On Monday EEF released its submission to the government in advance of November’s Autumn Statement from the Chancellor. Below is a short summary of what we said, which we’ll go into more detail on over the next week.
Manufacturing has performed strongly since the recession
Latest revisions to ONS data suggest that manufacturing has grown by 7.5% since 2009q4. This compares with an expansion of only 2.8% in the wider economy since 2009q3.
The sector is at the heart of the rebalanced economy we need
The economy needs more investment, innovation, and exporting. Manufacturing accounts for over half of UK total exports. In 2008 manufacturing accounted for 71% of UK business R&D investment.
We support the government getting a grip on the public finances…
We agree that a credible fiscal plan was the number one priority following the election. Maintaining fiscal credibility continues to be an important part of providing economic stability to the UK and helping keep interest rates lower for longer.
…even as the external economic environment has deteriorated
Necessary fiscal consolidation has meant manufacturers have been looking to external demand to support their growth. But macroeconomic turbulence has increased over 2011 in key external markets leading to weaker growth prospects from these markets, notably Europe but also the U.S.
Manufacturers are still busy but bad press from key markets is denting recruitment and investment
EEF’s own survey data and discussions with companies suggest output and orders are holding up. But the bad news and mounting uncertainty from key markets is making companies nervous – and future-looking business decisions are now being impacted with firms pulling back on investment and recruitment.
Systemic policy reform no longer seems enough given the uncertainty
Since Budget 2010 we’ve been urging the government to take a more urgent and focused approach on policy reform to support growth. We continue to call for a focus on tackling the most important barriers to growth in tax, regulation, skills, and access to finance. However this is no longer enough to support growth in the short-term.
Government should support investment now via enhanced capital allowances
The weak outlook for demand means we now call for the government to take short term action to boost investment. We propose a temporary two-year regime of 100% capital allowances, providing a major cashflow incentive for firms to action investment and offsetting the weak demand environment.
These recommendations reflect our urgency on boosting growth…
Our recommendations are consistent with our views that a more competitive business environment is a priority for growth in the medium term but that short term concerns on external demand require more urgent action.
…while retaining a commitment to fiscal credibility.
Fiscal credibility will only be maintained if the private sector can deliver sustainable growth. Our proposals focus on improving growth. Further, our major temporary recommendation on capital allowances is a measure, which – though it has a short-term fiscal cost – will over time pay for itself to the Exchequer.