In EEF's industrial strategy, The Route to Growth, we set out four ambitions that we believe are important for growth. One of these ambitions is that we want to see more globally focused companies expanding in the UK.
We will know when we are making progress when a higher proportion of turnover across the UK economy is accounted for by mid-sized businesses. This means we need to see companies growing and investing.
I have recently talked to a number of manufacturers about their investment strategies and the types of things that impact on their investment decisions. A couple of the messages that came through strongly are:
Certainty is exceptionally important for investment decisions
One company said the biggest barrier they faced when investing was the lack of a long-term plan for the business environment. The company in question perceived there to be a relatively high risk that the government will change some of the major policy areas they take into account when making investment decisions.
Another manufacturer said countries which provide some level of certainty around the variable cost elements of an investment were relatively attractive places to invest. Certainty around the legislative base, the cost of capital, assurances of how profits/losses can be treated, the stability of employment and wage discussions were some of the areas that can tip the scales when it comes to choosing where to invest.
This need for greater stability chimes with the message we set out in The Route to Growth – The UK needs an industrial strategy that provides a clear vision for the kind of economy we want, and makes sure there is coherence and accountability across government.
Companies face a number of draws on cash
One example is the cash companies must put away to cover pension deficits which can have a significant impact on their investment. One company that is heavily committed to investing indicated that over the past few years their annual pension costs have been roughly equal to their annual capital investment. They also said, if it were available, they would have used it for investment.
Making sure all parts of government policy are working towards the investment and growth our companies and economy needs is important.