EEF blog

We’ve been saying quite a lot about the risk of policy errors at this point in the economic cycle recently.  There is still a wide range of views on whether the UK is or isn’t yet out of recession. But there does appear to be more agreement on a long and bumpy road to recovery and the need to ensure that stimulus measures remain in place until the economy can stand on its own two feet. 

So first up is the car scrappage scheme – announced in the Budget and came into effect in Mid-May.  At the current rate the cash should run out in the next month or so.  Over the summer new car registrations have picked up and manufacturing output in motor vehicles and other sectors supplying to car manufacturers has also turned a corner.  But can this trend continue in the rest of the year and into next without incentives provided jointly by government and industry. 

EEF and other manufacturing bodies reckon not.  So we’ve written to the Chancellor calling for the scheme to be extended until February next year.  Our argument – as outlined in the letter goes like this;

‘Although the current climate has stabilised, output levels are still below pre-recession levels. Wary about the prospect of a sustained recovery and ongoing concerns about access to credit and cashflow means investment intentions remain low.  Consequently any relapse in auto industry output, coupled with the expected deterioration of the UK aerospace and defence industry in 2010, could pull manufacturing and the economy back into recession in the New Year’  

Rumours suggest that we might have won this argument.

A couple of surveys from EEF this year have show that the reduction and withdrawal of credit insurance has been a major problem for a majority of manufacturers.  We lobbied hard in advance of the Budget in April and HM Treasury listened and put in place a government backed top up scheme for companies that had had cover reduced. 

Take up of the initial scheme was low, so again government listened, and the eligibility criteria for the scheme were backdated from April 2009 to October 2008.  Further changes to the scheme have been announced today.  

• The price of the top-up cover will be cut from 2% to 1%.
• The £20,000 lower limit on cover will be removed.
• The upper limit on top-up cover will be doubled to £2 million. 

No corresponding increase in the money available for the scheme has been announced - but as we said last time the £5bn announcement was more headline grabber than assessment of need.  Any further expansion of the scheme that helps manufacturers is obviously a good thing, given some of the risks associated with a reduction in cover.  It should provide some breathing space for companies starting to see a trickle of orders come through.  But those that have seen a complete withdrawal of credit insurance will still be stuck.

The government has tried to get this off the ground and increase uptake, now we need to see similar moves for companies facing problems with credit insurance on exports. 

The Times Education Supplement has the news today that Lord Mandelson is considering giving Regional Development Agencies responsibility for drawing up skills strategies, which would then be implemented by the new Skills Funding Agency (SFA). 

Our Head of Economic Policy Lee Hopley has responded to the report here. Many manufacturers, and employers as a whole, will despair at yet another structural reorganisation in a system already in need of stability and simplification.  Such changes are happening with increasing frequency, it seems: the Learning and Skills Council is being abolished after less than ten years; the Department for Innovation, Universities and Skills lasted less than two; and now the Skills Funding Agency is being reformed before it has even been formed in the first place. 

Nevertheless, the debate over whether skills policy and funding should be set on a regional or sector-specific basis is one worth having.  It has always been our view that it makes more sense to look at specific sectors of industry, rather than on regional geography. 

There may be some areas of manufacturing that are defined principally by their region (cheese-making, perhaps?) - but is there a peculiarly North Eastern way of welding an aeroplane fuselage?  Probably not.  British companies operating in the same sector will have similar skills needs, regardless of where in the UK they are based – the ‘what’ is more important than the ‘where’.

Lord Mandelson’s intervention looks set to spark renewed debate on this issue, and we can expect some interesting responses from Sector Skills Councils, which would be the main losers under the proposed scheme.  By all means let's have that debate - but let's make sure that whatever the outcome, the system stands at least some chance of surviving an election and being fit for purpose for more than a couple of years.

The government has announced today that business will now be able to access free online information about a much greater range of public sector contracts.

These can be accessed through the Government's website - www.supply2.gov.uk. 

Previously this service was charged for. Most of these contract opportunities are worth less than £100,000 and are generally aimed at SMEs. 

Despite the recession moderating, getting finance is still difficult for many businesses.

We are always keen to hear from firms about these problems and to take them up with government if appropriate. But from today, business can also access help directly.

The government has set up a new Financial Intermediary Service in each RDA region.  This can be accessed by calling 0845 600 9 006 or through the Business Link website (businesslink.gov.uk). 

The Business Link advisers will work with banks and businesses to resolve problems and will also provide free support and guidance.

I know the FT has a small circulation, so here's a joint letter from EEF, CBI, IoD, FSB and BCC on the value to employers of agency workers:

Sir, Today (July 31) the government's consultation on implementation of the agency workers directive closes. When deciding on the detail of the new regulations, it is vital that ministers choose an approach that does not jeopardise the future of temporary work in the UK.

We agree that agency workers should be properly rewarded, but it is also important that agency jobs are not lost because of ill-considered regulations. On this basis we make the following points to the government.

Under no circumstances should there be a requirement to establish equal treatment on the basis of a "hypothetical comparator". This would be extremely complicated to understand, particularly for small companies. Equal pay for agency workers must mean equality in terms of basic pay only. Many bonus schemes are complex and often relate to company performance, and most are calculated retrospectively. Any requirement to include bonuses would create huge administrative problems for employers.

And finally, implementation must not take place before autumn 2011, the latest date required by the directive. Whatever the government's approach to implementation, the directive is likely to reduce the appeal of hiring agency workers. With high levels of unemployment for the foreseeable future, it would be a terrible mistake to impose new regulations any earlier than necessary.

By following these points the government can avoid unnecessarily damaging the temporary work sector.

Neil Carberry,

Head of Employment Policy, CBI

Alistair Tebbit,

Head of Employment Policy, Institute of Directors

Adam Marshall,

Director of Policy, British Chambers of Commerce

Ben Burgher,

Chair of Employment Policy, Federation of Small Businesses

David Yeandle,

Head of Employment Policy, EEF

The  government has finally realised that manufacturing has a critical role to play in building a better economy. But much of the government's recent support for the sector seems to mistake activity for activism.

You can see that in today’s announcements on Advanced Manufacturing. The £150m in support is nothing to blink at, but the lack the long-term strategic direction is disappointing.

What's more worrying is that continues a streak of short-termist, headline grabbing initiatives that, in total, does not provide industry the long-term certainty it needs about policy and funding priorities.

This package of measures exposes fundamental flaws in government approach to achieving this. Rather than concentrating scarce resources in areas that can make a real difference, today’s announcement continues the trait of smaller short term measures with no strategic targeting.

This scattergun approach is in danger of missing the mark and fails to put the government’s activist ambitions into practice.

Most manufacturers will struggle to see the bigger picture out of today’s announcement about the kind of industrial sector we want in the future.

If you're looking for ways to cut costs, why not sign up to one of our environmental performance seminars.  

Working with British Gas Business (BGB), EEF will be hosting five half day briefing and networking lunches, with experts from both BGB and EEF available to give advice to companies.

These half day conferences will provide companies with an insight to the low carbon innovation agenda in the UK with the regional impacts explained, and will then look in depth at the strategic tools to reduce costs through minimising the environmental impact of manufacturing operations and supply chain.

In particular there will be information on how manufacturers can cut costs by:

• reducing raw material use
• saving energy
• reducing waste
• developing and implementing an environmental strategy using an Environmental Management System and lean manufacturing

1. Chorley - 29th September,
2. Leamington - Spa 1st October,
3. Bristol - 8th October
4. Sheffield -  14th October
5. London - 20th October