Weekly briefing - 3 October

Pre-Budget and Interest Rates

We have urged government and the Bank of England to mount a twin approach to tackling the current economic turmoil beginning with a cut in interest rates this week followed by a positive pre-budget statement. On interest rates we believe that with inflation about to peak the more pressing need is to start cutting rates to boost confidence and a wait and see approach is no longer acceptable. With regard to the pre-budget statement we have urged government to implement some short term, targeted measures to help companies through the current situation. These include reversing the planned increase in small firms corporation tax and then freezing at 20% until 2010, postponing increases in a number of indirect taxes including the climate change levy, delaying the introduction of new employment legislation and temporary support for investment by raising the annual investment allowance.

We have made our annual submission to the Low Pay Commission's consultation on the National Minimum Wage. Previously we have believed this has had little direct impact on manufacturers, although recently there has been more of an impact on differentials and remuneration structures because of the level of increases. In addition, there has always been an indirect impact on manufacturers through the cost of outsourced services. In the current economic climate, we have urged the Commission to be cautious when recommending an increase in the NMW and re-iterated our call for the introduction of a pre-determined formula based on movements in basic rates of pay which we believe would give employers more certainty with regard to planning.

EEF was one of 5 UK organisations invited to give expert opinion on EU proposals on musculoskeletal disorders (MSDs) at work. MSDs, including back pain and upper limb disorders are the most common work-related illness and affect 1 million UK workers each year. The EC is considering options to reduce MSDs, including a new EU health and safety Directive. At the meeting we supported the need for non-binding activities to promote more effective management of the risks, but strongly opposed the option of a new ‘simplifying’ directive that would replace three existing Directives. We made clear that it would be simplification in name only as it would not just keep the existing requirements bu add more to them. A changeover would also result in very substantial administrative burdens. We were joined by other participants in expressing concern that options were being assessed before they had been properly defined, let alone subject to a proper impact assessment. We will be raising the issue with the Secretary of State next week and have already discussed joint campaigning with colleagues in Business Europe.

We were asked to contribute to a number of broadcast interviews this week on the state of the economy and its impact on manufacturing, as well as a debate about whether the UK is too dependent on financial services. Interviews were given to Channel 4 and Radio 5 live, whilst our Senior Economist took part in a debate on Radio 4’s ‘You and Yours’ with an economist and the Economics Editor of the Mail on Sunday. We also commented on the impact on our sector in a piece in The Times.