Pre-budget statement must help business fight the fire not fuel the flames say manufacturers

Leaders of Britain's manufacturing sector have urged the Chancellor to support the improving economic position and boost vitally needed investment by addressing five key priorities in the forthcoming pre-budget statement.
Choosing the other route and adding to manufacturers' costs at this time will further delay the much-needed return to investment EEF, the manufacturers' organisation, has warned.

Speaking on behalf of 20 organisations from across manufacturing who jointly signed the submission, EEF Director General, Martin Temple, said:

"If manufacturing is to take full advantage of improved economic conditions and make the investments necessary to improve competitiveness, it is vital companies are spared any further rises in costs and that current ones are addressed. By supporting investment in innovation and skills, the government is helping industry to fight the fire of increasing competition. It must not undermine this by fuelling the flames of rising costs."

Key priorities:
No rise in business tax or the regulatory burden Introduce short-term investment incentives, either in the form of capital allowances or a new capital credit. Extend and better fund modern apprenticeships Deliver action on Employers Liability Insurance & Pensions Extend Climate Change Levy agreements & introduce a fair and effective landfill tax
EEF believes that the weakness in investment poses the greatest threat to a sustained improvement in competitiveness, innovation and growth. As a proportion of gross value added manufacturing investment is set to hit its lowest level this year since statistics were collected, having already shrunk 40% from its peak five years ago.

Whilst accepting that this is largely due to a range of factors including the state of world trade, the situation has been exacerbated by a whole raft of extra costs including higher national insurance, severe increases in Employers Liability Insurance and rising energy costs. This has come at a time when companies are also facing the significant cost of maintaining company pension schemes.

In addition, within the constraints imposed by the worsening fiscal outlook, EEF believes it is within the Government's power to introduce a number of positive measures, which would help companies to invest in capital and skills. For example, the government has made a welcome commitment in principle to lift the age cap on funding apprenticeships in the national skills strategy. It must now make a firm commitment towards this and back it with greater funding if it is to address the shortfall in UK vocational skills.

Furthermore, in the last two years, the greatest cost burdens to employers have come from rapidly escalating ELI premiums and the need to top up company pension schemes. The government has promised a timetable of action to address these two issues and must now deliver as a matter of urgency. In particular, it must accelerate the replacement of the Minimum Funding Requirement and the review of the current system of ELI.

"After two years of sustained economic and political turbulence we now have an opportunity to take advantage of the improving conditions. However, fundamental weaknesses remain in terms of investment in capital, skills and innovation. By addressing these five key priorities the government will send a clear signal to manufacturers that it is willing to provide the best possible economic environment", said Mr Temple.

Notes for editors

1. EEF, the manufacturers' organisation, has a membership of around 6,000 manufacturing, engineering and technology-based businesses and represents members' interests at all levels of government and within the wider policy community. Comprising 12 regional Associations, the Engineering Construction Industries Association (ECIA) and UK Steel Division, EEF is one of the UK's leading providers of business services in health, safety and environment, employment relations and employment law, world class performance, education, training and skills.

2. The following bodies are signatories to the submission:

EEF, the manufacturers' organisation
Agricultural Engineers Association
Association for Instrumentation, Control, Automation & Laboratory Technology
BCECA
British Electrotechnical & Allied Manufacturers Association
British Fluid Power Association
Construction Equipment Association
Construction Products Association
Engineering Construction Industry Association
Engineering Industries Association
Finance and Leasing Association
Gauge & Toolmakers Association
Intellect
Manufacturing Technologies Association
METCOM (Mechanical & Metal Trades Confederation)
National Association of Steel Stockholders
SEMTA (Science, Engineering and Manufacturing Technologies Alliance)
Shipbuilders and Shiprepairers Association
Society of British Aerospace Companies
Society of Maritime Industries
Specialist Engineering Contractors Group