This blog forms part of a series of guest blogs on investment. You can follow the debate on twitter with the hashtag #bizinv
Tom Lawton is Head of Manufacturing at BDO LLP
You can follow BDO on twitter at @bdoaccountant
In my view a long term industrial policy is essential to support UK manufacturing which in turn is essential to the creation of jobs, exports and wealth for the UK economy. The UK manufacturing sector has been poorly served by successive governments that have not understood the importance of manufacturing to the economy. Three issues need to be addressed -
Creating a sustainable long term frameworkCoping with the global economy is difficult enough but UK Manufacturers also have to cope with changing policies by government, changing governments and a general tone that seems to chase the most recent “good idea”. I would like to see the government establish a clear vision for manufacturing (20% of GDP by 2020 and 25% by 2025?) and then establish an industrial policy framework that helps achieve that vision. Manufacturers will then feel more comfortable in taking long term investment decisions.
Developing a tax system that is biased towards manufacturingIt is fundamental that manufacturing uses the latest technology to offset relatively high UK labour costs and offer high quality and innovation at the right price. The government drive towards low tax rates does not help the significant capital spends that manufacturers need to incur to remain competitive. Germany gives a great example of how a high labour cost economy can be successful through investment in technology that is significantly supported by the tax system. What is preventing the government offering 100% capital allowances to manufacturers?
Providing better access to capitalRather than revisiting old arguments on this well documented matter I will just note that in the UK more than 80% of lending to SME's is provided by 4 banks. But in Germany the 4 largest banks share of SME lending is below 15% – with the majority of funding being provided by more than 400 local savings banks. We are not able to fundamentally change structure of UK banking in the short term but we should be able to provide more support than we have in the last few years. Manufacturers are very much in favour of an industrial bank but the current plans for such a bank seem poorly formed and provide considerable doubt as to whether it will be “fit for purpose”.
Manufacturing can offer a great value package to the UK economy through the creation of jobs, innovation, education and training. It would be great to see the sector getting the support it deserves.
Please note: these blogs contain the views of the author and are not necessarily those of EEF