Intelligence Briefing - 19 November 2010

Published: 19/11/2010

IN THIS ISSUE

Terry Scouler meets Business Minister on Manufacturing Framework | EEF twitter debate on currency wars flags up risks for UK manufacturers | Help us capture the Spirit of Manufacturing | Weekly Focus - update on the Carbon Reduction Commitment | In the news | Week in review | The week ahead

Terry Scouler meets Business Minister on Manufacturing Framework

With the government’s attention now focused on growth, Terry Scuoler, EEF’s Chief Executive, and EEF’s economics team met with the Business Secretary Mark Prisk to set out what manufacturers are looking for from the forthcoming Manufacturing Framework. The latter is essentially a reboot of the last government’s Manufacturing Strategy.

Against a back drop of a sector rebounding strongly from the recession, Terry Scuoler urged the Minister to adopt a strategy for manufacturing that reflects the sector’s strengths and removed barriers to growth. EEF highlighted four particular areas, including skills shortages, the rising regulatory burden, a less competitive tax regime and difficulties in access finance.

For further information contact Steven Coventry, Senior External Affairs Adviser

EEF twitter debate on currency wars flags up risks for UK manufacturers

With the US and China trying to keep their currencies low to boost exports, competitive devaluations – the so called currency wars – could destabilise global trade. The G-20 meetings last week failed, however, to resolve rising tensions. But do UK manufacturers had anything to fear from a currency war between the US, China and now countries like Brazil, South Korea, India and Indonesia? To answer this question, EEF held a discussion on Twitter, with online panellists including Jeremy Cook, the Chief Economist at World First, and Jeff Peel, Managing Consultant at Oxford Economics.

The panellists questioned the underlying motives of the US and China and wondered whether the UK government or the Bank of England would be able to minimise exchange rate volatility. Ultimately, the view was that if tensions rose, China held all the cards: their investments in the supply of commodities and rare earth materials were the ace up their sleeve in any stand-off with the US. The message for manufacturers was to get ready for a bumpy, yet rising pound, and higher commodity prices. The debate was picked up by the City Diary in the Daily Telegraph.

Help us capture the Spirit of Manufacturing

Anyone who works in or with our sector knows that the modern manufacturing workplace has often changed dramatically from the days of smoke-stacks and flying sparks. But the public perception of manufacturing has not kept up with the high-tech, highly-skilled reality.

EEF wants to challenge this perception and as part of this we are running a photography competition to create a national showcase of brand new imagery that reflects the real face of our industry – the inspiration and perspiration that captures the true spirit of manufacturing. This is also being supported by the government, with the Department for Business, for example, agreeing to publicise the images in its London office and beyond.

The competition is free and open to everyone and you can find out more here. You can also help this by highlighting the campaign to your employees, customers and suppliers and we can provide publicity material to do so.

EEF calls for fairness and transparency under EU ETS rules

Ahead of a crucial European vote on Free allocation under the EU Emissions Trading Scheme, we met DECC this week to outline our concerns around the issue of carbon permits. We told Officials that rules on free allocation, verification and costs must ensure UK manufacturers are not disadvantaged against both EU and global competitors and for more transparency in the decision making process.

For more information contact Gareth Stace, Head of Climate & Environment Policy


 

Weekly Focus - update on the Carbon Reduction Commitment

In amongst all the talk of cuts, the recent government Spending Review announced a less-heralded change which will have a direct cost implication for many manufacturers.

Without any prior warning the Government announced that revenues raised from the CRC Energy Efficiency Scheme, will now be retained by the Exchequer, instead of recycled to the participants as originally intended. The Treasury has estimated that this will cost the affected businesses around £1bn.

EEF was extremely disappointed with this decision, both in terms of its potential impact on members and the way in which it has been made without consultation. Earlier this month we and a number of other trade bodies wrote to the Government to outline our concerns and we will be meeting with Treasury officials to see if there is anyway that the impact can be mitigated and lessons can be learned ahead of a forthcoming consultation on the Climate Change Levy and Climate Change Agreements.

Responding to at least some of industry’s concerns, the government has announced a consultation which aimed at simplifying the scheme. The main focus of the document seeks views on two aspects of the scheme.

“To extend the introductory phase, postpone the start of phase two, and subsequent phases, and align the treatment of footprint years.”

This proposal gives government parliamentary time to make substantial changes to the scheme for phase II (2014). The allowance sale for phase I still remains.

“To remove the requirement for organisations who are not required to register as participants to make information disclosures.”

This is a welcome proposal, as many EEF members spent considerable time and money proving to the Environment Agency that their organisation was not part of the scheme. We have previously said to government that this part of CRC was extremely burdensome.

We will be responding to the consultation, which closes on 17 December and if you have any views let us know.

However, while we welcome efforts to make this easier for companies to comply with, we still believe that in the long-run more radical change is needed and we remain deeply concerned on the revenue raid on companies that was carried out in the Spending Review.


In the news

The spate of recent government announcements continued with the launch of its Skills Strategy this week where our views on whether it was truly radical enough were reported in the FT, Personnel Today and People Management. The Daily Telegraph remarked on EEF's 'Manufacturing Clout' in a profile piece on the CBI's new Director General, whilst our editorial partnership with The Manufacturer was reflected in a regional focus in the latest issue on the North East.


 

Week in Review

CPI

CPI annual inflation moved back up to 3.2% in October. The most significant upward pressures on inflation between September and October were from recreation and culture, and transport, in particular the costs of fuel and lubricants. There were also some downwards pressures with prices for furniture, household equipment and maintenance as well as clothing and footwear falling over the month.

Labour Market Statistics

The ILO measure of unemployment fell by 9,000 over the quarter to 2.45 million. The three-month unemployment rate is now 7.7%. The claimant count measure of unemployment – which records the number of people claiming Job Seekers’ Allowance – fell by 3,700 to 1.47 million, the claimant count rate remains at 4.5%, following a slight rise last month. Despite the rise, there are 162,400 fewer claimants than at this point last year.

EEF’s Pay Settlements

The three-month average pay settlement was 1.8% in October, up a little from 1.7% in September. The proportion of pay deals between 0.0% and 2.0% fell to 28.9% in the three months to October from 42.7% the month before. Conversely, the proportion of pay deals between 2.0% and 3.0% rose from 26.8% to 31.7% in October, though still below the figure of 33.3% seen in August. The monthly average pay settlement rose to 2.3% in October, compared with a revised figure of 1.5% in September.

Public Sector Finances

The current budget (excluding financial interventions) showed a deficit of £7.1 billion in October 2010, compared with a deficit of £6.9 billion in October 2009. Public sector net debt (excluding financial interventions) was £845.8bn (57.1% GDP) at the end of October 2010 compared with £694.7bn (49.3%) as at the end of October 2009.

Retail Sales

Although sales volumes in the three months August to October increased by 0.1%, compared with the previous three months, year on year, the volume of retail sales in October was 0.1% lower than in October 2009.


 

The week ahead

Wed 24th: Index of Services; GDP(q3) ; Business Investment


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