Manufacturing needs stability to build on last year's success
6th January 2015
Early January is a good a time for sober reflection. The countdown to a politically electrifying election has begun and in many respects it will be a plebiscite, with the defining issue being the future economic management of our nation.
Last year will go down on record as a good one for UK manufacturing. After two years of negative growth our fortunes revived and the country's makers ended the year showing around 3.5pc growth. We helped lead the economic surge experienced across the economy. Perspective, however, is everything, and we need to understand the fundamentals.
Our sector's growth has largely been driven by domestic demand, with our export performance on the other hand (with some notable and noble exceptions such as the automotive industry) remaining disappointing.
That is partly why, in our annual executive survey, manufacturers are tempering their forecasts for 2015.
This time last year 70pc of the companies we surveyed were optimistic about prospects for the year ahead. That rush of positive energy has almost halved. Meanwhile, worryingly, the number of executives expecting conditions to actively deteriorate has tripled, with 17pc of those asked voicing concerns.
Add to this the ongoing difficulties in the eurozone and a greater threat from geo-political events such as the wider impact of Russia's activity in the Ukraine and the impact of sanctions, and you begin to sow the seeds of doubt in terms of confidence. After the experience of 2008, manufacturers of all sizes still remain cautious and risk averse.
That said, our prediction for this year of 2pc growth in manufacturing is still positive and compares well with the long-term average.
Terry Scuoler: 'If policy isn't broken, don't try to fix it'
In such a pivotal political year it is incumbent on all political parties to play their part by committing to strong fiscal discipline, long-term support for manufacturing and a vision for the economy, underpinned by a strong industrial strategy.
Looking back to the build up to the last election in 2010, the drive to truly rebalance the economy, following on from the financial collapse experienced in 2008, with a greater emphasis on manufacturing was very much in vogue. Today talk of rebalancing is more often than not used as shorthand for closing the North-South divide and is in danger of diluting the still critical issue of creating a better balanced UK economy where industry and manufacturing form a greater share of GDP.
The coalition Government has, however, made progress and has proved to be a strong supporter of manufacturing through funding research and development tax breaks and innovation initiatives such as the industrial incubators known as Catapults. The Department for Business, led by Vince Cable, has spearheaded an industrial strategy that has helped boost specific sectors of manufacturing. This should be applauded.
At the start of this year, if manufacturers have one message for all parties as they prepare their manifestos, and prepare for Government, it is this: if it ain't broke don't try to fix it. Do not be tempted to pull the rug from under the feet of initiatives that support long-term industrial growth such as new infrastructure, roads, rail and other key projects, as well as funding for innovation. Let us also maintain the support for research tax credits and other critical business support, such as UK Trade & Investment, which focus on the long-term drivers of growth and industrial excellence.
The coalition has also made some progress with our education system so that there is now significantly more emphasis on core science subjects and mathematics. Support for apprenticeships has been inspirational and we must ensure that employers remain in the driving seat on these initiatives. The announcement before Christmas of a new national college for manufacturing wasn't headline grabbing, but is another example of the quiet revolution that has taken place to reinvigorate existing and new industries, whilst helping provide the skilled people needed to drive them forward.
There is some welcome cross-party consensus on these and other issues, and it would go a long way to building confidence among manufacturers about future stability to hear more reassuring messages about continuing to support what has worked well. In other words, our message to politicians is this, real progress is being made. Build on it, don't screw it up.
A long-term industrial strategy for Great Britain may sound grand, but it requires a cross-government approach and an enduring vision, with backing for industry cutting across and, supported by, all Whitehall departments.
Even the much-maligned European Parliament and Commission in Brussels has seen the light, with politicians across political groupings together with Eurocrats embracing the concept of "industrial renaissance" - effectively the EU's term for rebalancing the European economic model. They have gone as far as setting a target for increasing industry's share of GDP from the current 15pc to 20pc by 2020. Not everyone agrees with such targets and the EU's record in meeting them is woeful, but it does send out a clear message to industry that the new Commission does mean business.
Britain's manufacturers are also very clear about Europe. The UK's economic well-being is predicated on our continuing membership of the EU. Reform from within, yes, but Britain must play a leading role as a member.
Whatever the shape of the next British Government, we know public spending will be squeezed during its term. It is essential that support for business and an industrial strategy which puts Britain on course for long-term, sustainable economic growth remains a top priority and not a target for the inevitable cuts to come.
Terry Scuoler is chief executive of EEF, the industry association for engineering and manufacturing companies
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