EEF, the manufacturers’ organisation made the call on the back of its Annual Manufacturing Report and the need to protect key sectors and their supply chains. The report shows that despite the significant improvement in the sector’s productivity performance in recent years, where it has outperformed the rest of the economy by more than two and a half times since 2003, manufacturing will contract by 5% in 2009 and is unlikely to grow again until the second half of 2010.
In addition, EEF is urging government action to address the problems in key industrial sectors on the back of its figures predicting a further 10% decline in the automotive sector’s output.
Commenting, EEF Chief Economist, Steve Radley, said:
"This year was already going to be challenging for manufacturing but, the combination of the global downturn and continued schlerosis in the financial markets means the downturn will now be longer and deeper than expected.
"Whilst reductions in interest rates will kick in at some point we cannot afford to wait. The unprecedented speed of the downturn since last autumn is hampering companies’ ability to adjust and government must put measures in place as a matter of urgency."
EEF proposals
Comprehensive Loan Guarantee Scheme
Government must decisive action to restore access to credit. The government should introduce a comprehensive and national, not regional, scheme to guarantee bank lending to businesses of all sizes.
Minimise impact when Credit Insurance is withdrawn or reduced
The speed at which credit insurance is being withdrawn threatens the supply-chains that are the heart of the UK’s manufacturing base. Government must step in and minimise the effects on supply chains if credit insurance is withdrawn or reduced.
Quantitative easing
With the official Bank Rate fast approaching zero and the effectiveness of future cuts in doubt, the Bank of England will need to take unconventional, yet targeted measures to increase the supply of money and credit in markets that need it the most. But it must also proceed with extreme caution. An excessive or risky build up in its balance sheet would lead to greater volatility and undermine growth in the long-run.
Short-time working
Manufacturers are desperate to hold on to skilled staff through this downturn. More flexible and generous short-time working allowances and a renewed focus on adult apprenticeships will help manufacturers cope in the short-run.
5. Relieve the tax burden
Restore empty property relief and freeze business rates for 12 months
Rather than incentivising regeneration, restricting Empty Property is punishing legitimate businesses struggling to cut costs in a recession and undermining the link between the manufacturing base and local economies.
Raise the Annual Investment Allowance
Raising the AIA to £250,000 will ease cash-flow problems for manufacturers struggling to retool and reinvest in the downturn.
6. Restrict new regulation.
In the current economic climate, companies need to be able to maximise the flexibility of their operations. A commitment to introduce the proposed Regulatory Budgets will help to prevent the introduction of unnecessary new regulation that adds extra costs on to business and obstructs its ability of business to manage through the downturn.
ENDS