Intelligence Briefing 12th March 2015

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In this issue: Weekly Focus: EEF publishes Budget priorities | EEF’s 2015 Skills Manifesto: A more productive and flexible workforce | EEF meets EU Commission on Better Regulation | Influence future employment policy | In the Media | Week in Review | The week ahead

Weekly Focus: EEF publishes Budget priorities

Ahead of the Chancellor’s final Budget announcement of this Parliament on Wednesday 18th March, EEF published its six key recommendations for the Budget. Our focus is on measures which will continue to have a measurable impact on sustaining and underpinning support for economic growth.

  1. Bring forward the EII compensation package
    Some energy intensive manufacturing sectors’ ability to compete has been hampered by higher unilateral costs, including energy. Some action has been taken to alleviate these costs, but in 2015, UK steel producers will be paying more in levies and other charges than elsewhere in Europe.
  2. To address this, the government introduced a compensation scheme for Energy Intensive Industries (EIIs). However, compensation relating to the Renewables Obligation and Feed in Tariffs is not due to begin until April 2016. The urgency of the situation requires action before this date. Government should commence payments as soon as possible after state aid approval is achieved from the EU.

  3. Minimise uncertainty arising from Business Rates review
    Manufacturers do not want a review of the business rates system to create instability and uncertainty around future tax rates in the UK. The Government should clearly outline what will be within the scope of the review, and the milestones at which key decisions will be taken. Tax should continue to be calculated using individual property valuations and the uniform business rates should be set at national level. These areas should remain out of scope of the review.
  4. Review of capital allowances
    Capital allowances have been subject to significant change in recent years leaving investment intensive sectors with an unpredictable tax system that does not reflect the present value of depreciation costs to a firm.

    This element of the tax system is in need of reform. A thorough analysis of the UK capital allowance regime should commence as soon as possible with a view to develop a more stable system by 2016. In the meantime, the Annual Investment Allowance should be sustained at its current level.

  5. Improve access to R&D tax credits
    The R&D tax credit is a key pillar of the innovation support system, helping manufacturers to invest more in innovation than they would otherwise be able to do. The consultation by HMT and HMRC into improving access for small business therefore offers an opportunity to boost innovation and competitiveness.

    The R&D tax credit can be complicated to claim so steps must be taken to improve design, understanding and administration. In particular, manufacturers highlight the need for a stable regime, with any changes clearly and consistently communicated.

  6. Boost support for exporters
    Growing exports will be key to improving the UK’s balance of trade, and this requires a breadth of policy support. Exporters will face different barriers depending on their size, strategies, market and experience. To combat recent sluggish export performance, the UK needs to ensure its exporters are moving successfully into a diverse range of export markets. Given companies’ increased focus in this area, now is an opportune time to boost UKTI support to help manufacturers expand into new markets.
  7. Back employers’ control of apprenticeship funding through a voucher system
    EEF has long called for a demand-led system of apprenticeship funding, which gives employers greater purchasing power. To best serve companies of all sizes, government should pursue a voucher model for delivering this, which – if developed correctly – could provide employer choice and would not present cash flow problems to business.

For more information about EEF’s Budget submission, contact Lee Hopley, Chief Economist

EEF’s 2015 Skills Manifesto: A more productive and flexible workforce

New technology, manufacturing processes and process development requires ever-increasing skills levels from both the current and the future manufacturing labour force. This in turn puts ever-increasing demands on education and training institutions, which must work hand-in-hand with business to ensure an adequate supply of these skills today and in the future.

Last week EEF published its 2015 Skills Manifesto: A more productive and flexible workforce, which set key goals for the next Government. By setting goals – and measuring performance against them – Government departments can have confidence that policy and spending decisions produce the best outcomes for manufacturers.

The goals to be achieved by 2020 are:

  1. For three-quarters of employment in the UK to be classified as medium or high skilled to reduce the number of hard-to-fill-vacancies in manufacturing to 25%
  2. To increase the number of UK engineering graduates by 25%
  3. To increase the number of advanced and higher engineering and manufacturing apprenticeship achievements by 25%
  4. For the proportion of maths and science teachers at school holding at least a post-A level qualification in their subject to increase to 90%

There is enormous potential to secure competitiveness gains for business - better employment prospects and higher living standards for individuals - if Government and manufacturers collectively make profess on the skills agenda in the next Parliament. Therefore our Skills Manifesto calls on the next government to focus on three key themes and makes policy recommendations to deliver them:

1. Sustained growth in the talent pipeline for manufacturing

  • Careers inspiration should be introduced in primary school and an industry-led approach to careers provision must be developed in secondary school. From the ages 15/16, young people must have access to an independent careers adviser.
  • More STEM specialists must be recruited in schools and STEM teachers should spend time in industry as part of their continuous professional development to better understand the practical application of what they are teaching.
  • The number of work-based activities available at Key Stage 4 and 5 should increase and the next government should review the impact of removing compulsory work experience at Key Stage 4.
  • There should be an increased number of opportunities for international students graduating from UK universities to stay in the UK in order to seek employment upon completing their studies.
  • There needs to be a reduction in the cost and complexity for businesses engaging in the UK's migration system, with a particular focus on SMEs.

2. Investment in the national skills infrastructure must be levered to deliver the greatest economic benefit

  • A 'voucher' model should be adopted to give employers control of apprenticeship funding - it must be simple and sustainable.
  • Universities must have the capacity and capital to supply places for STEM applicants, including sufficient funding to cover teaching infrastructure and STEM specialist staff.
  • The Employer Ownership of Skills initiative should continue, but become more accessible to SMEs, both through an awareness-raising campaign and the introduction of new thresholds and criteria that are more realistic for small firms.

3. Employers must play a greater role in driving forward the skills agenda

  • New innovations in education that have a clear industry focus such as University Technical Colleges and the new National Colleges should be given time to become embedded in the system.
  • Employers must control the creation, maintenance and governance of apprenticeship standards, and this is best achieved through the continuation and roll-out of Trailblazers.
  • An existing portal such as UCAS or NAS should be expanded to include information for employers on the engagement with universities and recruitment of graduates.
  • Further work should be undertaken to explore how successful partnerships between universities and industry have been formed to determine how such models can be rolled out.

We will be using our Skills Manifesto as a key campaigning tool in the run-up to, and after the General Election.

For more information, please contact Verity O’Keefe, Employment and Skills Policy Advisor

EEF meets EU Commission on Better Regulation

EEF met with Jonathon Stoodley, the Head of Unit for Evaluation, Regulatory Fitness and Performance in the Secretariat-General of the European Commission, in London last week. We discussed how many of the recommendations for the restructuring of the EU Commission made in our EU Manifesto published last year have now been taken on board by the new Commission, including the introduction of a First Vice President of the Commission focused on Better Regulation. Further to this, EEF set out our position on reform of the EU Health & Safety regulatory landscape and EU Chemicals legislation. EEF has agreed to work with Mr Stoodley and the EU Commission to ensure that the views of manufacturing companies, both large and small, are fed directly into policy formulation in the EU.

For more information, please contact Fergus McReynolds, Director of EU Affairs

EEF hosts stand at Resource event

EEF showcased some of the remanufacturing work being done by members and hosted a series of discussions on the practical and policy implications of moves towards a more circular economy at the Resource trade show in London last week. The trade show is the first in the world to focus on the opportunities provided by more circular, resource efficient business models. EEF highlighted the cutting edge work already being done in this area by members, with staff and materials from Caterpillar, Jaguar Land Rover and Rolls Royce, and also gave visitors a sense of the policy and practical advice being provided by EEF. Our stand received a range of visitors, including high-profile speakers from industry, academia and consultancies. Topics ranged from the ability of composite technologies and additive manufacturing to play a part in circular business models, to the trend towards servitisation and how to best tap into innate human behaviours when trying to create change.

For more information, please contact Susanne Baker, Senior Climate and Environment Policy Adviser

Influence future employment policy

With less than 100 days to go before the Election, the major political parties are publishing manifestos and making policy announcements that have the potential to significantly impact on businesses. This is particularly the case for employment policy, with some parties committing to abolishing the employment tribunal fee systems, abolishing the so-called ‘Swedish derogation’ to the Agency Workers Regulations, eradicating zero hours contracts or enforcing gender pay reporting for larger firms. Other suggestions have including extending the right to request flexible working for grandparents and going further with shared parental leave.

EEF is gathering as much evidence as possible from its members to better understand the impact of such policies to aid its campaigning activities in the run-up to and following the General Election. We would like to invite you to contribute your thoughts and ideas on some of these key policy areas. Your views will help shape EEF’s campaigning priorities on employment-related issues to ensure that the next government creates an environment in which manufacturers can grow and prosper and not be held back by unnecessary employment regulation and red tape.

The focus group details are as follows:

  • Tuesday 24th March – 12.30pm - 14.00pm including lunch – St James’s House, Frederick Road, Birmingham, B15 1JJ
  • Thursday 26th March – 11.30am – 1.30pm including lunch – EEF, Station Road, Hook, RG27 9TL
  • Friday 27th March – 11.30am until 1.30pm including lunch – Broadway House, Tothill Street, London, SW1H 9NQ

If you would like to attend, contact Verity O’Keefe, Employment and Skills Policy Advisor

In the Media

Our Budget Submission received coverage in The Financial Times (£) and The Daily Telegraph (link unavailable).

Our response to the latest IoP data was reported in The Financial Times (£) and The Daily Telegraph.

The Daily Telegraph referenced EEF’s recent Manufacturing Outlook report in an article about a manufacturer that is expanding its business in Burnley.

The Sunday Times (£) and The Daily Telegraph quoted EEF’s calls to the Chancellor to announce relaxation to green taxes in the Budget.

Week in review

Index of production

Total production output decreased by 0.1% in January 2015 compared with December 2014 while manufacturing output fell 0.5% over the same period. Falls in output were concentrated in investment goods sectors such as mechanical equipment and electronics.

UK trade

The UK’s deficit on trade in goods and services narrowed to £0.6bn in January 2015, compared with £2.1bn in December 2014. This was largely a result of a sharp fall in imports, approximately half of which is attributed to oil imports, where trade remains volatile due to recent oil price movements.

The week ahead

18th March: Labour market statistics

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