Today the Chancellor set out his stall of a stronger economy, spurring on a wave of new optimism. But the unanimous verdict across UK manufacturing was that the reality facing businesses up and down the country is very different.
The Chancellor faced numerous dilemmas ahead of today’s Spending Review, from shoring up the UK’s fragile recovery, to providing funding for a post-pandemic wave of challenges, yet today’s Spending Review and Budget focussed on three areas:
- the levelling up agenda
- building a skills revolution; and
- our net-zero transition.
But as manufacturers have said time and time again, making meaningful progress in these areas will require significant, sustained investment. This means the Government will have to overcome its ‘short-termism’ and re-orientate towards long-term solutions that support businesses in the decade ahead.
So did the Chancellor deliver the long-term solutions and strategy manufacturers require?
Business rate reforms welcomed
Reforms to business rates was a key ask for manufacturers in this Budget and Spending Review. While the manufacturing sector continues to stabilise, our member companies are facing a long road ahead to normal trading conditions. The extension of the Annual Investment Allowance to March 2023, business rates relief to support plant improvements, and new reliefs to support green technologies are all good news as manufacturers look to go digital and green. We also saw an extension to the Recovery Loan Scheme until 30 June 2022 to support lending to small and medium-sized businesses.
The conclusions of the Government’s review of business rates are published alongside the Budget – we’ll be diving into the detail to understand what it means for business soon.
…But a mixed bag on R&D
Manufacturers were hoping to see a commitment to the £22bn R&D target, instead, the Chancellor pledged £20bn but extended the funding period by two years to 2024.
Worth noting for manufacturers
From 2021 onwards the National Living Wage is to be increased by 6.6% to £9.50 an hour. For those that currently receive the National Living Wage, this will mean a pay rise worth over £1,000. It is expected this will serve as a ‘wage boost’ for millions across the country. Some may argue this is a step forward for the UK’s lowest-paid workers, however for the majority of those in the manufacturing sector this increase in the National Living Wage will have minimal effect. This comes largely as a result of the manufacturing sector paying above average wages, with only a limited number of Make UK members having staff paid at a baseline rate.
And despite the promise of a ‘skills revolution’, what was announced will make just a small dent in what is an increasing skills gap. Stubborn labour market shortages continue to hold back manufacturers, stifling growth and recovery across our regions. Manufacturers will welcome shorter, sharper training courses such as skills boot camps, but these should not replace much needed and radical reform to existing skills and training pathways like apprenticeships.
'As far as manufacturers are concerned the rest of the statement was a curate’s egg. While there were some welcome announcements on business rates and the extension of the annual investment allowance, the announcements on skills amounted to little, if any, new money while the delay in the R&D spending target goes against the aim of making the UK a science superpower' – Make UK, CEO Stephen Phipson
Big questions still remain about the key challenges manufacturers face. What does a digital and green future look like, how is this funded? What does the levelling up agenda and re-balancing of our economy mean for a post-pandemic recovery, and how can we deliver it without robbing Peter to pay for Paul. And does the skills revolution mean businesses can finally meet their changing needs for skills?
Even after today, there still remains an absence of a medium to long-term economic plan which goes beyond simply chasing the next week’s headlines.
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