The manufacturing industry has warned the government to prioritise growth in the Budget as the sector fights back from a year-long downturn in the face of “existential threats”. Manufacturers have faced mounting pressures over the last 12 months as business costs soared in the aftermath of the Labour government’s first Budget before tariff uncertainty and persistently high energy costs sucked confidence from the sector.
The latest Purchasing Manager’s Index (PMI) from S&P Global showed the industry has bounced to a 13-month high — with a reading of 49.7 — powered by Jaguar Land Rover’s return to form after a cyber attack crippled production across its sites and wider supply chain.
But the state of factory output across the country remained below the all-important 50.0 threshold which would denote growth in the sector. Experts warned the recovery could remain “short-lived” if the government piles pressure on firms at the autumn Budget.
The sector’s industry body Make UK said companies fear further burdens and costs from changes to inheritance tax hitting family firms along with the implications of the looming Employment Rights Bill.
Chief executive of Make UK Stephen Phipson, said businesses were battling a “potent combination of weak demand at home and abroad, as well as escalating costs across the board”.
Make UK has now called for a commitment from the government of no further national insurance hikes and a targeted exemption from business rates for investments in green technologies. The manufacturing PMI figures released this month showed employment shrank for the twelfth consecutive month in October, with labour costs cited as the primary factor.
Director at S&P Global market Intelligence, Rob Dobson, said: “There are also concerns the forthcoming Budget will exacerbate the lingering challenges created by last year’s Budget, especially in relation to the impact of national minimum wage and employer NIC on costs, demand and production.
Phipson urged: If we are to get growth off the floor, then it is going to be business that provides it and this Budget simply has to have growth as the number one focus”. He added: “The government needs to stop sitting on its hands on the energy support scheme and continually kicking the can down the road hoping the problem will resolve itself”.
Make UK said there remained an “existential threat” to the survival of many companies due to the rising price of industrial electricity prices.
In a speech from Downing Street last week, the Chancellor addressed the “speculation about the choices I will make”, saying “it is important that people understand the circumstances we are facing, the principles guiding my choices — and why I believe they will be the right choices for the country”.
Meanwhile, a group of young entrepreneurs has issued a fresh warning that a prolonged hike to income tax will hit the self-employed hardest. In a clarion call ahead of this month’s Budget, the Young Entrepreneurs Forum warned that a mooted 2p rise in income tax alongside a cut in employers’ national insurance would “devastate freelancers, contractors and start-up founders — the very people Britain needs to power growth”.
The Treasury is reportedly considering a radical shake-up of the way it taxes work next month, that would see it unveil a two per cent hike to income tax mirrored by an equal cut to national insurance.
Chair of the Young Entrepreneurs Forum, Sean Kohli, said the overhaul would “send a message that Britain would rather tax enterprise than encourage it”, because founders and the self-employed would also miss out on the NI cut.
“If Britain wants growth, it needs to back those with the will to build, the founders who create jobs, take risks and power our future economy”, he said. “Instead, the government seems intent on taxing that will out of existence”.
Andy Jalil
The writer is our foreign correspondent based in the UK
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