches what we’ve previously had to help with developing our people and processes, to innovate and to work smarter.
“When budgets are tight or the economy is in turmoil, the ability to tap into a little bit of financial support can go a long way to unlocking investment decisions and ensuring UK firms can strive for that competitive advantage.”
What we need
“Now that we’re no longer tied to certain legislation, maybe we could insist that UK SMEs must be awarded a certain percentage of work for large government-backed infrastructure projects like HS2. They certainly do this elsewhere in the world and the innovation that stems from smaller firms could probably help save them millions in the process.
“Finally, I would also look at how we help SMEs become more sustainable in their processes and business outlook. Maybe grant support towards implementing ISO14001 would be a decent starting point and a win-win in achieving improved corporate and environmental performance.”
Nimisha Raja, Founder of Nim’s Fruit & Veg Crisps
Sittingbourne-based Nim’s Fruit & Veg Crisps is the UK’s only air-dried fruit and vegetable crisp manufacturer.
Nimisha is a former café owner who started her business in her shed after she became frustrated with the lack of genuinely healthy and great tasting snacks she could offer the parents and children frequenting her coffee shop.
What we want
“As a company that exports significantly to more than 20 countries (some of which are in the EU), we desperately need communication from the government on what support they are going to provide to help with potential new regulations and procedures created by Brexit.
“Even if things go relatively smoothly, there will still be increased paperwork and new checks we’ll have to put in place, which is going to cost us money, money that could be better spent investing in new technology or marketing that will help us expand.
“There are also rumours doing the rounds that entrepreneur relief could be axed – this is another big worry, especially in terms of attracting future investment.”
What we need
“As it stands, we’re going to lose access to a lot of EU grants that are so crucial when setting up and expanding your business and this could really impinge on the UK’s ability to compete globally.
“There has to be some form of replacement, so it will be interesting to see what the government comes up with and how quickly it is implemented. You would like to think it will be seamless, as now, more than ever, we need to seize the moment and attack opportunities.”
Jo Davis, Managing Director, Broanmain Plastics
Founded more than 60 years ago, Broanmain is a specialist, family-owned, technical trade plastic moulder and SME based in Dorking.
Broanmain offers thermoplastic, thermosetting and injection moulding services to a range of industries, including aerospace, electronics, and defence, through to the science sectors and consumer goods, and supports customers with prototype development, tool trials, right through to high volume production runs.
“The uncertainty on tariffs is a real concern in relation to Brexit…as a small business we don’t have the same level of cash to flex”
Wage hikes and recruitment
“Chancellor Sajid Javid has announced he will increase the National Minimum Wage. While this is a good thing overall for employees in all sectors, for an SME like Broanmain that already pays the Real Living Wage, this can dilute one of our competitive edges in regard to attracting staff. Our margins are already stretched. If it becomes a necessity to increase our base wage further still, this will diminish our profits and stifle ongoing investment in our facilities. Recruitment is difficult at this level, particularly in the South East where sourcing experienced processing engineers is already challenging.
“If recruitment becomes too much of an issue – or too costly – we’d need to look towards robotics and automation solutions to perform certain production tasks. Again, there needs to be some sort of automation strategy and this type of investment needs incentivising. A robot tax has been mooted previously, but this in my view would dissuade adoption by many SMEs. My work with the British Plastics Federation skills committee reaffirms the importance of facilitating greater collaboration between businesses and educational institutions, particularly with regard to emerging technologies.
“The uncertainty on tariffs is a real concern in relation to Brexit. Although this would affect everyone in our industry, for SMEs especially there needs to be some sort of nod towards a more flexible arrangement and possibly a transition period in order to give us time to assess where we can allocate these rises from import duties.
“Although we’d be no worse off than any of our competitors, as a small business we don’t have the same level of cash to flex. Like many moulders, we import a lot of our plastics granules from Europe – mainly Poland, but also France and Germany. If tariffs for raw materials increase, we’d have to absorb this cost almost immediately, or source other suppliers. Inevitably this would mean raising prices, but as an SME, it would be impossible to instantly pass on these rises to customers without jeopardising existing contracts and relations.
“Personally, I’d like to see the government put some specific support in place to support SMEs when tariffs are implemented, or give us a transition period. This could take the form of a tax incentive for SMEs.
“Uncertainty over export duties doesn’t impact our business as much, but it will affect a lot of our customers who trade in Europe and beyond. There’s a great deal of competition between OEMs at the moment and if our customers have to pass on price increases to their customers, this again undermines their competitiveness.
Supporting British firms
“One thing that might help to support growth in the UK is a tax incentive for British companies to buy British. We also need to ensure that British start-ups continue to receive incentives, as many will become the backbone of our economy in the future and will have the agility to react more swiftly to future changes in legislation.
“One thing I don’t want to see removed is the R&D Tax Credit system. These credits enable SMEs to push the boundaries in product development and process improvements. For engineering firms especially, this is a very valuable tool which is often under utilised or misinterpreted as just being support for technology. However, the R&D credits support innovation at every level, which is what UK SME manufacturers need more than ever right now.”
A word from Mike Hawes, Chief Executive, SMMT
“Our industry needs the Budget to deliver competitive business conditions”
“2020 is a year of change, challenge and opportunity for UK automotive as it strives to stay ahead in the global technology race, while facing fundamental changes to how it trades with the world.
“To keep driving innovation, jobs and prosperity, our industry needs the Budget to deliver competitive business conditions.
“Long-term incentives to stimulate the market and boost uptake of new technologies, investment in infrastructure and supportive measures on taxation, business rates and energy costs, will all be essential to attracting investment and helping industry unlock its full potential.”
The EU-Canada deal
Prime Minister Boris Johnson will set out his vision later today for a Canada-style free trade agreement with the European Union, in which he is expected to say there is “no need” for the UK to adhere to Brussels’ rules.
Under the current deal between the EU and Canada, import charges on many goods are eliminated, but there are still checks on customs and VAT.
Johnson will use a speech in London later today to call for a similar free trade arrangement with the EU and to warn the UK will walk away if one cannot be struck.
Firms will have to ‘adjust’
Chancellor Javid has denied the government’s policy of “no alignment” with the European Union will impact the manufacturing industry.
His statement, given during a meeting earlier this month with EU finance ministers at the Economic and Financial Affairs Council, is a softer stance when compared to his comments given to the Financial Times just days before, in which he said manufacturing firms will just have to “adjust” when the UK diverges from EU regulations after Brexit, adding: “There will be an impact on business one way or the other, some will benefit, some won’t.”
His comments prompted the Society of Motor Manufacturers and Traders (SMMT) to say any disruption to the automotive industry’s complex cross-border dealings could cost “billions”.
The UK left the EU on 31 January, entering a transition period until the end of 2020, while both the UK and EU negotiate arrangements around business, travel and trade.