Budgets, babies and bath water
One of the real dangers for manufacturing will arise if the Government throws the baby out with the bath water in its approach to budget cuts, says Alan J Hall.
I HAPPENED to be there a few weeks ago when David Cameron gave his first set-piece speech as Prime Minister. It was about manufacturing.
And we at EEF feel we could have almost written the script for him, with his remarks about rebalancing the economy away from finance and in support of manufacturing. All our efforts over this past year have been to try to persuade an incoming government exactly along these lines.
It was part of David Cameron’s remarks about manufacturing that he wished to see growth in the UK economy. The truth is, that to recover from the huge UK deficit, he needs growth in the economy just as much as we all do.
Our latest quarterly business trends survey published in early June gives an optimistic picture for manufacturing. The survey gives you confidence that there are the makings of an export-led recovery by manufacturers in this region.
This is not so surprising given the current favourable exchange rates for sterling. However, we live in very uncertain times, and winning business on the world stage is a very tough call indeed.
So while our manufacturing sector in this region (and in other parts of the UK) is on the rise, we still need help and support from this new coalition government to ensure that the recovery in the sector becomes robust and sustainable.
Chancellor Osborne’s Budget was full of cuts, savings and economies. EEF, in principle, is supportive.
Government had become bloated and prone to excess under the previous administration.
The bank bailout was so expensive that any incoming government was bound to address this deficit problem.
So what conditions will help manufacturing to prosper?
England doing well in the World Cup would certainly have helped to lift morale and productivity!
The relative weakness of sterling I have already acknowledged. George Osborne’s efforts to satisfy world markets about addressing the deficit are a third key factor.
However, the Government can create conditions that will be good for manufacturing (and good for business generally). These include a clear statement from the Government about its vision and ambitions for the UK economy.
We need to know the priorities and the importance it attaches to specific technologies or markets.
As a potential customer of manufacturing, it certainly needs to work more closely with the sector in setting out its needs in areas such as defence, our energy supply and our infrastructure.
We need stability and certainty through a simpler tax regime and better incentives to invest. And on the subject of stability, how about something really controversial; leaving ministers in post long enough for them to get on top of the job?
One of the real dangers in all of this could be the Government throwing the baby out with the bath water if its approach on budget cuts turns out to be so harsh that there is nothing left for supporting skills, programmes to win export opportunities for UK manufacturers, and for key strategic investments such as the money promised to Nissan for the new Leaf car and battery plant.
:: Alan J Hall is regional director of manufacturers organisation, EEF