On 12 December 2019, and then again on 31 January 2020, some of that uncertainty slipped away. That was the feeling, at least, at this year’s National Manufacturing Conference on Tuesday (25 February), where keynote speakers and businesses excitedly looked to the future following the Conservatives’ resounding win and the UK eventually leaving the European Union last month.
While there was a sense of cautious optimism at the QE II conference centre in Westminster, event organiser Make UK made it clear that now is the time for action, not celebration. The manufacturers’ organisation highlighted low levels of private sector investment and poor productivity, which chief executive Stephen Phipson said were partly down to poor level of capital allowances compared to other countries and the inclusion of capital investment in the calculation of business rates.
To counter those issues and ensure companies invest in the UK, the organisation called for a “triple boost” for industry to be included in the first budget of new chancellor Rishi Sunak, to be delivered on 11 March. The three measures were based on a snap poll of members, who were asked what the government should do immediately to make the UK a more attractive location for industry.
1. Increase investment allowances
Of the companies polled, almost three-quarters (70.7%) wanted an increase in investment allowances. The allowance gives tax relief to companies purchasing business equipment, and has been capped at £1m since January 2019 – much higher than in previous years, but only lasting until the end of this year.
“We know that the big concern for industry over the last couple of years since the EU referendum has been the lack of investment, and that’s been across the board, both on the skills side in personnel, but also – perhaps more importantly in the long run – in factories with new technology,” said Seamus Nevin, Make UK chief economist, to Professional Engineering. “We hear a lot of talk about the Fourth Industrial Revolution, but British businesses have not for the last three years been investing at the same rate as our international competitors.”
After the government announced an extra £13bn spending for 2020 and £100bn for infrastructure over the next five years in the last budget, Nevin said there is hope that the government will lead by example.
For SDE Technology, a pressings and assemblies manufacturer in Shrewsbury, Shropshire, that could not come soon enough. “Some of the investments we’re talking of are a five- 10-year payback,” said chief commercial officer Christopher Greenough to Professional Engineering at the Make UK conference. “We can’t do that unless we have a strong knowledge that this government is backing manufacturing.”
Brexit uncertainty held the sector back like the 2008 recession, he added. Now the £12m turnover, 50-year-old business hopes it can invest soon.
2. Cut cost of energy to EU averages
“The UK has uncompetitive energy costs, so we pay 50% more than Germany and 100% more than the French, and that just means that the cost of doing business – particularly for energy intensive sectors like steel, for example – a lot of that is uncompetitive,” said Nevin. “Talking about Britain post-EU, the last thing you want is unnecessary extra costs undercutting that ability to trade globally.”
Those concerns meant over two-thirds (69.7%) of companies in the Make UK poll wanted energy costs reduced to the EU average.
The UK’s higher costs partially come down to energy source, said Nevin – France has a huge amount of nuclear in comparison. The economist suggests one way of reducing costs would be to shift them between businesses and consumers.
For companies like SDE Technology, energy is another area where the government needs to bolster measures they have already taken.
“We just recently changed our working hours, because at 4.30pm in the evening there’s an extra tariff that comes on, so we changed our shift patterns to finish at 4pm,” says Greenough. “We as a business are trying to cut costs all the time, and that’s what every business does. It’s even harder when you see electricity costs going up and up – and when you’ve got the push to electrification, well surely now is the time we need to do something about the cost of electricity.”
3. Increase R&D tax credits
Almost half (48.5%) of the surveyed companies called for an increase in research and development tax credits. Such a move would be in line with the new immigration policy to attract the “brightest and the best”, Make UK said. Increasing R&D is also critical to increasing innovation as part of the Fourth Industrial Revolution.
“Only with innovation and forward-looking companies can the UK manufacturing sector get back to world-beating again,” said Greenough, whose company uses the credits most years.
“By increasing that value… it will drive innovation, and that’s what we need to be doing in this country. We’re on the brink of the next industrial revolution with the Internet of Things and Industry 4.0, and UK companies are really good at that innovation, so whatever we can do to release more of that innovation, more of that forward thinking, can only be a good thing.”
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Content published by Professional Engineering does not necessarily represent the views of the Institution of Mechanical Engineers.