Addressing the Chancellor and senior industrialists at the Biennial Dinner of EEF, the manufacturers organisation, its President, Mike Baunton will warn that the increasing costs of doing business in the UK are fuelling the drive to look at lower cost locations before newer businesses are brought on stream.
Whilst welcoming the positive measures introduced by the Chancellor on skills, innovation and R&D he will refer to the increases in National Insurance, Pensions, and Insurance costs in general. He will also warn of the escalating costs of energy, criticising in particular the potential for a 'self inflicted' wound from the recent announcement on emissions trading.
He will make it clear that the shift eastwards is a matter for the whole economy, not just manufacturing. In two years' time the Chinese economy will overtake Germany and, by 2050 will be 25% bigger than America. In response, he will all for innovative new approaches from business and policy makers to maintain the UK's competitive advantage. In particular, the Chancellor will be urged to speed up the pace of public sector reform and the introduction of measures to help drive innovation and investment.
"The shift to the east of some aspects of manufacturing is inevitable but it is controllable. However, there is now an increasing range of pressures making it more expensive to do business in the UK and eroding our advantage as a low cost, lightly regulated economy. This is only fuelling the fire of moves to lower cost countries and damaging our ability to manage proactively the transformation of our economy.
"To counter this and keep core businesses in the UK we need urgently to raise our game in areas such as design, innovation and attracting, nurturing and motivating talented people. Business and government has to recognize and accelerate the move to innovate, invest in people, and enhance our knowledge.
"This will help bring on stream new businesses and technologies. However, failure to get this right will see higher value activities across all sectors of the economy follow low cost ones out of the door."
Making it clear that the EEF favours free trade and is not seeking protectionism, Mike Baunton nevertheless said there will be areas government could choose to influence. Criticising the recent announcement on implementing emissions trading which will set significantly tougher limits in the UK than anywhere else in the EU, Baunton will say.
"Not all of the costs we face can be controlled by the government, but companies will find it hard to understand why it should cause a self inflicted wound at a time when they are facing so many other cost pressures."
Baunton will conclude that the key competitive edge for UK manufacturing will come from the knowledge of our people. Without a strengthening in the skills of our workforce we will lose out to our South East Asian competitors who are shifting rapidly from low cost, low skill economies to low cost, high skill ones.
He will call for far greater priority to be given to the value of vocational education so that it is recognised as of equal importance to the academic route. He particularly criticised the poor quality of careers advice given to young people which still conditions them to go down the academic route and which is leading to shortages of technical skills.