In the wake of the UK Government's 2023 Autumn Statement, the manufacturing sector eagerly awaited policy announcements that could shape investment decisions and workforce strategies.
Several key measures outlined in the statement, including permanent full expensing and initiatives aimed at bolstering engineering apprenticeships and advanced manufacturing, resonated well with manufacturers.
In a bid to gauge the immediate reactions of manufacturers, we conducted a rapid survey of 100 manufacturers. The findings shed light on how manufacturers plan to leverage the newly announced policies and their perspectives on critical issues such as full expensing, apprenticeship programs, Made Smarter initiatives, and the impact of the National Living Wage.
As attention shifts towards the upcoming Spring Statement, manufacturers are advocating for expanded capital allowances, extended freezes on business rates, enhanced R&D deductions, and measures to alleviate the tax burden on SME employers. Additionally, there's a call for a comprehensive review of the energy system to support the transition to clean energy and align with international standards.
Today we’ll delve into the perspectives and priorities of UK manufacturers in navigating the evolving landscape of policies and challenges shaping the industry.
Autumn statement – How did UK manufacturers react?
We welcomed the Government's 2023 Autumn Statement. It provided a much needed level of certainty for manufacturing businesses making investment decisions by announcing policies such as permanent full expensing. The manufacturing sector also welcomed measures to boost engineering apprenticeships and stimulate advanced manufacturing, which will be vital to boosting high-value growth and high-skill employment in our economy.
Following the Statement, we ran a snap survey of 100 manufacturers to capture our member’s initial thoughts, this is what we found,
💷 Full expensing
59% of manufacturers surveyed reported they will take advantage of full expensing, with a further third of manufacturers (33%) reporting they might take advantage. We asked whether manufacturers would like to see the inclusion of second-hand machinery: most manufacturers (83%) would like to see the inclusion of second-hand machinery in the full expensing policy.
👨🏭 Apprenticeship pilot
Regarding what should be tested in the apprenticeship pilot, manufacturers reported that they would like to see an emphasis on retraining existing workers (65%), with roughly half of manufacturers wanting financial incentives (54%), better pathways for school leavers (54%) and more flexibility in training delivery (49%) to be included.
🖥️ Made Smarter
Roughly half of manufacturers (47%) will take advantage of the Made Smarter programme once it is rolled out, with 16% having already taken advantage. Roughly a third (37%) are not planning to use the programme: we are speaking with manufacturers about the possible reasons for this.
🧾 National Living Wage
We asked what manufacturers think the impact will be from the rise in the National Living Wage. There was a mixed response, with roughly half of manufacturers (55%) reporting they see it as an increase in pay for their lowest paid employees, (53%) also say it is an increase in pay for the rest of the workforce (53%). Half say that it will increase the prices of goods (47%).
As we look to 2024 and beyond, our members’ focus is on:
Tackling current labour shortages and building a workforce fit for the future
Driving affordable, clean and secure energy supply
Boosting productivity through increased digitalisation
Ensuring the UK is a competitive place to do business and that British manufacturers' goods and services continue to be exported across the globe
Making homes for the future
Spring statement, what do manufacturers want to see?
🏭 Expand full expensing capital allowances to allow for the leasing of capital and upcycling of 2nd hand plant & machinery.
Making full expensing permanent was the right thing to do and will help most manufacturers. However, the tool still remains somewhat exclusionary by not allowing for leased and 2nd hand plant & machinery. Our studies show that nearly 15% of manufacturers access capital goods through leasing and these businesses are exclusively SMEs.
💰 Extend the business rates standard multiplier freeze from 1 year to 3 years to give businesses more time to adjust to their new evaluated rates.
Following the Valuation Office Agency’s revaluations of property values in April 2023, the manufacturing sector saw the biggest change in their rateable values (up by 27%) compared to the whole economy average (7%) meaning the businesses in that sector (which includes manufacturers) are disproportionately impacted by increasing rates. Extending the multiplier freeze would give businesses time to adjust their total costs.
🔬 Enhanced deductions for specific classes of R&D activities, such as R&D resulting in direct reductions in carbon emissions, digitalisation and automation that result in increased productivity.
Allowing companies to claim relief on 130% of capital investment in the year of investment of specific areas of expenditure may accelerate the speed to meet net-zero targets and increase productivity.
👨🏭 Reduce employer National Insurance contributions to ease pre-profit taxation burden on SME employers.
Manufacturers welcome the actions taken by the Government through 2023 to support people back into work, particularly through expanded access to skills training and improved support for occupational health and wellbeing. However, a significant majority anticipate increasing employment costs in 2024, providing a barrier to recruitment and threatening to undermine the positive measures already taken. There is more that the Government can do to support employers to ensure that they can recruit the people they need. Following the reductions to national insurance contributions for employees and the self-employed at the Autumn Statement, the Government should make it easier for employers to recruit by reducing employer contributions too.
⚡ Review the energy and pricing system to support the transition from fossil fuels and ensure a reliable and economically sustainable supply of clean energy in the future. The top priority should be aligning the UK-CBAM with the EU-CBAM timescales to provide a level playing field with EU competitors and prevent.
While the announcement of the UK CBAM is widely welcome, the one year difference between the implementation of the UK-CBAM (in 2027) versus the EU CBAM (in 2026) will increase risks for domestic industries and could cause de-industrialisation. It is crucial, therefore, that the UK-CBAM aligns with the EU-CBAM timescales to ensure a level playing field with EU competitors and prevent potential trade diversion of high-emission industrial products into the UK market.
Thank you for reading. We’ll be discussing the above and much more at the Make UK Annual Conference tomorrow, so keep an eye out! Hope to see you there!