The Manufacturing Technologies Association (MTA), the body that represents the UK’s engineering-based manufacturing technology suppliers, has urged the Chancellor of the Exchequer to use his Autumn Budget to bolster the manufacturing sector as it looks to make a speedy recovery from the impact of the Covid-19 pandemic.

Writing to Rishi Sunak, MTA CEO James Selka said failing to support such a vital sector of the economy threatened to stall progress on key national interest projects such as decarbonisation, high-speed rail (including HS2 and the Northern Powerhouse rail projects) and the new Tempest fighter aircraft.

To deliver the stimulus needed to progress these – and other key – projects, Mr Selka said positive action would be vital to restarting the UK economy and putting Britain’s manufacturing companies firmly in the vanguard.

Mr Selka said fiscal incentives to boost investment were vital. For example, increasing the Annual Investment Allowance to £1.5 million and extending this enhanced rate to 2024, would boost investment confidence and kick-start investment decision-making.

Such a move would address the MTA’s findings that significant capital projects – many key to job creation, productivity improvement, carbon emission reductions and export readiness — are currently being postponed by organisations of all sizes across all sectors.

Decisive action is also needed to support the skills retention and development needed to exploit new investments. Here, the MTA is advocating a scheme similar to the Kurzarbeit used in Germany, which is designed to give employers long-term confidence and help them retain and develop their people.

To mitigate the risk of further disruption to the economy, the MTA has also urged the Government to consider underwriting key insurances to include Covid-19 and its derivatives.

This is currently not available commercially, which the association said acted as a crucial barrier to investment and, impacted events such as the MACH exhibition, which perform a vital function in showcasing the best of British industry and raising confidence in it amongst global investors.

Mr Selka said while the Coronavirus Job Retention Scheme had been successful in preserving jobs in the initial phase of the crisis, there was clear evidence from the latest employment data that as the scheme wound down, people who had been on furlough had been made redundant. While the impact of this was felt more broadly in the service sector, manufacturing companies were facing similar problems as a short to medium term lack of work was proving insufficient to sustain their current employment levels.

To insulate industry against a second, or even third, wave of the virus, support for jobs into 2021 remains crucial, and Mr Selka said the MTA was therefore urging the Government to follow the example of its German counterpart, which has extended its Kurzarbeit scheme to 21 months.

For suppliers of capital goods, which embraces many MTA members, maintaining confidence among customers is key. Data from the ONS shows that business investment fell by more than 30% in Q2 and while overall economic activity has been picking up, survey data on investment intentions suggests recovery will take longer as concerns around a second wave of infections and the end of the Brexit transition period foster uncertainty.

Highlighting that the biggest hit to industrial activity has been in the investment goods sub-sector, Mr Selka said an extension of the enhanced AIA (which will otherwise expire at the end of 2020 and revert to just £200,000) would provide a valuable boost to confidence through uncertain times.

Concluding his letter to the Chancellor, Mr Selka said: “Despite the current enormous challenges related to Covid-19 and other market changes, we believe that, with your increased support, UK Manufacturing has the strengths and capabilities needed to reinvigorate the UK economy and deliver the jobs and community growth needed across the nation.

“Government has already invested in key elements of infrastructure geared to keeping British businesses ahead of the market, such as the fantastic High Value Manufacturing Catapult Centres and the Made Smarter programme. The MTA stands ready to work with you to drive a robust recovery.”