Intelligence Briefing - 28 May 2010

Published: 28/05/2010

EEF's weekly briefing on the issues affecting manufacturers including our regular round up of how we are representing manufacturers and the latest economic indicators.

Business Secretary Vince Cable briefed by EEF on manufacturers’ priorities

An early call from new Business Secretary Vince Cable MP was followed by a meeting between EEF, with new business minister Mark Prisk MP also present. The meeting, which took place on Monday, just a few days after allocation of portfolios and the same day as spending cut announcements were made focused how we want to work with them to help to rebalance our economy and to generate the economic growth we need to pay down the deficit. The Business Secretary praised EEF’s foresight in not supporting the political campaign against increases in National Insurance Contributions. We also discussed how they can support manufacturing within the Business Department and how we want them to promote the interests of business across government on issues such as deficit reduction, tax reform, energy supply and better regulation.

For more information contact Steve Radley, Director of Policy and External Affairs

EEF hears from Prime Minister on future of the economy

Along with selected guests, EEF attended an event with the Prime Minister, David Cameron MP, and Business Secretary, Vince Cable MP. The event, in West Yorkshire was an opportunity to discuss how business and Government can work together to deliver growth in the economy and ensure that the UK has got the right infrastructure in place to build a more balanced economy.

EEF welcomed the speech its recognition of stronger role for manufacturing. From now on EEF believes the policy framework must work hand in hand with the efforts of the private sector to deliver a competitive, high skill manufacturing base.

For more information contact Mark Swift, Media Relations Manager

High-level discussion with UKTI Asia Task Force leads to opportunity for EEF members

Following a meeting between EEF and the UKTI led Asia Task Force to discuss the recovery of Asia’s economies an invitation has been extended to EEF members for events on Doing Business in Asia. The two events on 8th July in London and 9th July in Manchester will be an opportunity to meet senior representatives from across Asia and opportunities for UK business.

For more details go to

Weekly Focus

Queen outlines plans for Parliament

Despite mostly being leaked in the papers over the weekend, the Queen’s Speech and official opening of Parliament was as high-profile and interesting as ever. The purpose of the speech is to outline Bills the Queen’s government want to progress in the coming year – and the speech did just this – with several of the 24 bills announced being of significance for UK manufacturing and wider business.

The speech was the day after £6 billion of spending cuts were announced so unsurprisingly the Queen confirmed that reducing the deficit and restoring economic growth was the Government's first priority. Under a Financial Reform Bill, the Bank of England will be given responsibility for preventing a repeat of the financial crisis and an Office for Budget Responsibility Bill was included too. This office will provide independent economic forecasts to inform government policy, more detail on its role is expected soon. The most important milestone ahead for manufacturers is certain to be the emergency budget on 22 June and then the Spending Review later this year.

Also included in the speech was a Energy Security and Green Economy Bill, which EEF hopes will deliver on the critical issues of energy security and climate change. The proposed Bill must deliver reforms to strengthen the UK's often fragile security of energy supply, while measures to promote energy efficiency should be aimed at both consumers and business so that all sectors of the economy share the burden of reducing emissions.

Flexible working and the default retirement age were mentioned in the speech, with a Pensions and Savings Bill which will restore the link between earnings and the state pension from 2012. It will also likely legislate for the phasing out of the default retirement age and set a timetable for raising the state pension age. This will be dependent on the outcome of a review. Industry recognises that the state pension age may now have to be raised more quickly than previously planned to help address the public sector deficit. However, call for it to be done gradually and in a way that allows those close to retirement sufficient time to make the necessary preparations. This autumn there will also be a consultation on extensive of rights for flexible working.

On the Welfare Reform Bill EEF agreed that it should be a fundamental principle of any modern society to reduce the number of people who reply on state benefits and welfare reform must have this aim as a central plank. However, employers must not be expected to shoulder all the burden for getting people off benefits and must be given support to provide work opportunities, especially for those who have been out of the labour market for some time.

Other bills focused on decentralisation and shifting power back to a local level, this will include changes to, for example, the Infrastructure Planning Commission, which was set up in 2009 by the Labour government and will change how and where planning decisions can be made.

In the news

The Queens Speech, the government's plans to cut the deficit and the latest economic data have dominated the news agenda this week. Our views on plans to reduce the deficit were reported in the FT, with specific comments on investment in energy and cuts to STEM subjects. Comments on the Queens Speech were reported in the FT and Daily Telegraph, the latter with particular reference to the Default Retirement Age which were also covered in the trade magazines, Personnel Today, People Management and Professional Pensions. On other topics, views on the latest economic data were covered in The Observer and The Independent whilst our response to the EU's decision to delay an increase in the emissions target was reported in the FT. Separately the latest opinion column by our Director of Policy, Steve Radley appeared in The Manufacturer.


Economic Data Review

Week in Review

Index of services

In Q1 annualised inflation for services producer prices rose by 0.8%, compared with a fall of 0.5% in Q4 2009. Upwards impacts were most strongly felt on the prices of advertising placements, freight forwarding and maintenance of motor vehicles. There were some downwards pressures, for example from property rentals and construction plant hire.


Figures for Q1 GDP were revised upwards to 0.3%, partly due to the strength of business investment over the quarter; and the growth of production output, within which manufacturing grew by 1.2%. Consumer spending remains weak, with household expenditure unchanged on Q4 2009.

OECD Economic Outlook

The OECD revised its forecasts upwards for output growth in 2010, to 2.75% across the OECD countries. However, significant downside risks were noted including: strong growth outside the OECD forcing up commodity prices; concerns over the sustainability of public debt leading to rising risk premiums; and inflation expectations rising. Given rising inflation expectations in the UK the OECD recommended a policy of beginning to normalise interest rates by the end of 2010.

CBI Quarterly Distributive Trades Survey

The balance of retailers who saw sales volumes rising fell to -18%, compared with last month’s considerably more positive figure of 13. The largest falls were seen amongst chemists and household goods, though clothing sales were also down. Expectations for the next month are also negative, with a balance of -15% expecting another fall. Poor weather and slowing momentum in the housing market were suggested as reasons for the worse-than-expected results.

GfK Consumer Confidence

Consumer confidence levels fell for the third month in a row in May to a balance of -18. However, this remains above the pre-recession lows for consumer confidence and may not reflect the results of the General Election given the survey period. Consumers were particularly worried about their financial situation and the “general economy” in the next 12 months.

The week ahead

Tue 1st: PMI Manufacturing

Wed 2nd: PMI Construction; REC Report on Jobs; BoE Lending to Individuals

Thur 3rd: PMI Services

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