Budget 2014: What do manufacturers want?

19^th March 2014

Rachel Pettigrew, Senior Economist at EEF, The manufacturers’ organisation, delivers the manufacturing industry’s wish-list for today’s Budget announcements

Ahead of today’s budget here is a quick recap of the economic environment and EEF’s key Budget asks that would reconfirm to manufacturers that a competitive business environment is front and centre of the government’s priorities.

In recent quarters economic indicators have continued to improve. The outlook for 2014 is positive and manufacturers are gearing up for a year of growth. Demand in the domestic and overseas markets is picking up and companies are actively looking to exploit these opportunities by targeting new markets and developing new products. However, growth and indeed companies’ investment plans are likely to be more on the steady and moderate side rather than the significant. The government will also continue to be constrained by its fiscal position.

In light of this, we want to see the government focus Budget 2014 policy announcements on ongoing improvements to the business environment that will support companies’ investment decisions in the years ahead.

EEF’s Budget 2014 submission outlines the areas we will be focusing on today. In brief, below are the key policy changes we want to see forming the backbone of today’s Budget 2014 announcements.

1. Competitive UK energy costs

Concerns over rising energy costs have been plaguing manufacturers for some time, impacting the competitiveness of the UK as well as having a more immediate impact on profitability and firms’ ability to invest. EEF is calling for action on three fronts:

• Carbon Price Floor (CPF): Freeze and gradually reduce the overall CPF from 2016/17 through to 2020/21.
• Energy Intensive Industries (EII): A commitment to extend all measures in the current EII package for as long as it is needed, up to and possibly beyond 2021/21.
• Climate Change Levy (CCL): Freeze planned increases on the CCL and also further increase the relief rate of CCL for gas from 65% to 75% for sectors with Climate Change Agreements.

2. Improvements in the lending environment

The UK’s investment challenge is linked to the lending environment for SME’s and more needs to be done to spur continued improvements to help ease credit conditions. We want to see Government focusing on the following issues:

• Transparency and accountability: Set out metrics on the outcomes Government expects banks to deliver to their customers as a result of the appeals process.
• Switching: Set up regular reviews of progress on encouraging switching.
• Business Bank: The Business Bank must clearly articulate its role in the market, setting out outcomes, objectives and evaluation measures.

3. Further action on the skills agenda

We want the government to continue the pace of reform in the skills and training landscape to ensure it better meets the demand of industry. Key areas of importance include:

• Employer ownership of Skills Pilots: Remain committed to the principles and apply the lessons from the first Rounds going forward to allow sufficient investment in time and resource needed to succeed.
• Apprenticeship Trailblazers: Look to Trailblazers to build on their work to develop into Industrial Partnerships, to take end-to-end responsibility of the skills system. Use Trailblazers to give better approximation of the cost of delivery.
• Training costs: State the proportion of training costs that will be publicly funded in the future to provide certainty and stability to employers.
• Accessibility of skills funding: Funding specifically allocated to engineering companies to help meet their skills needs must be accessible to all, particularly SMEs. Set realistic thresholds and encourage collaboration between SMEs.

4. A long term vision for infrastructure investment

Infrastructure delivery: New proactive approach to infrastructure delivery should be sustained with focus turning to medium term requirements. Government should also set out their position urgently on the Airports Commission interim proposals.

We also know that trade and investment will be a key theme of the Budget. In addition to the policies we have outlined above, other policy announcements that would support this focus include:

• Moves to make the UK tax system more competitive for investment,
• More funding for UKTI, to provide more support for experienced exporters and expand awareness of the services provided,
• Boost to innovation support, for example more funding for TSB to support schemes such as Catapults and SMART grants.

Be sure to keep an eye on EEF’s blog for an update on what the Government actually delivers.

This article was originally posted at www.eef.org.uk/blog.