Amidst warnings of more disappointing productivity growth to come, downgrades to the public finances and Brexit related uncertainty, Britain's manufacturers are urging the Chancellor to use his available ammunition to boost investment and improve industry competitiveness in the forthcoming Budget.
Together with a bold, ambitious industrial strategy, a fiscal package aimed at boosting business confidence to innovate and invest should be a centrepiece of a productivity-focused autumn budget.
The call was made by EEF, the manufacturers' organisation in its submission to the Chancellor published today.
According to EEF, whilst manufacturing is enjoying positive growth on the back of strong global trading conditions, investment remains subdued compared to the strength of other activity indicators for a host of reasons – from the need for clarity on Brexit outcomes to the availability of a range of skills to manage and implement new technologies.
Reigniting manufacturers' confidence to invest is crucial to improving their productivity performance as well as avoiding UK companies having to catch-up with competitors that are already moving apace on new technology uptake, as and when certainty about future EU relations materialise.
EEF has made series of recommendations that would deliver improvements to the business environment, aligned with priorities for the soon-to-be-published industrial strategy white paper, without rocking the boat on the fiscal targets.
But the risks of a failure to an investment recovery are such that the Chancellor needs to expend some firepower helping companies to propel more of their investment plans over the line.
Commenting, Terry Scuoler, Chief Executive of EEF, the manufacturers' organisation, said:
"'The chancellor has to offset acute anxiety among companies over Brexit with a budget that reassures business the Government will deliver a comprehensive and ambitious industrial strategy. This is essential if we are to sustain long term growth and accelerate the benefits of the fourth industrial revolution."
"While the white paper should provide the bones of a framework for all parts of government to enable the growth ambitions of businesses, the budget statement must start to put on some of the flesh. By continuing to invest in improving key aspects of the business environment such as skills and infrastructure, while keeping down costs – such as energy prices – Britain's makers will have more certainty about the UK as a place for their future activities.
"As business fully understands, the productivity stakes are high and investment in new technology and associated innovation in the industrial sector must get that extra nudge to equip companies to take advantage of growing global markets and anchor activity in the UK over the long term."
EEF has made the following recommendations to boost investment and innovation:
- Increase the rates of capital allowances to 30% for the first two year of qualifying investment for a time limited five year period
- Cap increases in the business rates multiplier at two per cent to minimise increases in business costs
- Promoting the benefits associated with the 4th industrial revolution through demonstrators and
- Enhance supply chain cooperation on 4IR innovation and adoption through collaborative funding as part of the Industrial Strategy Challenge Fund.
- Increase the rate of the R&D tax credit under the Large Companies scheme
In addition, EEF priorities to continue to improve the skills base, infrastructure and minimise industry costs burdens as part of industrial strategy delivery include:
- Consult with business organisations on a new business impact target
- Immediately announce how revenues from the Immigration Skills Charge will be spent
- Announce a fund to effectively deliver Industrial Energy Efficiency investments
- Announce provisions for the Mayoral infrastructure supplement
- Outline a three year plan to prioritise spending by the Department for International Trade on export promotion and trade policy