Manufacturing body calls for Government intervention amid ‘potent cocktail’ of escalating costs

Charlotte Horobin

East Midlands manufacturers are calling for an emergency, pre-recess package of business support measures to help shield companies from what it is calling “a potent cocktail of escalating costs amid a worsening economic outlook”.

The call comes on the back of the Make UK/BDO Q2 Manufacturing Outlook survey which shows both output and exports falling in the region in line with the national picture.

According to Make UK, the seriousness of the situation and, the prospects for the next six months, means that industry cannot wait for the promised help in the Autumn which the Chancellor made in the Spring Statement, with action required immediately before the summer recess. In response, Make UK has made a number of recommendations for measures Government can introduce now to address rising business costs, including the following:

– Waive or reduce business rates for the next 12 months
– Implement VAT deferrals for larger businesses and waive completely for SMEs
– Temporarily freeze the Climate Change Levy and, if energy costs continue to rise, remove it completely
– Review the efficacy of the business interruption loan schemes introduced during the pandemic and deploy a successor scheme by Q3
– Extend the super-deduction investment policy
– Make the increase in the Annual Investment Allowance permanent

According to the survey output dropped substantially from the last quarter (+19% from +29%) and although the UK market held up, exports declined significantly in line with the national picture.

However, despite the worsening outlook overall, the jobs outlook in the region remains reasonably healthy (+18%) while investment intentions have also bucked the national trend at a relatively healthy level (+15%).

Make UK has forecast growth for manufacturing in 2022 of +2.3% (down from 3% in Q1 and 3.3% in Q4 2020) and 1.7% in 2023.

Charlotte Horobin, director for the Midlands of Make UK, said: “Whilst industry has recovered strongly over the last year we are clearly heading for very stormy waters in the face of eyewatering costs and a difficult international environment.

“Clearly some of the factors impacting companies are global and cannot be contained by the UK Government alone. However, just as it is quite rightly taking measures to protect the least well off, it must take immediate measures to help shield companies from the worst impact of escalating costs and help protect jobs.

Jon Gilpin, head of manufacturing at BDO in the Midlands added: “Manufacturers across the region have shown their ability to overcome a wave of challenges over the last couple of years to remain competitive. Rapidly rising input costs, ballooning energy bills and in some cases inflation-busting pay settlements have hit margins and slowed investment plans. There is now a strong case for Government action to help manufacturers weather the immediate storm and incentivise investment for long-term growth.”