Intelligence Briefing 18 November 2011

NEWS

EEF pushes Growth Agenda with PM, Ministers and officials ahead of Autumn Statement

Along with the other main business groups, we participated in a roundtable discussion with the Prime Minister, Business Secretary Vince Cable MP, Employment Minister Chris Grayling and the Skills Minister, John Hayes MP, to discuss what the government should do in the Autumn Statement and its response to Youth Unemployment.

We emphasised the need to take steps to help companies invest through increasing capital allowances, reforming the R&D tax credit to provide more immediate reductions in the cost of R&D and improving the flow of credit to business on the right terms, particularly, through implementing recommendations to increase competition amongst the banks. We also highlighted the need to introduce a meaningful package of measures to compensate energy intensive industries for the cost of the government’s climate change policies.

We also met David Gauke MP, a minister at the Treasury to press the case for reforming the R&D tax credit for large companies to make it ‘payable above the line’. This would provide more immediate support to companies investing in R&D and enable companies with tax losses to take advantage of it.

Finally, we attended a roundtable at HM Treasury with other business representation organisations to discuss the government’s Growth Review in the lead-up to the Autumn Statement on 29 November. The Director of HM Treasury’s Enterprise and Growth Unit, Peter Schofield, led the discussion, which went through the current review workstreams, tentatively suggesting areas where some progress was likely and sought business representatives’ views on ways forward for the Growth Review.

The Autumn Statement is likely to include announcements on reforms to the planning system and infrastructure development with the focus on moving the assessment of applications to a presumption in favour of development. Though HM Treasury was giving little away in terms of detail, the Chancellor is likely to say something on ‘credit easing’ – including an intervention in concert with the major UK banks to try to improve the flow of finance to SMEs.

For further information contact Stephen Radley, Director of Policy or Andrew Johnson, Senior Economist

EEF wins lobbying industry Trade Body of the Year award

At a ceremony in Westminster this week EEF won the Public Affairs News award for Trade Body of the Year for our campaigning on behalf of our members. Public Affairs News is the trade paper for public/external affairs professionals across the UK and Brussels. The award was presented by Laura Kuensberg, ITV News Business Editor, and John Gardner of Babcock International, the sponsors for the category. You can find out more about the awards and the other winners here.

For more information contact Rocky Lorusso, External Affairs Adviser

Research on finance suggests manufacturers at disadvantage

EEF attended the launch of the second edition of the SME Finance Monitor, a quarterly survey of more than 5,000 SMEs and their experiences accessing finance. While the survey showed that economic conditions are impacting on the demand for credit, problems from providers continue to suppress demand from would-be borrower companies. Other findings included:

• Over the wider set of results including the first release of the SME Finance Monitor in July, 63% of companies overall were granted new/renewed loan requests but worryingly being in the manufacturing sector made a decline more likely;
• 37% of new/renewed overdrafts granted to manufacturing companies required security compared with 25% for the overall sample;
• Half of businesses approached by their banks to cancel/renegotiate their facility were given no reason why.

You can read the report here and as always we are keen to hear from companies about their own experiences attempting to secure finance. If you would like to discuss this further contact Andrew Johnson, Senior Economist.

Sharing UK experience of Climate Change policy on the international stage

At the invitation of the British government, EEF this week represented UK industry at a seminar with the Indian Government to discuss the UK’s approach to climate change policy. Alongside Greg Barker MP, UK Climate Change Minister, we set out the experience of climate change policy for industry in the UK over the last 10 years. We highlighted our concerns that climate change policy will make UK manufacturing less competitive in a global marketplace. We set out that lessons could be learnt from the approach which the Government of India is currently taking, that of adopting efficiency targets as a mean of reducing energy use, whilst promoting the low carbon economy without putting a cap on production.

For further information, contact Gareth Stace, Head of Climate and Environment.

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Weekly focus

Industry hopes ahead of the Durban Climate Change Summit

Representatives from around the world will gather in Durban, South Africa, at the end of the month to once again discuss the international community’s response to Climate Change.

The UNFCCC Conference of Parties, to be held in Durban from the 28th November until 9th December, is the 17th meeting (COP 17) at which international countries will attempt to negotiate a global deal on tackling climate change. This is particularly because the most famous previous agreement, the Kyoto Treaty (which committed signatories to legally binding reductions in greenhouse gas emissions) comes to an end in December 2012.

A race is on, therefore, to see if a successor to Kyoto can be agreed, and ensure that some of its existing measures are carried forward. Most notably this includes the Clean Development Mechanism (which allows developed countries to offset carbon emissions by funding emissions reductions in developing countries) Many are worried that these mechanisms might fall by the wayside with no emissions reductions targets.

UK manufacturing has a strong record of reducing its carbon emissions and has played its part in helping the UK to meet its Kyoto targets. However, EEF has always argued the need for a level-playing field and because our members operate in a globally competitive market we are concerned that if there is not a genuine international agreement, our members could be at a competitive disadvantage.

Ahead of Durban we hope for a new, internationally agreed and legally binding target for emissions reductions. However, after many years of negotiations, we are no closer to having such an agreement. Ahead of the summit therefore, we have set out the yardstick against which we will judge the success of the Durban discussion.

This position paper sets out five principles that need to be considered in order to help climate change negotiations break the deadlock:

1) The EU (which negotiates as one on climate change) must seek a global agreement that truly represents an equivalent effort from both developed and developing nations ensuring a level playing field

2) In the absence of an international agreement, the EU should work with industries and governments in other regions to develop sectoral approaches with certain sectors, such as steel, cement and chemicals

3) The EU should consider a range of policy levers, wider than cap and trade, that can achieve international consensus and provide the needed equivalence of effort

4) The EU should re-consider how it positions itself as a leader in tackling climate change, leading the charge has not brought important partners such as the US and China along in terms of cap and trade. These economies have explored alternative approaches to climate change mitigation

5) Technology must play a more central role in policy levers to ensure that progress is made to reduce global GHG emissions. EU manufacturers should not be priced out of this emerging market

The first principle reiterates the need for a level-playing field, however, not just in the sense of developed and developing nations, but in the context of the increased costs imposed on developed nations through their climate change policies that rapidly developing nations do not face. We argue that this is causing competitive disadvantage for Europe.

Our second principle therefore sets out the need for Europe to reconsider its ‘leadership’ position of setting tougher targets than the rest of the international community. We argue that our current leadership approach has not worked - with no other country, for example, copying our cap-and-trade scheme (the EU Emissions Trading Scheme) – and it is therefore time for a new approach. Other policy levers must be considered that will help to level the playing field, and increase buy-in from those not ratified to a global agreement. Suggested other policy tools include global sector agreements. Finally technology is a critical aspect to moving to a low carbon economy. Much more prevalence must be given to developing and deploying new technologies at the international scale.

Although it is not expected that an international agreement will be met at Durban, the main focus will certainly be about ensuring the mechanisms under Kyoto do not expire and setting the scene for post-Kyoto talks in 2012.

For further information contact Helen Drury, Climate and Environment Adviser.

In the news

Our response to the latest data on bank lending was published in the Independent and Guardian whilst our comments on the funding of Apprenticeships were published in three separate pieces (here, here and here) in the Daily Telegraph. Our comments on energy policy in response to the announcement by Rio Tinto were used in the FT whilst our Autumn Statement wish list was also published on the FT.com website (registration is required for the FT). Our Senior Economist, Andrew Johnson, gave a broadcast interview to Radio 5 on the Bank lending data.

Week in review 

	CPI	After hitting 5.2% in September, CPI inflation eased back to 5.0% in October. RPI also fell back from 5.6% to 5.4%. In October, the most significant downward pressures on inflation came from transport and food prices, which fell by 0.9% over the month as a result of discounting by supermarkets. Upward pressure came from increases in the cost of clothing, electricity and gas.
	Labour market statistics	The number of people in employment fell by 197,000 in the three months to September, while the ILO measure of unemployment rose by 129,000, its highest level since 1994. This pushed the ILO unemployment rate up to 8.3%. The Claimant Count measure of unemployment – which records the number of people claiming Job Seekers’ Allowance – rose for the eighth consecutive month, though the rise was somewhat smaller than in previous months. The claimant count rate was unchanged at 5.0%.
	EEF Pay Settlements	The three-month average pay settlement was 2.4% in October, at the same level as last month’s revised figure. Pay settlements have been stable since the beginning of the year at a level a little below the long-term average.
	Retail sales	Retail sales volumes were 0.9% higher in October 2011 than October 2010. They increased by 0.6% over the month.

The week ahead

Tue 22nd: Public sector finances

Wed 23rd: MPC minutes

Thu 24th: Q3 GDP (2nd estimate); Business Investment

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