UK manufacturers call for Budget that focuses on growth

Britain’s manufacturers are urging the Government to use the forthcoming Budget to focus solely on measures to boost growth, warning that any further increases in business taxes, as well as a continued failure to reduce industrial energy costs, risks setting the UK on a path to deindustrialisation.

The call comes on the back of data published by Make UK showing that manufacturers’ business costs have already risen significantly this year in response to the increase in National Insurance Contributions (NICs), while companies fear further cumulative burdens and costs from the changes to Inheritance Tax and the looming implementation of the Employment Rights Bill.

Furthermore, according to Make UK, there remains an urgent need to reduce the UK’s industrial electricity prices which it described as an ‘existential threat’ to the short-term survival of many companies. Make UK expressed dismay at the lack of progress on bringing forward the consultation on the British Industrial Competitiveness Scheme (BICS) given four months has elapsed since the proposal was announced.

In response, Make UK is calling for six key measures to be announced in the Budget: an expansion of the BICS to all manufacturers which must be backdated to June 2025; a ringfencing of the £1.1 billion raised from the Growth and Skills Levy for investment in the skills system; a targeted exemption from business rates for investments in green technologies; a commitment to no further increases in NICs; a targeted electrification discount for companies switching from natural gas or oil to electricity; and an expansion of Full Expensing to include leasing.

Escalating costs across the board
Stephen Phipson, CEO of Make UK, said: “Business is facing a potent combination of weak demand at home and abroad, as well as escalating costs across the board. If we are to get growth off the floor then it is going to be business that provides it and the Budget simply has to have growth as the number one focus.

“In particular, energy costs are now an existential threat to deindustrialising the UK and we need to get them down as a matter of urgency. 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. The scheme needs to be brought forward and backdated to when it was first announced.”

According to new data released by Make UK, almost three-quarters (70%) of companies are bracing themselves for tax increases, while more than two-thirds (68%) said their costs have already risen more than expected in the last six months forcing more than half (58%) to raise their prices. Almost a similar number (53%) intend to raise their prices in the next six months.

Furthermore, more than nine in 10 companies say the increase in NICs has impacted their business in the form of reductions in pay increases (54%) and pay freezes (29%). Half of companies (51%) have frozen recruitment.

Looking forward, 95% of companies are concerned about the Employment Rights Bill while over two-thirds of companies (67%) say it will negatively impact their business. Moreover, Make UK warned that little progress has yet been made in reversing the 41% decline in engineering and manufacturing apprenticeship starts since 2017. While there are welcome steps towards a more flexible Growth and Skills Levy, the removal of levy funding from most level 7 apprenticeships risks valuable apprenticeship training becoming unavailable to companies.

The report was based on data from various Make UK surveys between July and September.