United Kingdom
A structured Government approach to manufacturing? - Tom Lawton
The spending review has been casting its gloomy shadow over most of the economy in recent months...
... and manufacturers have not been exempt from an understandable nervousness about the review and its direct and indirect impacts on the sector. However, manufacturers were also hopeful that the review would help to provide some valuable insights into how the Government intends to “rebalance the economy” towards manufacturing and perhaps give more clues as to the general direction of the manufacturing framework, expected to be released in November.
The spending review
As expected the review was severe and will have a direct impact on a few manufacturing sectors, with defence and its supply chain being the most obvious example, and an indirect impact as the spending cuts feed through changing public sector contracts into the sector. But generally it has to be said that manufacturing seemed to come out ahead of the game overall. In the context of what was a comprehensive and wide ranging review we noted three themes of particular relevance to manufacturers and longer term manufacturing strategies:
- Renewed commitment to science and innovation
- Greater investment in low carbon technologies
- Changed emphasis on building skills
Renewed commitment to science and innovation
The plan to safeguard the science budget, at £4.6bn per year, is a boost for general innovation and R&D as well as to “hi-tech” manufacturing companies. The £200m per year additional funding to support high growth businesses and the commercialisation of new technologies, including the R&D technology centres, should be a tangible gain for R&D intensive SMEs.
Whilst more clarity is needed to spell out all the implications and how the spending on science will connect to business / manufacturing, these announcements must be regarded as good news for the sector. However, there was limited mention of R&D support for the medium to large manufacturer, arguably the key drivers of the manufacturing sector in the years ahead.
Greater investment in low carbon technologies
The £1bn funding to establish a Green Investment Bank and additional significant funding to support carbon-capture projects, low carbon technologies and vehicles and support for households and businesses to invest in renewable heat measures should provide a significant boost for “cleantech” manufacturers. However, a number of economists consider that the promised £1bn for the Green Investment Bank falls far short of the £4bn to £6bn needed to effectively deliver green projects and are calling for more clarification as to how additional required funding is to be leveraged from the private sector.
Low carbon technologies have been clearly flagged by the Government as an area of potential growth and market leadership for UK manufacturers. In theory it does suit our skills in innovation and research and development – and the windy, sea surrounded island on where we live should provide a base for UK developments at least. But it is important that UK manufacturers are given a “fair opportunity” to take part in the supply chain for any large scale UK based developments that are awarded to overseas manufacturers.
Changed emphasis on building skills
One of the problems faced by UK manufacturers is the lack of skilled staff and engineers. Therefore the announcement that the Government will increase funding for apprenticeships by £250m a year (an increase of 50%) came as good news to manufacturers. Whilst the extra apprenticeships will not be reserved only for manufacturing, the scheme is designed to particularly benefit areas where there is an adult skills gap, such as manufacturing.
Whilst Train to Gain will be missed by a small number of manufacturers, the apprentice scheme should help to bring a new generation of skilled staff to the manufacturing sector in an industry currently dominated by an aging workforce. However, the reforms to the support of higher education must be viewed with some caution in an economy that will increasingly be knowledge based in the future.
The CSR also noted that investment in infrastructure would be a key aspect of Government policy. At the CBI annual conference a few days after the spending review announcements the Prime Minister announced a “National Infrastructure Plan” which will invest £200bn of public and private money over the next five years in infrastructure projects. This should be good news for manufacturers but it is important to note that the private sector will be expected to find around £160bn of the funding requirement for these major projects.
The manufacturing framework
It is now absolutely clear that public sector spending will provide less support to the economy than in the past and that the private sector will need to take the lead on generating growth, employment and infrastructure within the UK economy. We believe that UK manufacturing is up for this challenge but even in the changed philosophy of where we are now the importance of the Government in establishing a long term stable framework to assist and support manufacturers should not be forgotten.
We believe that the Government should use the manufacturing framework to articulate its ambitions for UK manufacturing over the next ten to twenty years and how it intends to develop a realistic and sustainable support structure to help manufacturers achieve these ambitions. In the medium to long term we should not forget that the Government is hugely important to manufacturers in many “macro level” matters such as education and skills, regulation, training and apprenticeships, taxation policy and establishing / supporting large scale infrastructure and environmental projects. There needs to be clarity or the development of clarity on these matters in the framework.
In the short to medium term manufacturers need national and regional initiatives that work, are “joined up” and are easy and practical to understand and access. And in a global economy with huge emerging economic / manufacturing superpowers we need the UK to be seen as a “place to do business” to continue to encourage overseas investment in our manufacturing companies and skills.
It is not an easy task – but we hope that the manufacturing framework provides the strongest foundations possible in not only making it clear that manufacturing is fundamental to the UK economy now and in the future but also in providing a strong, sustainable and supportive platform for UK manufacturers.
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