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Manufacturers have warned that the UK government must deliver on its promise of an effective industrial strategy to offset rising employment costs imposed by Chancellor Rachel Reeves in last October’s Budget.
A post-budget survey of senior manufacturing executives found 57 per cent believed a long-term industrial strategy would lead to increased investment, despite almost universal concerns about rising wages and salaries. energy costs.
“The pressure on the future industrial strategy will now be even greater to put investor confidence back on the path to growth,” warned Make UK, the manufacturers’ lobby.
High expectations over industrial strategy come as Whitehall prepares for government officials having warned will be a sharp overhaul of spending, as Britain’s public finances came under increasing pressure from bond markets last week.
A senior Whitehall official said there was now a growing risk of a mismatch between industry expectations for industrial strategy and what was deliverable, given the lack of government money available to fund priming outside of core missions, such as reaching net zero or strengthening defense.
“Unless it’s tanks or wind turbines, there’s hardly any money,” the Whitehall official said.
The survey of 161 manufacturing executives echoes those of other leading business groups including the CBI and British Chambers of Commerceby highlighting the impact of Rachel Reeves’ decision to increase employers’ social security contributions.
More than 90 percent of those surveyed said labor costs would be their biggest expense in the coming year, due to the NIC increase, expanded employment rights and increased of the national living wage.
As a result, the survey reveals that companies would seek to both reduce costs and increase prices, thereby adding inflationary pressures to the economy. “This will be painful for both their customers and their staff,” Make UK added.
However, despite this gloomy outlook, the survey found “increased optimism” about the planned publication of an industrial strategy in the spring which could be a “game changer for investment”.
The Labor government announced his industrial strategy last October, releasing a plan targeting eight sectors, including advanced manufacturing, clean energy and life sciences, with the aim of stimulate investment and stimulate economic growth.
A senior executive at carmaker Nissan said the publication of the industrial strategy was “crucial for the future” of car design and manufacturing in the UK.
“Global competition for investment is at an unprecedented level and it is clear that the UK manufacturing sector is at a turning point. Countries that can demonstrate a clear long-term strategy, supported by policies promoting an attractive investment environment, will be at the forefront,” added the Nissan executive.
The strategy will be overseen by a 16-member Industrial Strategy Advisory Board chaired by Clare Barclay, managing director of Microsoft UK. Other members include Dame Anita Frew, chairman of Rolls-Royce, and Greg Clarkthe former Conservative business secretary.
Whitehall insiders said the consultation on the shape of the industrial strategy, which ended in November, had sparked a huge response from businesseswith over 3,000 responses submitted to the Department of Business and Commerce.
Make UK chief executive Stephen Phipson said more detail was needed in areas such as skills and regional devolution policy.
“The Government has taken a major and positive first step, but must now back it up by setting out the immediate and meaningful priorities it will contain, given the very clear benefits that manufacturers believe it will bring,” he added .
Industry Minister Sarah Jones said she welcomed the confidence shown in the potential of the industrial strategy. “We will continue to do all we can to promote the UK’s cutting-edge industries to global investors,” she added.
Data Visualization by Amy Borrett
