Make UK 2025 Executive Survey
Will an industrial strategy - a game changer
Welcome back manufacturing champions! Hope you’ve all come back refreshed and ready to support UK manufacturing!
In today’s edition of Manufacturing Monday’s we’ll be looking at the Make UK / PwC Executive Survey, which asks senior manufacturing leaders on the opportunities, risks and challenges for their business in the year ahead, as well as the outlook for the UK and international economies.
Some key findings include:
UK still seen as a competitive place to manufacture with boost to come from industrial strategy
Almost six in ten companies will increase investment in response to an industrial strategy
While almost half say a strategy will help them secure the skills they need and boost productivity
Majority of manufacturers believe opportunities will outweigh risks in 2025
The survey shows the introduction of an industrial strategy will be a game changer for increasing investment and boosting productivity, while helping manufacturers secure the skills they need for the future.
As well as the benefits from an industrial strategy, the survey shows that, despite the current challenges from escalating costs and a potential trade war, a majority of manufacturers believe that overall, the UK remains a competitive place in which to manufacture and the opportunities for their business in 2025 far outweigh the current risks. However, despite this view, as many think the UK economy will deteriorate as grow in 2025.
In response, manufacturers are backing their belief in the UK as a place to manufacture with a significant emphasis on developing new products, entering new markets and upskilling and retraining staff. The survey also gives credence to the view of some Economists that companies will counter the impact of increased costs by investing in new technologies and automation to improve their efficiency.
That said there is little doubt that the next twelve months are set to be immensely challenging in a complex international environment. To help companies navigate a way through these challenges it is now vital that Government sets out as a matter of urgency the immediate and significant priorities as part of its formal industrial strategy given the very clear benefits manufacturers believe this will bring.
Key impacts of the 2024 Autumn Budget
Last Autumn we saw the first Labour budget in 14 years, one which was controversial to say the least…
We’ve read that there is a lot of potential for the UK manufacturing industry, but also some challenges, unfortunately some of these are as a result of the Autumn Budget, below we will cover some of the main ones,
Rising employment costs
The increase in employer National Insurance contributions (NICs) represents a significant escalation in the cost of employing staff. From April 2024, the headline rate of Class 1 employer NICs will rise from 13.8% to 15%, coupled with a reduction in the earnings threshold for NICs from £9,100 to £5,000 per eligible employee. For manufacturers, particularly those with large workforces, this marks a substantial financial challenge, likely to strain operating budgets and force difficult decisions regarding recruitment and retention.
Adding to the pressure, the National Living Wage (NLW) is set to rise to £12.21 per hour in April 2024, marking a 28.5% increase since 2022. Furthermore, the government has lowered the age threshold for the NLW from 23 to 21, making younger employees eligible for the higher rate. These measures can have a cascading effect on employers, particularly in manufacturing, where maintaining pay differentials is crucial for preserving morale and incentivizing skill development. The situation is further complicated by an 18% increase in the apprentice rate, creating additional financial strain on businesses committed to workforce development.
Manufacturers now face a balancing act: managing escalating employment costs while ensuring they remain competitive and attractive employers in a tight labour market. Many are exploring avenues such as automation and process efficiencies to mitigate these costs while preserving operational capacity.
Capital Gains Tax
The government’s decision to raise the lower CGT rate from 10% to 18% and the higher rate from 20% to 24% represents a significant shift. The phasing out of Business Asset Disposal Relief (BADR) further compounds the challenge, particularly for business owners planning asset sales.
While the direct impact on manufacturers may be limited, the increased administrative burden and potential inefficiencies in asset management could deter long-term investment. Manufacturers are now tasked with navigating a more complex tax landscape, balancing compliance with strategic decision-making.
Inheritance Tax (IHT) and Business Property Relief (BPR)
Changes to IHT and BPR are causing unease among SMEs and family-owned businesses, which make up over 90% of the UK manufacturing sector. By 2026, BPR will only apply fully to the first £1 million of privately held assets, with relief on additional assets reduced to 50%. Similarly, shares not listed on a recognized stock exchange will also see their relief halved.
These changes risk discouraging family-owned businesses from reinvesting in modernization and expansion due to heightened tax liabilities on intergenerational transfers. This could lead to a shift in behaviour, with business owners favouring asset sales to third parties over passing them down to relatives. The resulting decline in investment may stifle innovation and growth across the sector, undermining its long-term competitiveness.
Business rates and investment decisions
Manufacturers are preparing for another revaluation of business rates in 2026, following a 2023 review that increased rateable values for the sector by an average of 27.1%. This increase, nearly four times the national average, disproportionately affects investment-heavy industries like manufacturing.
As a pre-profit tax, business rates add to the operational cost base, reducing funds available for investment and recruitment. Many manufacturers have called for a comprehensive overhaul of the business rates system, urging the government to adopt a more equitable approach that reflects the sector’s unique challenges. Without reform, rising rates could further erode the sector’s global competitiveness, deterring innovation and expansion.
Thank you for reading. For further information or a copy of the report, visit our website here