The UK’s manufacturing sector is poised for a significant boost now the Government has put in place a long-term industrial strategy, with more than a third of companies planning to accelerate investment projects. This shift in momentum is captured in a major annual survey on investment priorities published today by
Make UK and
RSM UK.
While the new industrial strategy, announced in June, has sparked optimism, both organisations are now urging the Government to use the upcoming Budget to reinforce and expand key investment incentives. The survey reveals that nearly 40% of manufacturers base their investment decisions on the availability of tax reliefs, underscoring the importance of a stable and supportive fiscal environment. The urgency of this call is amplified by data showing that investment intensity in UK manufacturing has fallen to its lowest level since the immediate aftermath of the EU Referendum in 2016.
Fhaheen Khan, senior economist at Make UK, emphasised the significance of the moment: “Manufacturers have long called for an industrial strategy and it is clear that this will bring immediate benefits in terms of accelerating investment projects. However, it is also clear that we are at a critical juncture for investment, and there is a real sense of urgency.
“The forthcoming Budget must not only safeguard current incentives but, refine them with a set of carefully targeted measures to focus on boosting the take up of accelerating technologies and innovation. Furthermore, the statement should end the frequent tax changes to incentives we have seen in recent years by committing to a business tax regime which is set in stone for the lifetime of this Parliament.”
Mike Thornton, head of manufacturing at RSM UK, added: “Despite headwinds, UK manufacturers remain optimistic, but to allow them to transform, invest and drive future prosperity they need a helping hand from the Ggovernment, not more taxes. Simplification is key here. We know that tax reliefs influence investment decisions, so the Chancellor has a real opportunity to make them more accessible and easier to claim in the forthcoming budget. This will not only boost investment but drive innovation, improve productivity and accelerate economic growth through industry.”
Snapshot of investment trendsBeyond policy, the survey offers a detailed snapshot of current investment trends across the sector. The industrial strategy is already influencing decisions, with over 43% of companies directing investment toward decarbonisation. Data analytics and artificial intelligence (AI) are also high on the agenda, with 35.4% of firms prioritising these technologies, while 34.2% are focused on expanding manufacturing capacity.
Interestingly, skills development has overtaken plant and machinery as the top investment priority for the coming year, cited by 47.6% of respondents compared to 44.1% for equipment. Despite ongoing debates about the UK’s industrial performance relative to global competitors, nearly 68% of companies invest up to 10% of their turnover in plant and machinery, with another 18% investing between 10% and 50%.
However, the overall investment intensity has slipped to 6.8%, down from a 10-year high of 8.1% last year. R&D investment shows a similar trend, with 68% of companies investing up to 10% of turnover and 18% investing between 10 and 50%. R&D intensity has dipped slightly to 6.2 from 6.5%.
The survey, which gathered responses from 170 companies between 23 July and 21 August, paints a picture of a sector ready to invest but in need of consistent and targeted support. With the right measures in place, UK manufacturing could be on the cusp of a new era of growth and innovation.