Intelligence Briefing - 3 December 2010

EEF quizzed by Select Committee

EEF’s Chief Economist, Lee Hopley, gave oral evidence to the Business Innovation and Skills Select Committee, which is currently conducting an enquiry into government assistance to industry. The committee were particularly interested in manufacturers experience in accessing finance, overcoming barriers to exporting and views on forthcoming tax changes. We again pressed the need for action to improve relations between banks and business, especially providing greater transparency around lending principles and also the need to ensure that government schemes are working effectively.

Read our regular Weekly Focus (below) for more on this issue.

Secretary of State for Business briefs business on Growth Review

EEF was among the Business organisations briefed by Vince Cable on the government’s Growth Review. It will work with the private sector, initially on six policy themes and six sectors, Advanced Manufacturing being one, to identify the barriers to growth and ensure that all government departments are working together to support growth. We welcomed this new, more joined up approach from government, but expect the process to deliver concrete action plans. EEF will be involved in review projects between now and the Budget in March.

Building links with the new Shadow Cabinet

The Labour Party in Opposition must not forget the importance of business and manufacturing in particular: that was our key message this week when we met with John Denham MP, for the first time since his recent appointment as Shadow Business Secretary. Other issues on the agenda included the Government’s localism agenda and the Labour Party’s future attitude to employment legislation, where we urged the Party in Opposition not to make pledges which would undermine the UK’s flexible labour market. As recently set out by their new leader, Ed Miliband, the Labour Party is embarking on a major policy review and EEF was encouraged by Mr Denham to contribute views to the relevant areas.

Helping the Treasury understand the practical impact of tax changes

On Monday, the government launched a road map for corporate tax reform over the next five years. As part of the road map, HM Treasury launched consultations on changes to how it will tax foreign profits and intellectual property, and on potential changes to the R&D tax credit. On Tuesday, EEF’s tax policy team accompanied the HM Treasury officials responsible for the R&D tax credit consultation on a tour of Bowers & Wilkens, a Worthing-based member designing high-end audio systems. As part of the visit, the officials were shown the intricate links between B&W’s specialist R&D facility and its production activity. EEF and B&W stressed the fact that the modern innovation process involves development cycles that stretch across any artificial distinctions between research and production made by the tax system. Working with our Tax Policy Committee, EEF will respond to the government’s consultation on reforming the R&D tax credit and would like to hear members’ experiences in claiming the credit, as well as their views on how to make it more valuable for members.

For further information, contact Jeegar Kakkad, senior economist

Weekly focus – Update on EEF’s lobbying on access to finance

Access to finance remains a key concern for our members looking to expand and grow their businesses. Our latest credit conditions survey results for Quarter 4 2010 do indicate a reduction in the proportion of companies seeking finance reporting an increase in the cost of credit, an improvement on recent quarters since the financial crisis. However, there are still not substantial numbers reporting a fall in the cost of credit.

The government has recognised that problems accessing finance are an important barrier to growth. It recently produced a Green Paper, which EEF responded to, outlining how it sees the issue and suggesting possible avenues for government action. Since submissions closed in September, a group of the major banks in the UK has published a report listing commitments they will make to improve access to finance for businesses. The government has also published a response to the submissions to its Green Paper.

Our Access to Finance update covers announcements from the government and the banks, EEF’s actions feeding into these, and next steps. The debate on action to improve access to finance is ongoing and if members have views they would like to feed in either on problems they have or potential solutions please email Andrew Johnson, Senior Economist at ALJohnson@eef.org.uk or phone 020 7654 1539.

In the news

Economic news has dominated the agenda this week. Our access to credit survey was reported in the Daily Telegraph, Independent and Guardian, whilst our recent Shape of British Industry report was the subject of a major feature in the Evening Standard. Our response to the latest PMI figures was reported by The Guardian whilst Steve Radley, our Policy Director and Lee Hopley, Chief Economist gave interviews for Radio 5 Drivetime, BBC Business News and the Today programme respectively. We are also taking the opportunity to ramp up our messages on energy and climate change policy and our message on the need for simplification was reported in the Financial Times.

Week in review

	Lending to individuals	Total lending to individuals increased by £1.3 billion (0.1%) in October. Within the total, lending secured on dwellings rose £1.0 billion in October, compared to a £0.2 billion increase in September. Consumer credit rose £0.3 billion in October, after a £0.1 billion increase in September.
	Manufacturing PMI	The manufacturing PMI rose to 58.0 in November, marking a sixteen year high, and well above the long-term average of the series, which is 51.2. Strong activity rates fed through to a record-high employment index of 57.9.
	Services PMI	The Services business activity index was 53.0 in November, slightly down from 53.2 in October. The figure is above the 50.0 no-change mark, and suggests that growth has now continued for nineteen months, however, the pace of expansion is below the survey average.

The week ahead

Wed 1st: Manufacturing PMI

Fri 3rd: Services PMI

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