Political uncertainty is the new normal, with uncertainty surrounding the UK’s future relationship with the EU weighing heavily on businesses’ confidence to invest.
Manufacturers are carrying on with existing business plans and eyeing new growth opportunities, particularly in overseas markets, where the depreciation in the pound has supported a boost in export competitiveness. Their business ambitions over the next few years to grow, export, innovate and adopt new technologies also appear to be in place.
But this post-referendum lull is likely to prove temporary. With risks looming around the UK’s future trading relationship with the EU, manufacturers have turned pessimistic about the performance of the UK economy and increasingly cautious about their business prospects over the next two years. Our recent report showed that manufacturing investment is set for a slowdown and EEF is forecasting manufacturing slipping back into recession in 2017.
Domestic policy will have a part to play in determining whether the next round of manufacturing investment takes place in the UK or elsewhere. In our Autumn Statement submission we outline how the policy environment can be improved to enable manufacturers to fulfil their business ambitions and help anchor manufacturing in the UK.
EEF does not believe that an overly expansive fiscal stimulus program should not be pursued – at least for now - while the consequences of Brexit remain uncertain. Rather the Government should retain the ability to deploy heavier fiscal artillery if evidence points to a sharp slowdown in UK economic activity.
Our submission follows the structure of what a good industrial strategy should seek to deliver (which we covered in our report on the ambitions of industry back in September); a more productive and flexible workforce; more reliable and resilient infrastructure; a lower cost of doing business; and better support for growing businesses.
Specific recommendations in our submission include:
1. Better support for growing businesses
- Extend the scope of the R&D tax credit to allow for more process innovation by SMEs
- Increase the level of the R&D tax credit under the Large Companies scheme
- Establish a Technology Catalyst Fund to support the early adoption of technologies that can deliver productivity gains (such as those associated with the 4th industrial revolution)
- Introduce a review of the current capital allowances regime for investment
- Increase funding for export support
2. Delivering a more productive and flexible workplace
- Build on improvements in the design of the Apprenticeship Levy
- Abolish plans to introduce the immigration skills charge
- Alter the tax system to encourage employers to pay for private health care
3. A more reliable and resilient infrastructure
4. Lower the cost of doing business
We’ll be blogging in more detail across this week on the key priorities in each of these four areas - subscribe to our campaigning blogs feed so you don't miss out.